I'm considering to open an account at IB. Only one final question remains: what is the withholding tax situation? I want to avoid to pay tax on dividends twice.
I'm a Belgian citizen, living in Switzerland (Vaud).
I have contacted IB for this, and got the following response:
What does this really mean?
* IB will always provide tax information to CH, so better make sure that my tax sheets are filed correctly?
* IB will not withhold any taxes on dividends, except for US corporations. I will need to pay tax on them in CH?
* dividends of US corporations will be tax withheld by IB, do I need to pay yet again tax in CH then? Does the US and CH have a tax treaty?
My current situation with my broker in Belgium is that I am not taxed at all on any dividends. It's up to me to declare the income of dividends in CH.
Of course tax is applicable! Dividends are income and you are required to include them on your tax return assuming you are required to submit a tax return.
I have a question on this topic and general taxation of dividends in Switzerland.
I will receive the total of about $1000 in dividends from various US companies that I have in my IB account. IB is not withholding US taxes from me. (Im a US citizen)
I plan to declare these dividends here and pay taxes on them next year....my questions are:
1) Does the tax I pay on these dividends get credited to the tax owed in the USA? Even if I file a FEIE for my earned income?
2) Do dividends get taxed at your normal income rate here or is there a lowered tax rate for them in Switzerland? In the USA I would pay 15% tax on qualified dividends and here my ordinary tax rate is about 20-22%
I would be very helpful to whoever can help me here...I have searched this topic on the zurich tax website and have only found references to the much more familiar case of people being taxed at source in the USA and looking to get the money back.
This is what the Ct. Zurich tax office has to say about supplemental income in addition to source-taxed earned income:
"13. What does a supplementary withholding tax assessment mean? Persons liable for withholding tax who are domiciled in Switzerland or in the Canton of Zurich respectively for tax purposes shall be assessed in respect of their income that is not subject to withholding tax (e.g. earnings from self-employed part-time working, pensions, earnings from moveable assets and real estate in Switzerland and abroad, support contributions etc.), as well as for their assets within the context of the ordinary procedure. In this supplementary ordinary assessment procedure, the income that is subject to withholding tax shall be taken into account when determining the applicable rate. If necessary, the person who is liable for withholding tax must submit a tax return to the municipal tax office of his place of residence. If withholding tax that has been imposed upon securities earnings is to be reimbursed, a schedule of securities must in every case be submitted to the municipal tax office of the person who is subject to withholding tax. "
This question is still unresolved. How should I arrange to correctly file dividends in CH (and obviously then be taxed on them), but avoid that I am taxed 15% in the US, and then on top of it also be taxed again in CH?
If I must pay (say) 20% tax, because it is considered as income tax, I can live with that. At least, if that means I don't need to pay the 15% US tax. I don't want to pay 35% tax...
Two and a half years and no direct answer . I've been asking this question as well and even paid a visit to the Steueramt, but nobody could tell me how it works.
It really should not be complicated. You list the dividends on your swiss tax return under investment income. They get taxed at normal income tax rates in Switzerland. You are then able to credit this amount paid to your outstanding us tax obligation. Typically, the swiss tax is higher than the US tax on dividends so you pay no taxes to uncle sam.
I've never had to do this for the US though, my personal deduction and exemptions still exceed my dividend income. Thus I wouldn't even begin to know how to list in on the US return
And what if I buy UBS SPI, a Swiss-domiciled ETF? Is there a withholding tax on that?
What if I buy some Vanguard or iShares ETF, domiciled in Ireland? They hold stocks from around the World, not only USA. What is the tax rate, at which Point is it levied, is there a way to get it back?
It doesn't matter, as long as the US has a tax treaty with the country where the shares are being offered you can claim a tax credit.
If you are investing in Iran's "Ayatollahshares Tehran 100 Index", you might have a problem
Regarding withholding tax, I try to sty away from countries that have withholding taxes on dividends.
It's too much a time and energy sink to do it. (unless dealing with very significant sums of money) Otherwise, why gumm up your tax returns with countless additional pages
Ok, but what with a simple case of Holding NESN (Nestle) shares? The are Swiss domiciled, I am also Swiss domiciled. They pay out each year 3% dividend. Let's say I hold 100 000 CHF worth of NESN, that means a dividend of 3000 CHF. Will the tax Office take away 35%? Can I reclaim it? Do I have to declare it as income? Is the answer to any of These questions depending on if I pay the Quellensteuer?
If you are filling in a Swiss tax return, you will state on your tax return how much in Nestle shares you have, how much dividend income you made and how much tax was withheld. Then the tax already paid will be deducted from your overall taxes due. (1-1) Its very straightforward.
For quellensteuer, it gets complicated. Theoretically, your quellensteuer and your dividend witholding taxes settle your bill with the tax authorities. There are no tax forms to fill out and you are done. Maybe you paid more in withholding taxes than you actually should have but thats the name of the game. On the other hand, your 100k Nestle fortune is not subject to wealth tax. You also live in Zurich city based on profile, so your quellensteuer is actually likely less than you would pay if you you did a tax return
Thanks a lot, that's the kind of clarification I needed. What remains a mystery, is how a multi-country ETF domiciled abroad deals with withholding tax. In this case we have three countries involved: domicile of the investor (Switzerland) domicile of the fund (Ireland) domicile of the stock (US, Germany, Japan, China, etc.)
Yes, that's all true. Fair enough. I wonder though, what happens if I start earning over 120 000 in the near future? I will be required to submit a tax declaration. Will I be able to deduct the dividend tax then? I do live in Zurich, but if that day comes, I will consider moving to some place with lower Steuerfuss, like Küsnacht, Kilchberg or Thalwil.
You then have the option of requesting a tax refund from the IRS if tax was withheld at source for US-source income, based on the relevant US-Swiss tax treaty, or you follow the suggestions above re disclosing the withholding to the Swiss tax authorities and using it as an off-set.