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Kirk Rice Blog

Swiss Anticipatory Withholding Tax Repayment ClaimsWritten on June 10, 2022 by Kirk Rice LLP

Swiss Anticipatory Withholding Tax Repayment Claims
Taxing Times Questions

The Question:

I have noticed that dividends paid on my shareholdings in Swiss companies have suffered a tax withholding rate of 35% of the gross dividend payment. On top of that, I then suffer a further tax liability on this income in the UK. This seems very high. Is there anything I can do to reduce the level of tax I am paying?

Kirk Rice LLP answers:

This is a high rate of tax for dividend income. Believe it or not, many people do not even notice that they are being taxed to this degree. This may be because their Swiss company shareholdings are buried within their share portfolios, or perhaps because they have not examined the dividend vouchers being provided to them. Let’s look at Swiss anticipatory withholding tax.

If you are UK tax resident and UK domiciled (or non-UK domiciled but paying tax on your overseas income on the arising basis), you will be taxable in the UK on your worldwide sources of income.

Where you are required to complete a UK tax return, you will need to include the Swiss dividend income in the foreign income pages.

UK income tax is then levied at the appropriate rates (so after accounting for the personal allowance, 0% on the first £2,000 of dividend income, 7.5% for income falling in the basic rate tax band, 32.5% higher rate and 38.1% additional rate).

Should your business be audited and can it pay for itself?

Whilst a lot of company owners might be very glad to avoid having their companies audited, in this article, we explain why it can often work to your benefit to go through the process.

 

You then need to consider, how much of the Swiss anticipatory withholding tax you can credit (offset) against the UK tax arising. The answer lies in the detail of the UK/Switzerland Double Tax Agreement and is normally 15% of the overseas tax arising.

So, 35% tax is levied by our friends in Switzerland, and 15% could be utilised as a credit against the UK tax arising. What about the remaining 20%? Is this lost?

Not necessarily. It is possible to make a tax repayment claim to the Swiss tax authorities who will repay the difference upon a successful application. Such a claim can be backdated up to three years from the date of the dividend payment.

Examples:

Let us consider an example: Fiona has an investment portfolio in which she holds 4000 Nestle SA CHF0.10 shares. In April 2018 she is paid a gross dividend of CHF9,400. From this is withheld CHF3,290 by Switzerland (being 35% of the gross figure), to leave a net dividend payment to her of CHF6,110.

Fiona is taxed in the UK on the gross dividend of CHF9,400 (ie £6,958) and may offset 15% withholding tax (ie £1,044) against her UK income tax. She may therefore make a claim for a repayment of tax from the Swiss tax authorities of the 20% not credited against her UK income tax liability (ie £1,392).

The process is a bit involved but if your portfolio manager is not undertaking this work, we at Kirk Rice LLP are able to do this for you. The tax repayment arising can, in some cases, be significant, so it is well worth looking into.

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If you would like to discuss Swiss anticipatory withholding tax, please email info@kirkrice.co.uk to arrange a call with a tax specialist who will guide you through what we need, to file the relevant repayment claims.

You can read more about the Swiss anticipatory withholding tax at www.gov.co.uk

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