Are there any withholding taxes?

Tax (2nd Edition)

Romania Small Flag Romania

Any income obtained by a non-resident from Romania is generally subject to WHT in the rate of 16%, except for dividends which are subject to 5% WHT. In case the income is paid in a bank account located in a country which does not have concluded with Romania an exchange of information agreement, the WHT rate is 50%, but only if it is related to a transaction qualified as artificial.

However, these can be reduced to lower rates and even eliminated under certain conditions.

Australia Small Flag Australia

Broadly, interest, dividends and royalties received by a non-resident from an Australian source will generally be subject to withholding tax (subject to the operation of a double taxation agreement and any specific exemptions which may apply).

Australia also imposes withholding tax on certain other payments (including payments for entertainment, sports and certain construction activities) received by foreign residents that do not have a permanent presence in Australia.

Under Australia’s PAYG withholding regime, employers withhold tax from salaries or wages paid to employees and certain other individuals taxed in the same way. The PAYG withholding regime also operates in respect of payments made to a business that does not quote an Australian Business Number or in respect of certain bank accounts and shares or trust interests, where an investor does not quote a Tax File Number.

France Small Flag France

Dividends paid to a non-resident company are subject to a 30% withholding tax on the gross amount paid, unless provided otherwise by relevant tax treaties. If the dividends are paid to a company located in a non-cooperative jurisdiction, the rate is increased to 75%. As of 8 April 2016, seven countries are considered non cooperative countries by French authorities: Botswana, Brunei, Guatemala, Marshall Islands, Nauru, Niue and Panama.

According to the EU Parent-Subsidiary Directive (2011/196), transposed into article 119 ter of the FTC, dividends paid by a French company to its parent located in another EU member state are, under certain conditions, withholding tax exempted.

Interest paid to a non-resident company is generally not subject to any withholding tax, unless the payment is made to an entity located in a non-cooperative jurisdiction. If so, the 75% rate will also apply to the gross amount.

Royalties paid to a non-resident company are subject to a 33.1/3% withholding tax on the gross amount paid.

According to the EU Interest and Royalties Directive (2003/49/CE), transposed into article 119 quater of the FTC regarding interest and article 182 bis of the FTC regarding royalties, interests and royalties paid by a French company to its parent located in another EU member state are, under certain conditions, withholding tax exempted.

Belgium Small Flag Belgium

Companies fall under the obligation to withhold a payroll tax on remuneration and pensions paid to both resident and non-resident employees and directors. There are partial exemptions of payroll tax available for the employer in certain circumstances. Payroll tax is deductible in the hands of the employer.

Withholding taxes are levied on income stemming from movable property, such as dividends, interest or royalties. Such withholding tax may be offset by the recipient of the income against its corporate income tax, provided that certain conditions are met.

Bulgaria Small Flag Bulgaria

Yes. Withholding tax is due by foreign entities on incomes derived from the country:

The income from financial assets issued by local legal entities, the State and the municipalities shall be income from a source within the country.

The income originating from transactions in financial assets shall be income from a source within the country.

The income from dividends and liquidation shares in local legal entities shall be income from a source within the country.

The following types of income assessed by local legal entities, local sole proprietors or foreign legal entities and sole proprietors through a permanent establishment or a fixed base within the country, or paid by local natural persons or foreign natural persons, having a fixed base within the country, in favour of foreign legal entities, shall be income from a source within the country:

  1. interest, including interest comprised in financial leasing contributions;
  2. income originating from rent or any other granting of the use of movable property;
  3. royalties;
  4. remuneration for technical services;
  5. remuneration under franchising contracts and factoring contracts;
  6. remuneration under contracts for management and supervision of a Bulgarian legal entity.

The income originating from agriculture, forestry, game husbandry and fish industry inside the territory of the country shall be income from a source within the country.

The following income shall also be deemed to be from a source within the country:

  1. income from renting or other grant of use pertaining to immovable property, including ideal share of immovable property located within the country;
  2. income from disposal of immovable property, including ideal shares thereof or limited property rights thereupon, that is located within the country.

United States Small Flag United States

Yes. Most U.S. source income, except for capital gains, that is paid to a foreign person is subject to a 30 percent withholding tax. The withholding rate may be reduced or eliminated by a tax treaty. Further, the disposition of a U.S. real property interest by a foreign person is generally subject to FIRPTA withholding of 15 percent. Withholding may also apply at a 30 percent rate under FATCA for non-compliant entities.

