Ordinary investors lack knowledge and information. Broker disregard isn’t helping.
Every dividend received from a foreign country is potentially taxed before it reaches you - ‘withholding tax’. You can do something about that. But only if your broker helps you.
Most countries also have ‘double tax agreements (DTAs)’’ with the UK which reduce or eliminate this tax. Some countries allow you to apply in advance for the reduced/zero treaty rate to apply, while others always deduct the full withholding tax rate and then require the UK recipient to apply to the foreign tax authority for a refund. The tax reduction given by the DTA needs to be claimed by the registered shareholder applying to the country of origin for a reduced treaty rate or a refund.
Ordinary investors via platforms are not registered shareholders. Pension savers via SIPPs are not registered shareholders, indeed a SIPP is legally a pension fund and different rules apply. In these cases a third party must apply on behalf of the beneficial owner.
UKSA is aware that some intermediaries automatically help investors to do this with regard to the USA. However for investments in other countries such as Germany, the Netherlands, and Israel, they don’t. Further, most brokers do not tell investors a company’s country of residence when the investor buys the company’s shares. Nor do they explain the process to be followed to reclaim holding tax. There is no advice on this in MoneyHelper.
UKSA has written to the FCA demanding as a minimum that brokers declare country of residence, with links to appropriate tax information and process to be followed. In the case of SIPPs, managers must apply for the treaty benefits available, since with SIPPs the claim must be made by the pension fund, not by the individual whose SIPP it is.
A detailed exposition of the position regarding SIPPs can be found here. A general briefing paper is here.
Enquiries: John Hunter, Director, 07764 615726
Mohammed Amin, UKSA policy team, Contact
