Do you own shares in an overseas company?
If so, it’s very likely that you have paid what’s known as Dividend Withholding Tax (DWT) – perhaps without even realizing it.
The good news, however, is that, in many cases, investors are entitled to claim a full or partial refund of the tax withheld.
In this guide, we’re going to take a closer look at DWT and provide you with an overview of how to claim a rebate of this tax easily online.
As you navigate through the sections you will learn…
- What is Dividend Withholding Tax
- How DWT is calculated
- Who can claim a DWT refund
- How to claim your DWT refund from overseas easily online
Sprintax have developed a service to support investors in claiming a DWT refund. So, if you have specific DWT questions related to your own particular situation, don’t hesitate to reach out to our team!
Now let’s get to the guide!
What is Dividend Withholding Tax?
Many governments around the world withhold taxes on dividends which are paid to nonresident shareholders by organizations located within their territory.
In other words, if you own shares in a company which is headquartered outside of the country where you reside (including if you participate in an employer share scheme) it is likely that tax will be withheld from dividends you receive.
What are the reasons for imposing Dividend Withholding Tax?
One of the methods that governments use to bolster their coffers is to impose a tax on foreign investors. This includes taxing dividend payments remitted to overseas investors.
Each country sets out its own rules relating to how much tax should be withheld from dividends (more details below).
Many countries also sign tax treaty agreements which reduce the amount of tax charged to eligible investors.
I work in the US for a foreign-headquartered company and receive restricted shares through my company’s employee share scheme.
Will I owe taxes to the foreign country when dividends are paid?
Depending on the country where the parent company is headquartered, it is likely that tax will have already been withheld from any dividend payments you receive.
Exactly how much tax has been withheld depends on the country where the parent company is headquartered.
In the below table, we have illustrated how DWT rates vary country-to-country.
Note that the list is not exhaustive as it only shows the DWT rates of certain countries:
Investment Country Statutory Dividend Withholding Tax Rate
Australia 30%
Austria 27.50%
Belgium 30%
Canada 25%
Denmark 27%
Finland 35%
France 25%
Germany 26.375%
Ireland 25%
Japan 20.42%
Norway 25%
Sweden 30%
Switzerland 35%
US 30%
However, the good news is that many investors pay too much DWT and are entitled to a refund. Sprintax can help you to reclaim your overpaid DWT.
Why am I entitled to a Dividend Withholding Tax refund?
If you reside in a country that has an income tax treaty with the country that taxed the dividend, and said treaty provides a lower tax rate when compared to the tax rate imposed on the dividend you received, you should be eligible for a refund of the excess tax withheld.
For example, if you are a US resident and receive dividends from an employee share scheme sponsored by a Swiss parent company, 35% tax will be deducted from your dividend payment and remitted to the Swiss government.
However, through the tax treaty agreement which has been signed by both the US and Switzerland, US-resident individuals can benefit from a 15% tax rate on dividend payments. This means that you are due a 20% refund from the Swiss government, but you must file a refund application to receive it.
Note that all of the countries listed in the table above have comprehensive tax treaty networks ranging from 60-100 countries.
How much will my Dividend Withholding Tax refund be worth?
The answer to this question largely depends on the country that withheld tax from your dividend, and the country where you reside.
As discussed above, each country’s DWT rate is different.
For example, Germany deducts 26.375% tax from dividends paid to nonresidents.
So, if you have received a dividend payment of €4,000 from a German company, the “net dividend” remitted to you would have been €2,945. However, many of Germany’s tax treaties provide a maximum 15% tax rate for dividends paid to individuals (note: this rate can vary), so it is likely that you are entitled to a tax refund of approximately €455.
Note that some investment countries – such as the UK – do not impose tax on ordinary dividends.
Does the US impose a Dividend Withholding Tax?
The US imposes a 30% rate on dividends paid to non-resident individuals, but this rate is often reduced to the rate provided under the individual’s specific tax treaty pursuant to an efficient DWT relief system administered by US banks and brokers. For this reason, it is not common for nonresident individuals to owe 30% DWT on US dividends unless the individual resides in a country that does not have a tax treaty in place with the US.
