Re: taxes on uk dividends
 

Well some taxes have been paid on it but in another way: like this article below explains and what I meant is that the Spainish authorities would probably not take this into account and charge us with a further tax on the income?!

Understanding the dividend tax credit

Companies pay you dividends out of profits on which they have already paid - or are due to pay - tax. The tax credit takes account of this and is available to the shareholder to offset against any Income Tax that may be due on their 'dividend income'.

When adding up your overall taxable income you need to include the sum of the dividend(s) received and the tax credit(s). This income is called your 'dividend income'.
How tax credits are worked out

The dividend you are paid represents 90 per cent of your 'dividend income'. The remaining 10 per cent of the dividend income is made up of the tax credit. Put another way, the tax credit represents 10 per cent of the 'dividend income'.

Dividend income at or below the £35,000 basic rate tax limit

Re: taxes on uk dividends
 

“Because all contractor dividends are paid after the contractor limited company has already paid corporation tax at 21% on the profits, to avoid paying tax twice (‘double taxation’), dividend payments carry a ‘tax credit’. That means the taxman assumes tax of 10% has already been paid on the dividend.
Contractors may see the phrase ‘a dividend tax credit franks the net dividend for the basic rate of taxation’. All this means is that the taxman considers that basic rate taxpayers have already paid tax of 10% on the dividend, via corporation tax paid by their limited company, and have no more tax to pay.
What this also means is that there is what’s known as a gross dividend, which is what the dividend would be if not for the tax credit. The gross dividend is calculated by ‘grossing up’ the net dividend. To ‘gross up’ the dividend, multiply the net dividend, which includes the tax credit remember, by 10/9. This is important, because when a contractor needs to declare their taxable income, the calculation must use the gross and not the net dividend.
So if the contractor limited company pays a dividend of £9,000, the tax credit is 10% of the gross dividend, or £1,000, and the grossed-up dividend is £10,000. What the contractor actually receives is £9,000, and what goes into the paperwork as taxable income is £10,000. “
“Tax payers cannot claim the 10 per cent income tax dividends credit if your taxable income is less than your personal tax allowance as no tax is payable. This is because the 10 per cent income tax dividends tax rate is a credit against any income tax due, not a tax refund.
IR35 Dividend Income
One further issue regarding the tax on dividends is if the director and shareholder are subject to the IR35 rules then the income from the company must be taken as salary. Dividend income received by someone under the IR35 rules would be subject to being re-assessed as PAYE income with the potential damaging consequences of back dating and reclassifying that dividend income received as PAYE dividends income resulting in back taxes and interest penalties."

it is my understanding the basic salary quoted is not high enough to get the Dividend Tax Credit as stated so there would appear be a potential tax liability and if this is a company subject to IR35 then it would be even greater than shown

On top of all this, National Insurance is only paid on “Income” not on “Dividends” so there would be no liability there unless caught by IR35.

Re: taxes on uk dividends
 

Thanks for that Domino, but going back to my question how would Spain view this??? Would they take into consideration the tax credit...? I very much doubt it somehow!?

I think I might need to get in touch with your solicitors in Peterborough!

Re: taxes on uk dividends
 

I think that's a good idea.

There are clearly some members who do understand the question of UK dividends and tax credits (I'm certainly not one of them:() but the real question is how it will be treated by Spain.

The answer is almost certainly in the link to the HMRC site which covers the Double Taxation Treaty with Spain which I posted earlier.

http://www.hmrc.gov.uk/manuals/dtmanual/DT17609.htm

It seems mind bogglingly complicated so it is essential that you find someone who really understands the Double Taxation Treaty with regards to dividends. I have read though it a couple of times and my brain hurts!

Re: taxes on uk dividends
 

I also read it a couple of times!!! and still none the wiser!:confused:

At the end of the day I think that what ever is written by HMRC is one thing but how will the Spanish authorities see it is another!

I'm very surprised that no other expats have come forward to discuss this issue as I am sure that others must in the same predicament???

Or perhaps keeping it quiet?????:wink_smile:

Re: taxes on uk dividends
 

keeping quiet because they are crying in their cava (or Rioja) that they hadn't realised the fiscal opportunities themselves ? ? :ohmy:

I am really interested in the resolution on this
:sneaky:

Re: taxes on uk dividends
 

http://www.hmrc.gov.uk/cnr/app_dtt.htm#3
gives a starter on the dual taxation

presumably when you move to Spain the company will own the property and you will be paying rent to the company. IIRC you may be able to claim relief on your Spanish tax for some\all of the rent.

this is fairly common with certain elements in the UK, due to the restrictions under Sharia law about interest etc. The wrinkle is if then unemployed could actually claim Housing Benefit :thumbdown:

Re: taxes on uk dividends
 

I have read DT17609 many many times and am still no wiser.
My case is in theory quite simple.
I have a daughter resident in Spain, currently not working. She has a portfolio of shares which will generate dividends from UK based companies and so they will be subject to UK Tax. When she declares this income to the Spanish authorities they will also want to raise a tax on them. Does this double taxation agreement mean that she should pay only 15% in total and to whom will it get paid? ie is it just an extra 5% to Spain and how will they assess it or grant any reliefs.
:confused:

Re: taxes on uk dividends
 

as your daughter is not working will the income from the dividends exceed the initial tax free band under SP income tax rules ?

Re: taxes on uk dividends
 

have you ploughed your way thru DT17609 para 3(b) ???

Re: taxes on uk dividends
 

Her income from the dividends will exceed her basic allowance.
I have re-read para 3(b) and can confirm that she does not fall foul of para 3(c) so if she is entitled to the tax credit what does she end up paying in Spain and the UK.
I still don't get it!

Re: taxes on uk dividends
 

I haven'y commented on this thread so far as this is not something I have personal experience of.

Having do a bit of research on it, as I understand it, under the Double Taxation Treaty dividends paid to non UK tax residents are "Excluded" income (like the State Pension) so no tax is paid in the UK.

Tax on these dividends will have to be paid in Spain at the savings rate of 19% on the first €6000 and 21% thereafter.

I believe there is a basic allowance against dividend income of €1500 plus the personal allowance of €5151. You can also deduct the 10% UK tax credits from the resultant tax due.