Author Topic: Is this a way to avoid Dividend Withholding Tax?  (Read 1897 times)

alwaysonit

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Is this a way to avoid Dividend Withholding Tax?
« on: September 24, 2014, 01:28:33 PM »
If an accumulating fund is domiciled in Ireland going by point 5 here
http://www.revenue.ie/en/tax/dwt/leaflets/dividend-withholding-tax-guidelines.html
some holders of the fund will be subject to DWT and some will not.
Luxembourg has the same rules.

Does the fund find a way around the DWT if over 50% of holders are exempt from the DWT or how does this work?

When I asked Interactive Brokers if I would still be subject to the full withholding tax amount they replied
“The tax withholding is based on the company that provides the dividend, not on the individual who receives the dividend.”
which would imply that all holders of the fund are subject to the same level of DWT.
But is this the full level or the reduced level of DWT?

Should all brokers ask non-USA residents to fill in the W-8BEN?
For example when I signed up for Interactive Brokers I was asked to fill in one, but not for Saxo.
Does it make a difference that I’ve submitted the form with one broker but not the other, even though I can buy the same ETF through them?

And is DWT treated exactly the same for bonds as it is for stocks?

Wile E. Coyote

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Re: Is this a way to avoid Dividend Withholding Tax?
« Reply #1 on: September 24, 2014, 02:17:58 PM »
I'm not clear on what you are asking here.  What do you mean by an accumulating fund?  Ireland also has rules of residence for entities that are not necessarily based on domicile, so perhaps you could clarify what you mean by that.  What is your situation? Where are you tax resident and and why are you looking to set up a structure in Ireland and then trying to avoid Irish dividend withholding tax.  There are generally quite complex limitation of benefits provisions in most treaties that make it quite difficult to treaty shop, but a bit more info on the specific facts would be helpful.

alwaysonit

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Re: Is this a way to avoid Dividend Withholding Tax?
« Reply #2 on: September 24, 2014, 03:08:13 PM »
An accumulating fund is also called a capitalizing fund, it reinvests the dividends rather than distributing.
When I submitted the post I was also wondering if an ETF reinvested it's funds rather than distributing them did it escape the DWT completely, now I think neither way can but correct me if I'm wrong.

I'm not a tax resident of anywhere, perpetual traveller.
I've just set up a thread with a simple example which will answer most of the questions if you care to take a look at
http://forum.mrmoneymustache.com/index.php?topic=24157.0

The only question it doesn't answer is the final one, is DWT treated exactly the same for bonds as it is for stocks?
« Last Edit: September 24, 2014, 03:16:23 PM by alwaysonit »