Revenue Tax Briefing

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Revenue Tax Briefing Issue 41, September 2000

Dividend Withholding Tax Summary of Scheme

Introduction

Tax Briefing, Issue 35 [March 1999] contained details of the Dividend Withholding Tax (DWT) scheme as contained in the 1999 Finance Bill. Issue 39 [March 2000] highlighted a number of changes to the scheme which were proposed in Finance Bill, 2000. These changes have now been enacted. The following is a summary of the scheme based on the legislation currently in force and should be read in conjunction with the earlier articles.

DWT Scheme

In general, DWT, at the standard rate of income tax for the year of assessment in which the distribution is made, applies to all dividends paid and other distributions made by companies resident in the State on or after 6 April 1999. The Irish resident company making the distribution is required to withhold the tax and pay it over to Revenue. However, the legislation makes provision for an entity known as an “authorised withholding agent” (AWA) to act for the company making the distribution. If an AWA is involved, the amount of the distribution can be paid gross by the paying company to the AWA, who then takes over responsibility for applying the DWT rules.

The basic principle is that DWT must be deducted at the time the distribution is being made unless the company or the AWA has satisfied itself that the recipient is a non-liable person and is entitled to receive the distribution without the deduction of DWT. All DWT must be paid to Revenue by the 14th of the month following that in which the distribution is made.

Exemptions

Certain recipients of distributions are specifically excluded from the scope of the tax while certain other persons are entitled to an exemption. (See Issues 35 and 39 of Tax Briefing for lists of these recipients). It should be noted that exemption is not automatic and must be established by means of an appropriate declaration of exemption which must be completed by the applicant and accompanied by the necessary certification. Blank declaration of exemption forms are available from:

DWT Section,
Office of the Revenue Commissioners,
Government Offices,
Nenagh,
Co. Tipperary.

Tel: +353 67 33533
Fax.: +353 67 33822
e-mail: info@dwt.revenue.ie.

Where a distribution is to be made directly to an exempt shareholder by the company or by the AWA, the shareholder must give the completed declaration of exemption and back up certification to the company or the AWA. If the distribution is to be made through a Qualifying Intermediary (QI), the evidence of entitlement to an exemption must be given to the QI. That QI will then notify the company of the amount of the distribution to be received on behalf of exempt persons. Where a distribution is to be made to an exempt shareholder through a series of QIs, the evidence of entitlement of the shareholder to an exemption must be given to the QI from whom the shareholder will finally receive payment. This QI will then pass the information up through the chain of QIs to the paying company or AWA.

Supporting Documentation

The supporting documentation which must accompany a declaration of exemption is as follows:

  • A declaration made by a non-resident person (not being a company) must be accompanied by a certificate of residence from the tax authority in the country of the person’s residence
  • A declaration by the trustee or trustees of a non-resident discretionary trust must be accompanied by:
    • a certificate given by the tax authority of the country in which the trust is, by virtue of the law of that territory, resident for the purposes of tax certifying that the trust is resident in that territory,
    • a certificate from the trustee or trustees showing the names and addresses of the settlers and beneficiaries of the trust,
      and
    • a certificate from Revenue indicating that they have seen the certification and have noted its contents.
    In this context it should be noted that the DWT legislation defines the term “beneficiary” in a wide manner. The term means any person who, directly or indirectly, is beneficially entitled under the discretionary trust, or may, through the exercise of any power or powers conferred on that person or any other person or persons, reasonably expect to become beneficially entitled under the trust to income or capital or to have any income or capital applied for that person’s benefit or to receive any other benefit.
  • A declaration made by a non-resident company which is claiming the exemption on the basis that it is either:
    • ultimately controlled by persons resident for the purposes of tax in a relevant territory , or
    • a company, the principal class of shares of which (or of a company of which it is a 75% subsidiary) is substantially and regularly traded on a recognised stock exchange in a relevant territory, or
    • a company which is wholly owned by two or more companies, each of whose principal class of shares is substantially and regularly traded on one or more recognised stock exchanges in a relevant territory,
    must be accompanied by a certificate from the company’s auditor certifying that in the opinion of the auditor it meets one of these criteria.
  • A declaration from a company claiming the exemption on the basis that it is resident for the purposes of tax in a relevant territory and is not under the control, whether directly or indirectly, of a person or persons resident in Ireland must be accompanied by:
    • a certificate given by the tax authority of the relevant territory in which the company is, by virtue of the law of that territory, resident for the purposes of tax certifying that the company is resident in that territory, and
    • a certificate signed by the auditor of the company certifying that in the opinion of the auditor the company is not under the control, either directly or indirectly, of a person or persons who is or are resident in Ireland.