Canada Small Flag Canada

Canada imposes withholding tax at a statutory rate of 25% on a number of types of payments from Canada to non-residents, including dividends, trust distributions, rents, royalties and management fees. Withholding tax does not apply to interest payments made to arm’s length non-residents, unless the interest is “participating debt interest”. The withholding tax rate may be reduced or eliminated by a tax treaty. For instance, under the Canada-US Tax Treaty there is an exemption from withholding tax on non-arm’s length interest payments.

A 15% withholding tax applies to amounts paid to a non-resident of Canada for services rendered while physically in Canada. This withholding tax is a prepayment of the non-resident’s Canadian income tax from carrying on a business in Canada. If the non-resident is entitled to the benefits of a Canadian tax treaty, then the withholding tax may be refunded on the filing of a Canadian tax return if the non-resident does not have a Canadian permanent establishment.

Where a non-resident disposes of “taxable Canadian property”, the purchaser is required to withhold 25% of the purchase price unless it is provided with a tax clearance certificate issued by the Canada Revenue Agency. Such a tax clearance certificate will be issued if the seller has paid or provided security for any Canadian capital gains tax arising from the disposition. “Taxable Canadian property” generally includes (a) Canadian real property, (b) property used in a business carried on in Canada, (c) designated insurance property, and (d) equity interests in corporations, partnerships or trusts that derived more than 50% of their value from (1) Canadian real property, (2) Canadian resource properties and/or (3) Canadian timber properties at any time in the 60 month period prior to the disposition. In the case of corporations that are listed on a designated stock exchange, mutual fund corporations and mutual fund trusts, the non-resident seller must have held at least 25% of the issued shares or units at any time in the 60 month period prior to the disposition in order for the shares or units to be treated as “taxable Canadian property”.

Ukraine Small Flag Ukraine

As a general rule, non-residents’ profits from a source of origin from Ukraine are taxed by withholding taxes at rate 15%. Therewith, the aforementioned tax rate may be reduced in accordance with a tax treaty on avoiding double taxation, and in cases established by the Tax Code of Ukraine.

Cyprus Small Flag Cyprus

There are no withholding taxes on dividends or interest paid to non-residents. Royalties or similar payments to a non-resident for intellectual or industrial property rights are liable to withholding tax only if they are for the use of the rights within Cyprus: no tax need be withheld if the rights are used exclusively outside Cyprus. The rate of withholding tax for use of general intellectual or industrial property rights within Cyprus is 10%; rental payments made to non-residents in respect of films shown in Cyprus are subject to withholding tax at 5% of the gross amount, in either case subject to relief under any applicable double taxation treaty.

Ecuador Small Flag Ecuador

Withholding taxes apply to all payments made locally by withholding agents. It also applies to all payments made by any individual or entity to a foreign beneficiary.

The withholding tax rates applicable to local payments go from 0.2% to 10% depending of the nature of income being paid.

The withholding tax rate applicable to payments abroad is 10%-13%-22%-25% or 35% depending on the nature of the income paid or the jurisdiction of residency of the recipient of payment.

United Kingdom Small Flag United Kingdom

There is no withholding tax (WHT) on dividends paid by UK companies, save for a 20% WHT applied to certain dividends paid in respect of income profits and capital gains of a UK real estate investment trust. Interest and royalties are subject to a 20% WHT unless the rate is reduced under a double tax treaty or exempt under the Interest and Royalties Directive, or the interest is considered to be short interest rather than yearly interest.

In Coal Staff Superannuation Scheme Trustees Limited v Commissioners for Her Majesty's Revenue & Customs [2016] UKFTT 450 (TC), the tax tribunal held that EU law allowed HMRC to charge UK withholding tax on manufactured overseas dividends owned by a pension fund when it did not charge an equivalent tax on manufactured dividends in relation to UK shares. According to the Tribunal, this regime did not breach Art. 63 TFEU. Even if the regime did involve a restriction on the free movement of capital, it was justified for reasons of fiscal cohesion. This decision is under appeal to the Upper Tribunal which has already rejected a preliminary application for an immediate reference to the CJEU notwithstanding that the Brexit process might render a future reference an impossibility; see [2017] UKUT 0137 (TCC).

Gibraltar Small Flag Gibraltar

There are no withholding taxes in Gibraltar.

