Withholding taxes (WHT) on overseas investment income, particularly dividends, are onerous enough but it’s still surprising just how many organisations either don’t reclaim anything at all or, especially in the case of charities, do not reclaim as much as they could. In a revealing article on the subject recently published by leading corporate and charity tax specialists, Baker Tilly, the firm highlighted one case of a charity for whom their international tax services team was able to claim back over £200,000 in respect of just one single year.
This sum was recovered from tax authorities in several different territories including the US, Denmark, Sweden and Switzerland. What international tax services specialists find so remarkable is that even larger sums may be being lost unnecessarily by other UK entities including not-for-profit organisations who rely on every penny that they can raise.
Providers of international tax services are quick to reiterate that withholding taxes are not something that investment managers have to take on the chin and pass on to fund owners. In many cases they can be as high as 35% especially where dividends are concerned meaning that a gross receipt of £100,000 can net down to only £65,000 by the time it arrives in the UK.
Any experienced international tax services expert will tell you that the UK has one of the most sophisticated double taxation networks in the World and organisations with overseas investments should ensure that they are taking full advantage of it. The benefits are often quite substantial with a dividend from a normal portfolio sized shareholding in a Swedish company attracting a 30% WHT which can subsequently be slashed to an actual tax payment of only 5% once international tax services specialists have got to work in securing the appropriate level of refund due under the Sweden-UK double taxation treaty.
If you speak to an international tax services professional, he or she will tell you that it is possible in certain countries to obtain total exemption from WHT if local tax laws afford special taxation privileges to not–for–profit organisations. Even where this is not the case, it is often possible to just have the treaty rates of tax rather than the higher WHT rate applied to investment income at the point of payment where advance clearance has been obtained.
Baker Tilly’s specialist international tax services team is already busily reclaiming WHT for a number of different organisations who all start by receiving a review of investment income sources and which tax authority is involved in each territory. This provides an estimate of potential WHT reclaim values prior to the lodgement of individual refund claims in each of the territories concerned. If you pay WHT on overseas investment income and would welcome advice on maximising refunds, please feel free to contact our international tax services department.