Period of validity of exemption forms

Exemption declarations for resident (excluded) persons remain valid until such time as:

  • The excluded person notifies the paying company or the QI that they have ceased to be an excluded person, or
  • The paying company or QI becomes aware, for whatever reason, that the person who made the declaration has ceased to be an excluded person.

Exemption declarations for qualifying non-resident persons remain valid for a maximum period of 6 years. This period of validity is determined by the date on which the relevant certificates accompanying the exemption declarations are issued. The legislation confirms that these certificates remain valid for the period from the date of issue until 31 December in the fifth year following the year in which the certificate was issued, thus providing for a maximum period of validity of 6 years where a certificate was issued on 1 January in a year.

All queries in relation to the DWT scheme, including requests for additional information, forms etc. should be addressed to:

DWT Section
Office of the Revenue Commissioners
Government Offices
Nenagh
Co. Tipperary
Ireland

Tel: +353-67-33533
Fax.: +353-67-33822
e-mail: info@dwt.revenue.ie

DWT Documentation

The following is a list of the documentation most commonly used in connection with DWT:

  • Exemption Declaration forms:
    • Composite Resident Form is used for declarations to be made by “excluded persons” resident in Ireland
    • Composite Non-Resident Form is used for declarations to be made by “qualifying non-resident persons” not resident in Ireland.
  • The DWT Declaration and Payslip is used for the return which all paying companies and AWAs are obliged to make to Revenue by the 14th. of the month following that in which a distribution is made and which contains summary details of distributions made and DWT deducted.
  • The Guide to the Submission of Returns in Electronic Form provides a specification for the electronic returns which paying companies and AWAs are obliged to make to Revenue by the 14th. of the month following that in which a distribution is made and which contain details of each person to whom a relevant distribution is made.
  • Where Revenue is satisfied that a paying company/AWA does not have the facility to make an electronic return, a “paper” return can be made using the DWT Distribution Details form.
  • Similarly, the Guide to the Submission of QI Returns in Electronic Form specifies the manner in which QIs must make their returns when requested to do so by Revenue.
  • Dividend Withholding Tax Information Leaflet (DWT-INFO1) provides general guidance on DWT to investors and QIs/AWAs.

All of the above documentation may be obtained by contacting DWT Section at the above address and numbers.

Dividend Withholding Tax Refunds

Who can claim a refund of DWT?

  • Persons who are within the charge to income tax, where the amount of DWT deducted exceeds their income tax liability
  • Persons who are not within the charge to income tax
  • Persons who are “non-liable persons” for the purposes of DWT (i.e. excluded persons or qualifying non-resident persons).

Who processes these claims?

Generally speaking, claims for refunds from Irish individuals may be submitted to the individuals’ own Tax District. However, where a resident company, charity or pension scheme, which is an excluded person under the DWT legislation, suffers DWT as a result of not having its DWT exemption declaration in place in time, claims for refunds may be submitted to DWT Section.

Claims for refund may be submitted, using the Dividend Withholding Tax Refund Claim Form to

International Claims Section,
Office of the Revenue Commissioners,
Government Offices,
Nenagh,
Co. Tipperary,
Ireland

Tel: +353 67 33533
Fax:. +353 67 32916

What documentation is required to support a refund claim?

