Irish dom means no divi withholding. For underlying stocks, any double taxation agreement will apply. So if you hold an Irish domiciled ETF that holds US stocks I believe you will lose 15% of the underlying divis; but this is completely transparent to you, the yield is after any withholding.
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Thks, Just so I'm clear, A US based person investing in a US stock gets $100 in divs for example, and a UK based person in the same stock would only get $85, I know it seems obvious but just want to be clear that the 15% is only relevant to outside investors ( UK to be exact - due to treaty ) . My thinking here is that anyone likely to be living off divs in the UK would lean towards UK stocks only?
I guess my bigger question is how could I leverage my dual status allowing me to live in the UK ( NHS and low property tax) while maintaining a sizable holding of US stock not subject to the 15% treaty withholding as the divs are paid stateside to a US person. I wonder how HMRC would handle the US divs paid directly into my US account but reported as income on my UK tax return as I am resident there.
Ok, here goes.
As a US person you pay tax to the IRS no matter where you live.
As a UK resident you pay tax on worldwide income.
You will pay the greater of the two in total, but not double. You deduct any foreign tax paid from the other return - that's the gist of the double taxation agreement.
So say you are UK resident, you get a personal allowance, ISA, cap gains allowance etc. You are not US resident but get some kind of allowances.
You do your US tax return, and owe $5000. You do your UK tax return, and owe 4k GBP which is currently about $6k USD. You probably reclaim much of the $5k from the US and pay the UK, as you are UK resident, but probably the US has first dibs on any US dividends. In total you shouldn't have to pay much more than 4kGBP/6kUSD - certainly not 11kUSD unless you're really structured badly. BUT the US will not see the ISA as a tax shelter, so you'd have to pay christ knows what in tax on any dividends in there, and it may be that you should break US ties - which means all of the above is moot.
HMRC would likely just want to know the value converted to GBP of all dividends received. For Canada at least, you can either do it based on the exchange rate of the day you receive each dividend distribution, or multiply the whole lot by the yearly average (which I get told is not actually 100% clear that it's allowed but I'm damned if I'll convert 20x or more distributions to CAD, when the whole lot is only a few hundred CAD).
Ahem. Anyway I'm probably talking shit, because actually you wouldn't even be subject to the 15% withholding as you're a US person. Or if you were, you'd get it back when you filed your tax return. It's tax paid. And either way, outside an ISA, you'd get to claim it on your UK tax return.