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bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 2989
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A client of ours earns money through a personal services

Customer Question

A client of ours earns money through a personal services company in the UK. He also has a job earning way over the personal allowance so any dividends or salary will be heavily taxed. He is Greek and his wife lives, works and earns well in Greece. I have read that personal tax in Greece on dividends from foreign companies is at 10% and UK tax arrives there with a 10% tax credit with Greece having a Double Tax Treaty with the U.K.If this is the case it would be advantageous for the company shares to be in his wife's name. Is this the case or am I missing anything?
Submitted: 4 months ago.
Category: UK Tax
Customer: replied 4 months ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 4 months ago.
Pease cancel the previous request, it was a typo.
Expert:  bigduckontax replied 4 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

You are behind the times. The notional 10% tax credit on dividends ended on 5 April 2016.

Dividends are now tax free to an UK taxpayer up to GBP 5000 per tax year and taxed at the following rates thereafter [source: Gov UK web site]:

'Basic rate taxpayer - 7.5%

Higher rate taxpayer - 32.5%

Additional rate taxpayer - 38.1%'

However, depending on the quantum of the dividends, it may still be advantageous for the shares to be transferred into his spouse's name. There will be no Capital Gains Tax (CGT) liability on this disposal as inter spousal transactions do not attract CGT. Some time with a wet towel round the head and the backs of a number of used envelopes will be required to make the appropriate calculations.

I do hope that you have found my reply of some assistance.

Customer: replied 4 months ago.
Not quite yet.....the interesting part of the question is what happens to those dividends in the hands of a Greek national/resident spouse?
Expert:  bigduckontax replied 4 months ago.

They will be received bearing UK taxation credit at the 7.5% basic rate. This tax credit can be used to offset part of the Greek taxation liability.

Customer: replied 4 months ago.
have you any knowledge of how these dividends would be taxed in the hands of a Greek national?
Expert:  bigduckontax replied 4 months ago.

The general rule appears to be a taxation level of 10%, which is where we came in! A full summary can be found here:

file:///C:/Users/Intel/Downloads/Recent%20developments%20in%20tax_2015_Greece.pdf

Customer: replied 4 months ago.
Sorry Mr Duck, I don't seem to be able to open the attachment (but I am working on an I pad). Is there an alternative way of sending it?
Expert:  bigduckontax replied 4 months ago.

Here is the relevant extract from that source:

'10. Tax treatment of income from dividends, interest and royalties Pursuant to Law 4172/2013, in conjunction with Ministerial Circular 1042/26.01.2015, the income acquired by a natural person in cash or in kind in the form of dividends, interest and royalties is considered income from capital. In brief:

• For natural persons income from dividends is taxed with a 10% coefficient, income from interest is taxed with a 15% coefficient, and income from royalties is taxed with a 20% coefficient.

• For legal persons or legal entities having their residence for tax purposes in Greece, with regard to the income stated by them, there is tax withholding with a 10% coefficient for dividends, with a 15% coefficient for interest and with a 20% coefficient for royalties.

• For a domestic natural person or a natural or legal person or a legal entity which does not have its residence for tax purposes and does not keep a permanent establishment in Greece (i.e. with an office, a branch, etc.), tax withholding on all the dividends, interest and royalties exhausts their tax obligation.

• For natural persons exercising a business activity, by virtue of the royalties they hold (e.g. artists, authors, etc.), for income from royalties whether of domestic or foreign origin, the exhaustion of the tax obligation does not apply, but they are taxed as income from a business activity.

• No 10% withholding is implemented on profits exported by a permanent residence in Greece (branch) of a foreign company to its central office abroad, since the branch has no legal personality.

• For a domestic legal person or a legal entity, whether for-profit or non-profit, or a permanent establishment in Greece of a foreign legal person, income from dividends or interest, tax withholding is implemented without exhausting the tax obligation, it is taxed as income from a business activity and the tax withheld is set off with the income tax.

• For a natural person, resident abroad for tax purposes, the income from dividends or interest abroad, regardless of whether they are entered in Greece or not, must be entered in such person’s annual income tax statement.

• For a natural person, resident abroad for tax purposes, if income from interest abroad has been imported in Greece, tax withholding is implemented on the gross amount of the interest and withholding is carried out by the domestic financial-credit institution or trustee which intervenes as a payment body and exhausts the tax obligation of the natural person.

• Provided that the beneficiaries of the income from dividends, interest and royalties, whether natural persons or legal persons or legal entities, do not have their residence for tax purposes in Greece or do not keep a permanent residence in Greece, but they are residents of a state with which there is a D.T.T., the provisions of the bilateral treaty shall apply, by virtue of increased typical power.'

Please remember that Just Answer essentially provides an UK taxation advice site.

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