Dividend tax

Discussion in 'Business Discussion' started by Suzy Emerald, Oct 27, 2018.

  1. Suzy Emerald

    Suzy Emerald Building Trust Entrepreneur


    I need to pay 5% dividend tax in country A when I pay myself dividend out of my company. I live in country B. Would I in general need to pay income tax over these dividends in country B?
  2. jackfrost

    jackfrost Building Trust Entrepreneur

    Usually you would pay the dividend tax in your country of residence (tax residence) depending on which country you are based in and double tax agreements. If country A also has you on the hook with their tax laws the double tax agreements would -usually- shift that over to country b. Also make sure that country A company is actually considered a country A company or in reality country B company by country B since you are UBO etc pp otherwise you will be on the hook for corp taxes in country B at their corp tax rate.
  3. Suzy Emerald

    Suzy Emerald Building Trust Entrepreneur

    @jackfrost Thanks for the info. I would actually not spend time in country A but rather spend 80% of my time in B. The company is formed in A and will have an physical office there as well. Local laws in A require 5% dividend tax so I thought I would not need to pay any tax on these amounts in country B.
  4. jackfrost

    jackfrost Building Trust Entrepreneur

    Well from the sounds of it you are tax resident in country B then (does not need to be even with 80%)

    Just an office is usually not enough to not make country B declare your company as a country B resident / taxable company if you hold the majority of shares. You will need to check your country B CFC / foreign income / management whatever laws.

    Lets suppose you pass country Bs substance tests for those and it it is ok with company being a country A company and being taxed in country A then you should probably check the double tax agreement between your two countries. They will have a dividend / passive income clause that will tell you which country is allowed to tax you in which way on those dividends. You might get taxed in both countries but country B might give you a tax credit for the 5% paid in country A. It is very unlikely (unless we are talking Malta, Cyprus etc) that you are not going to pay proper dividend taxes in country B with country B's dividend tax rate.

    The double tax agreement will also have clause about what constitutes proper local offices / substance tests in which country and what makes which country be the tax receiver for said company or local office / subsidiary of said company.

    Mind you this is all very dangerous private knowledge from having to deal with it myself so just a starter for you to know where to look. I don't understand a lot of those parts correctly myself. Final word should come from a tax lawyer - i would always advise two independent lawyers.
    Suzy Emerald likes this.