The Fintech company Revolut has slowly and all at once changed how people in Ireland manage their day to day banking and has introduced many to investing for the first time.
Through the Revolut mobile app, you can invest in US stocks and even cryptocurrencies. Although Revolut is not a registered broker in Ireland, the user experience and ease of trading has made it a very popular choice.
In this blog post, we will cover one issue that confuses Irish investors on the Revolut trading app – that is why is US withholding tax being deducted from your dividends? We will also discuss what your responsibilities are as a taxpayer on this dividend income.
Why is 15%/30% withholding tax being deducted from my dividends on Revolut?
If you invest in US stocks on Revolut, there is a 30% withholding tax on any dividend income if you are not a US resident. This rate may be reduced below 30% in certain circumstances if the country you are from has a double taxation treaty with the United States.
Ireland has a double taxation treaty with the United States which can reduce the withholding tax rate to 15%. Therefore you will receive 85% of the dividend income as opposed to 70%.
For Revolut to be aware this reduced rate is to be applied you must fill out a W8-Ben form. This form essentially certifies your foreign status. See below full description as per Revolut.
A W-8 BEN form is an Internal Revenue Service (IRS) form that serves as a Certificate of Foreign Status of Beneficial Owner. By completing this form you confirm that you are not a US taxpayer and that a reduced rating of Withholding may be applied depending on your country of residence and any tax treaty between that country and the US.As per https://www.revolut.com/help/wealth/stocks/understanding-investment-events-and-regulations/what-is-a-w-8-ben-form
Will I have to pay Irish tax on my dividend income from Revolut also?
The taxes you pay on dividend income in Ireland are PAYE, USC and PRSI. This means that the actual rate of tax you pay on the income will depend on how much other income you have. If you single and make over €36,800 per annum from your job the marginal tax rate on any additional income you make will be 48.50%, this rises to 52% if you earn above €70k.
The 15% of US withholding tax that you have already paid will be treated as a credit against any tax due to the Irish tax authorities.
For example. if you received dividend income from Coca Cola shares of €200, US withholding tax of €30 (15%) will be automatically deducted and you will receive a net amount of €170.
When it come to the time of filing your annual tax return in Ireland this €30 will count towards the total tax bill due on this dividend income. If the marginal tax rate of the individual was 52% , this would mean the additional tax payable on this dividend income would be €74 ( 200 * 52% – €30).
Where must I disclose my Revolut dividend income in Ireland?
If you are a regular PAYE worker you can submit your dividend income in your annual tax return which can be accessed on your my revenue account. The deadline for submitting this return is October 31st in the year following you receive the income. ( 2022 dividend income must be included in your 2022 tax return which has a deadline of 31 October 2023). It is also possible to declare this income mid year on revenue.ie.
For self employed or chargeable persons, dividend income can be included on your Form 11 under the relevant section.
More on dividend investing in Ireland:
Therefore dividend income can be taxed quite heavily if you are working. Are you considering becoming a dividend investor? If so you might like to see what kind of investment level is needed to achieve monthly after-tax earnings of €100.
This post is for informational and educational purposes only and should not be construed as financial advice.