If you are a non-US individual who suffered 30% tax on a US dividend and you reside in a country that has a tax treaty with the US, you can reclaim your withheld dividend tax easily online with Sprintax.
Who can help me to claim my Dividend Withholding Tax refund?
Why spend hours on end trying to navigate the world of Dividend Withholding Tax?
At Sprintax, we have developed a service specifically to support individuals in filing their tax paperwork and claim their DWT refunds across the globe.
The Sprintax Dividends software will guide you through the process from start-to-finish and ensure you receive your maximum DWT refund.
I have received dividend payments from more than one county. Can Sprintax Dividends help with these refund claims?
We would love to! We file refund applications for most countries that impose DWT on nonresident investors, but some exceptions apply.
How long will the process take?
The DWT refund process varies from country to country, but we find that it typically takes an average of 6-12 months for a DWT refund application to be completed and for the refund to be transferred to an investor.
If the refund period is expected to take longer than 6-12 months, you will be informed of this prior to the filing of your DWT refund application.
What information will I need for my DWT refund application?
In order to apply for your DWT refund, you will need to provide some important pieces of information, including your:
- Name
- Legal Address (cannot be a P.O. Box or “in care of” address)
- Email address
- Taxpayer Identification Number
- Dividend statements
- Bank account details (in order to receive your refund)
You may also need to provide some details relating to your income tax return filed with your local tax office.
I have been receiving dividends subject to DWT for a few years. Can I claim a refund for dividends paid in prior years?
Yes. The “statute of limitations” for filing DWT refund applications varies from country-to-country.
The table below reflects the statutory deadlines in certain investment countries:
| Investment Country | DWT rate | Statutory Deadline for DWT Refunds (exceptions apply) |
|---|---|---|
| Australia | 30% | Four years from dividend payment date |
| Austria | 27.50% | Five years from 12/31 in year dividend was paid |
| Belgium | 30% | Four years from 12/31 in year dividend was paid |
| Canada | 25% | Two years from 12/31 in year dividend was paid |
| Denmark | 27% | Three years from dividend payment date |
| Finland | 35% | Three years from 12/31 in year dividend was paid |
| France | 25% | Two years from 12/31 in year dividend was paid |
| Germany | 26.375% | Four years from 12/31 in year dividend was paid |
| Ireland | 25% | Four years from 12/31 in year dividend was paid |
| Japan | 20.42% | Five years from dividend payment date |
| Norway | 25% | Five years from 12/31 in year dividend was paid |
| Sweden | 30% | Five years from 12/31 in year dividend was paid |
| Switzerland | 35% | Three years from 12/31 in year dividend was paid |
| US | 30% | Three years from 12/31 in year dividend was paid |
Is there anything else I should be aware of when it comes to DWT?
If your dividend was subject to 15% DWT in the foreign country, you likely have been subject to the correct (lowest) DWT rate but note that exceptions may apply.
Also, Ireland’s DWT rules are unique as all non-resident individuals who reside in countries that have an income tax treaty with Ireland are entitled to an exemption from DWT (0% rate). Thus, if your Irish dividends were subject to 25% DWT and you reside in a treaty country, you are entitled to a full refund. You can find a link to Ireland’s tax treaty network here.
How can I claim a DWT refund with Sprintax Dividends?
1 – The first step is to create an account at Sprintax Dividends.
2 – Sprintax will then prepare an estimate of your DWT refund and inform you of the documentation required to file a DWT refund application. Once you provide the required documentation, agree to the terms of the Sprintax Dividends service and sign a limited Power of Attorney to allow Sprintax to file your refund application with the relevant tax authority on your behalf, your DWT refund application will be filed.
3 – Finally, once your refund is approved and paid by the foreign taxing authority, Sprintax will transfer your money straight to your bank account.
It’s that easy!
Can Sprintax Dividends support my organization to organize DWT refund requests?
Yes! Sprintax Dividends has been specifically designed to help individuals and organizations alike to file a DWT tax refund application and claim their DWT back.
Our software will ensure that the maximum dividend tax refund is returned for both your team and your organization.
To learn more, simply register here for a free demo of the Sprintax Dividends system!
