UK Tax on Ireland domiciled ETF dividends:zero for nonresidents? distributions-n

[partington]

This is quite a specialised question, but it's always possible someone will know the answer.

I have some unit trust and ETF investments with an online broker in the UK, and have been getting dividend payouts from these over the last year. On my end of year tax form from the broker these are divided into 'UK dividends' for the funds based in the UK, and 'foreign dividends' - the vast majority -as most of the ETFs are domiciled in Ireland or Luxembourg.

I was entering my details into UK tax software (I'm usingTaxCalc) and as soon as I tried to enter the dividends from the Ireland and Luxembourg ETFs under the 'foreign income : dividends' section it flashed up a dialogue box that said, 'as you have indicated you are non-resident in the UK, foreign income is not taxable, and so you do not have to fill in these pages'!

This seems a bit too good to be true, that simply by buying (accidentally) a load of funds that are run out of Ireland or Luxembourg, the dividends are treated as income arising in a foreign country, so even though it goes straight into my broker account in the UK, it is considered not taxable in the UK because I'm not a UK resident)?

Is this really correct, does anyone know? And if so, why isn't this recommended on all the investment sites for expats?

[Oxx]

If you're non-resident in the UK you are not subject to income tax on non-UK income/dividends, so this is right.

In fact, the reason that many ETFs and some funds are not resident in the UK, using jurisdictions such as Ireland, Luxembourg, Jersey, is that they are then not subject to UK taxes, and so much more attractive to non-UK residents.

[KittenKong]

As a non-resident I have Irish ETFs held by a UK stockbroker also and they are certainly neither taxed nor to be declared. For non-residents without any taxable UK income, UK ETFs and shares and interest aren't taxed either and several years ago HMRC told me not to bother filing a return at all unless I started getting some taxable income. That wont be until I'm 68 (some hope!).

[Pikeybkk]

Any offshore investment leave it up to the investor to declare their incomes, they do not report it to any authorities except for residents of the country in which they are based, which they have to by law. This would be the norm. Thus the onus is upon you but know this, the walls of privacy are being torn down.

[Eneukman]

If you're non-resident in the UK you are not subject to income tax on non-UK income/dividends, so this is right.

In fact, the reason that many ETFs and some funds are not resident in the UK, using jurisdictions such as Ireland, Luxembourg, Jersey, is that they are then not subject to UK taxes, and so much more attractive to non-UK residents.

Correct. I have dividends that are paid in Euros or US $ and I do not have to include them in my tax return. However, you should submit form SA109 to let HMRC know that you are not resident in the UK for income and capital gains tax purposes.

Alan

[Oxx]

If you're non-resident in the UK you are not subject to income tax on non-UK income/dividends, so this is right.

In fact, the reason that many ETFs and some funds are not resident in the UK, using jurisdictions such as Ireland, Luxembourg, Jersey, is that they are then not subject to UK taxes, and so much more attractive to non-UK residents.

Correct. I have dividends that are paid in Euros or US $ and I do not have to include them in my tax return. However, you should submit form SA109 to let HMRC know that you are not resident in the UK for income and capital gains tax purposes.

Alan

Of course, the currency of the dividend is totally irrelevant. Plenty of offshore ETFs pay in sterling. Just a couple of examples I hold are iShares SEMB and INXG, both traded on the London Stock Exchange but domiciled in Ireland.

[ozyjon]

It's good to be rich, being poor sucks.

[peleid]

Just one point which people may or may not be aware of, if you rent your property out in England and live abroad, it does not matter whether you get 1,000 pound or 15,000 pound from this, by English law everybody has to fill in a tax return.

Malcolm

[humqdpf]

Generally speaking, Country A has no interest in income you earn in Country B as long as you are non-resident in Country A. You can of course be taxed in Country B unless you are resident there. I have no idea how Thailand treats income or other gains earned abroad by residents. You might want to check that.

You also need to be sure that you are truly non-resident in the UK, especially if you have a British passport - there are guidelines about the number of days you can stay in the UK in any one tax year if you wish to remain non-resident. It also helps to be able to prove residence in another country (such as a resident permit), should the British revenue come calling.

Internationally, many of the tax rules have been or will soon be tightened up - for instance, in the UK until very recently, non-resident (and non-domiciled) individuals did not have to pay capital gains on the sale of real estate. Now no more. And the British Government and other jurisdictions will make more of an effort to gather taxes on assets and profits that hitherto were taxed in other jurisdictions at lower rates. Some of the folks who make money on line in say Thailand but make profits/income in the UK may find greater scrutiny.

