How is UK dividend income taxed for French residents?

When our accountant declared our qualifying UK dividend income for 2018 this year, she did not enter the tax credit [listed in the notes to the tax forms] for UK dividend income of 17.7% that I thought was allowed. Is there, in fact, no tax credit to be deducted?   Are dividends received in the UK received gross or net of tax? Is there still an abatement of 40% in France and, if so, how is this applied? We live in France.  J.H.

28 August 2019
By Hugh MacDonald

UK dividends have been paid gross now for several years, so there has been no tax credit to declare on the French tax declarations; the dividends are declared gross.

As for the tax credit, firstly, this should not now be used since no UK income tax is now deducted at source on the UK dividends.

With regard to the rate of 17.7%, this is incorrect and no one understands where the French tax authorities (Fisc) found this rate.

Previously, when the UK did deduct income tax at source on dividend income, the rate deducted was 10% and when net after-tax dividend income was declared in France, the Fisc made things easy to find the amount of then UK income tax deducted by providing the necessary multiplier. 

So, dividend income of €100 gross meant that in the UK the 10% tax would amount to €10 and thus the net income was €90 and by applying the correct multiplier of 11.2% to this net income, this gave the €10 tax paid.

When added to the net of €90, this gave the gross dividend taxable of €100. 

The current proposed multiplier of 17.7% relates to a UK income tax rate of 15%, which never applied to dividend income, so where this comes from is a mystery.

However, in any event, as stated above, this should not be used as there is no longer any income tax on UK dividends.

There is still a 40% abatement on the gross that is applied for income tax (if you opt out of the “flat tax”) but not social charges, which are levied on total dividend income.

 

Reader's query answered by Hugh MacDonald

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