All refund claims should be accompanied by original dividend voucher(s) and/or subsidiary tax certificate(s). In certain instances, International Claims Section will entertain the processing of “bulk claims” from nominee companies on behalf of their underlying clients. Where such claims are permitted, Form: Bulk Claim Int should be used and, in addition to provision of original dividend voucher(s) and/or subsidiary tax certificate(s), nominee companies will be required to furnish statements to the effect that they hold the relevant shares in a nominee capacity only. Letters of authorisations are required from the underlying clients to the effect that the nominee companies are empowered to claim refunds of DWT on the clients’ behalf.

In order to establish entitlement to a refund, it will be necessary to provide the following information:

  • Individuals resident in a relevant territory - to show the tax resident status of the claimant, we will accept a copy of the certificate which was issued in order for the claimant to obtain an exemption from DWT.
  • Companies resident in a relevant territory and entitled to exemptions on the basis of tax residence status and control by persons not resident in Ireland - to establish the basis for entitlement to exemption, we will accept a copy of the certificates which were issued in order for the claimant to obtain an exemption from DWT.
  • Companies resident in a relevant territory and entitled to exemptions on the basis of auditors’ certificates - to show the “ultimate control”/“share trading” status of the claimant, we will accept a copy of the auditor’s certificate which was issued in order for the claimant to obtain an exemption from DWT.
  • Companies resident in a relevant territory but NOT entitled to exemptions - to show the tax resident status of the claimant, the claim must be accompanied by a certificate from the tax authority in the country of residence of the claimant. The Dividend Withholding Tax Refund Claim Form incorporates a tax residence certificate which can be completed and stamped by the tax authority where the claimant is resident for tax purposes. A letter from the tax authority can be substituted if the certificate cannot be completed by the tax authority. In the case of companies resident in the United States, we will accept Form 6166, issued by the US Internal Revenue Service. This form will be valid from the date on which it issues to 31 December in the fifth year following the year in which it issues.
  • Bodies of persons resident in a relevant territory - to show the tax resident status of the claimant, we will accept a copy of the certificate which was issued in order for the claimant to obtain an exemption from DWT.
  • Companies not resident in a relevant territory, but entitled to exemptions on the basis of auditors’ certificates - to show the “ultimate control”/“share trading” status of the claimant, we will accept a copy of the auditor’s certificate which was issued in order for the claimant to obtain an exemption from DWT.

The foregoing assumes that all persons who are potentially entitled to seek exemptions from DWT actually wish to obtain exemptions. In cases where a non-resident person might not be able to obtain an exemption, but wishes to obtain a refund of DWT deducted e.g. a company which is resident in a relevant territory, but which cannot obtain an exemption on the basis of an auditor’s certificate, or where a non-resident person does not wish to obtain an exemption e.g. where a person who once held shares in Irish companies, and received a net dividend, no longer owns these shares and no longer requires a DWT exemption, then the tax residence status of the claimant must be certified by the relevant tax authority, either on the relevant refund claim form or on a supporting document, as appropriate.

In addition, certain individuals who are not resident in Ireland and who are ordinarily chargeable to tax in respect of any income arising from sources within Ireland may claim relief from that tax. Those who may claim this relief include:-

  • Citizens of Ireland
  • Individuals who have been resident in Ireland and who now reside outside Ireland for the sake or on account of her/his health or the health of a member of her/his family resident with her/him
  • Individuals who, before 5 April 1935 were:
    • British subjects
    • employees, ex-employees of the British Crown or their widows
    • residents of the Isle of Man or the Channel Islands
  • Citizens, subjects or Nationals of Member States of the European Union
  • Residents of Members States of the European Union whose Irish income represents at least 75% of their total world income
  • Residents or Nationals of a State with which Ireland has a Double Taxation Agreement which provides for such relief.

In these cases, Form 59 Claims (F.R.) is used to claim relief. Generally, proof of citizenship (in the form of a photocopy of the claimant’s passport) is required in support of a claim.

Forms for non-resident persons seeking to reclaim refunds of DWT can be obtained from International Claims Section at the address outlined above.