Just as with the money laundering rules, the new tax rules in a number of countries will probably make life more difficult for the small guys while the large companies get away with it. For instance, I moved country and my UK bank immediately wanted a large amount of information from me - this is to fulfil their responsibilities under the new money laundering laws. But if I had been a company with ownership that was far from transparent in one of those jurisdictions that are less onerous, no one would have asked a question about origin of funds or anything else.

Again, HM Government is waking up to at least some of this - apparently some of those very expensive properties in central London (where a 4 bed house will cost you $8million), have been bought up by companies with unknown beneficial ownership and there is the suspicion that some of the money involved is dirty (e.g. drug profits).

[partington]

Thanks for the replies-I've been googling for hours on this, and although clear descriptions of my exact situation are hard to find, (mostly I think because it is very unusual in today's financial climate for a non-resident UK citizen to be able to have a UK broker's account, and this is likely to get even rarer in future) this looks like it's absolutely correct.

It is very clearly stated by HMRC that, for UK residents, Irish-domiciled ETF dividends are classified as "foreign income" and must be entered on your tax form as "foreign dividends". As somebody pointed out above, the currency of payment is completely irrelevant, as is the investment basis of the ETF. One of my Ireland ETFs is a UK government bond fund invested entirely in UK gilts and paid in pounds. The domicile of the fund makes this "foreign income"(although interest here rather than dividend); another is a UK high-dividend company ETF, also only invested in UK companies, paid in pounds, and also classed as "foreign income".

It's also very clearly stated by HMRC that for non-residents, only UK-arising income and NOT foreign income is taxable, so putting these two statements together makes it very clear that if you invest in UK shares or bonds via an Irish fund, and you are non-resident, you don't even have to declare it, even if done through a UK-based broker!

Amazing what you learn. I am nearly a thousand pounds better off that I thought I would be yesterday, since nearly all of my dividend/interest is not even declarable. I too, have not had to fill in a UK tax form for years (I've been non-resident for well over ten years) as my only income was from rental, and this never went above the personal allowance, so HMRC asked me to stop sending returns.

Over the years the rent has increased, and over the past year I have had significant new dividend accumulation that took me (I thought!) above the personal allowance for the first time , so I began to try to fill in my first tax return for ten years.

But with the excluded foreign dividends I'm nowhere near the personal allowance limit, so a celebratory drink is in order I think...

[topt]

Just one point which people may or may not be aware of, if you rent your property out in England and live abroad, it does not matter whether you get 1,000 pound or 15,000 pound from this, by English law everybody has to fill in a tax return.

Malcolm

This may be true as a general principal but your statement above " by English law everybody has to fill in a tax return." is provably factually inaccurate.

As long as the tax man knows you are renting and agrees (because any taxable income is below the personal allowance for example) then you may be told (as the OP mentions above) not to bother - as I was also.

[peleid]

Just one point which people may or may not be aware of, if you rent your property out in England and live abroad, it does not matter whether you get 1,000 pound or 15,000 pound from this, by English law everybody has to fill in a tax return.

Malcolm

This may be true as a general principal but your statement above " by English law everybody has to fill in a tax return." is provably factually inaccurate.

As long as the tax man knows you are renting and agrees (because any taxable income is below the personal allowance for example) then you may be told (as the OP mentions above) not to bother - as I was also.

Both my wife and I have been fined 100 pound by the inland revenue for filing a tax return, although we are both under the tax thesh hold, YOU HAVE BEEN WARNED!!

[peleid]

Sorry, my apologies, that was for not filing a tax return

[topt]

Just one point which people may or may not be aware of, if you rent your property out in England and live abroad, it does not matter whether you get 1,000 pound or 15,000 pound from this, by English law everybody has to fill in a tax return.

Malcolm

This may be true as a general principal but your statement above " by English law everybody has to fill in a tax return." is provably factually inaccurate.

As long as the tax man knows you are renting and agrees (because any taxable income is below the personal allowance for example) then you may be told (as the OP mentions above) not to bother - as I was also.

Both my wife and I have been fined 100 pound by the inland revenue for filing a tax return, although we are both under the tax thesh hold, YOU HAVE BEEN WARNED!!

Suggest you read my post again - I said as long as the tax man agrees/tells you that you do not need to. As well as that HMRC also have to agree for you to be paid gross otherwise the tenant/agent are supposed to withhold and account for the tax.

An interesting link here for those who want to know more https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4800

Apologies to partington.