Switzerland Small Flag Switzerland

Switzerland does levy a withholding tax, at a rate of currently 35%, on profit distributions made by Swiss-resident companies. Swiss-sourced interest payments on specific debt instruments, i.e. bonds and similar instruments such as serial mortgage notes, serial promissory notes, deposit certificates, commercial papers and money market papers, are also subject to withholding tax at a rate of 35%. The same applies for interest paid on savings accounts of banks resident or domiciled in Switzerland. No withholding tax applies on interest paid on ordinary loans.

Furthermore, the creditor of a loan which is secured by a mortgage pledge may be liable for Swiss federal and cantonal income tax on interest received if the property in question is located in Switzerland. In such case the (Swiss) debtor would be required to withhold the federal and cantonal income tax due and remit the amount to the competent Swiss tax authorities.

Swiss-resident recipients can normally obtain a full refund of withholding tax, whereas foreign recipients may do so only if they fall under the relevant provisions of an applicable tax treaty.

Israel Small Flag Israel

Israel maintains a broad withholding system applicable to both domestic and outbound payments.

For example, Interest payments to corporate entities are generally subject to withholding tax at the standard corporate tax rate level (currently 24%) unless a withholding certificate providing for a lower rate (or exemption) is provided. Payments to non-Israeli residents may be eligible for reduced rates of withholding under a tax treaty.

For withholding from dividend payments, please refer to question 22 below.

Other payments to non-Israeli companies (such as capital gains derived from the sale of an asset located in Israel) are generally subject to the standard corporate tax rate, collected via withholding. Certain exemptions with respect to the sale of securities may be applicable under domestic law or a tax treaty.

Italy Small Flag Italy

Italy levies withholding taxes (WHT) on the following outbound payments:

  • Dividends: dividends paid to non-resident companies are usually subject to a 26% WHT which may be reduced by the applicable double tax treaty. Dividends paid to companies resident of an EU or EEA member State are subject to a 1,2% WHT. The WHT rate can be reduced if a double tax treaty or the Parent Subsidiary Directive is applicable;
  • Interest: interest payments made to non-resident companies are usually subject to a 26% WHT. Some exemption from WHT are provided for certain interest payments received by non resident companies. For example: (i) no WHT is levied on interest from certain bonds paid to persons tax resident of jurisdictions with an effective exchange of information with Italy; (ii) no WHT is levied on interest from Italian current accounts; (iii) no WHT is levied on interest payments made in relation to long-term (more than 18 months) loan arrangements granted by certain companies or entities. The WHT rate can be reduced if a double tax treaty or the Interest and Royalties Directive is applicable;
  • Royalties: royalties paid by Italian companies or individuals to nonresident beneficiaries are subject to a withholding tax rate of 22.5% (i.e.: 30% of 75% of gross royalties). The WHT rate can be reduced if a double tax treaty or the Interest and Royalties Directive is applicable.

Portugal Small Flag Portugal

Personal Income Tax Code and Corporate Income Tax Code present specific withholding tax applicable over certain type of income (e.g. interest, dividends, royalties) with source in Portugal. As a rule, such withholding taxes are usually definitive on payments to non-resident entities and individuals, and merely on account of the final tax due on payments to resident entities and individuals.

Kenya Small Flag Kenya

The Income Tax Act imposes withholding tax on royalty, interest, dividends and management and professional fees as set out in the table below:

Nature of income

Resident rate

Non-resident rate

Dividends

5%

10%

Royalties

5%

20%

Management and professional fees

5%

20%

Interest

15%

15%

Poland Small Flag Poland

Poland imposes withholding taxes on various payments. In particular, withholding tax is levied at 19% rate on dividends and other income from sharing in legal persons' profits. Interest, royalties, and various intangible services are also subject to withholding tax at an applicable rate of 20%.

The withholding tax rate resulting from Polish law applies unless a relevant double tax treaty concluded by Poland stipulates a lower rate, or an exemption. For the application of the double tax treaty, an up-to-date tax residency certificate of the payment recipient is required.

In case of payments received by certain specific types of entities (such as EU/EEA pension funds, or investment funds), different withholding tax treatment can also result from Polish domestic legislation. In addition, the relevant provisions of Polish law which implemented the EU Parent-Subsidiary Directive and the EU Interest-Royalties Directive states the exemption, under specific conditions, of the dividend and the interest paid to certain associated companies.

Japan Small Flag Japan

Yes. Interest on loans (where the loan proceeds are used in Japan), dividends on shares of a Japanese corporation (which are not publicly traded), and royalties for use in Japan of intellectual property are subject to withholding tax at the rate of 20.42% (20% national tax and 0.42% special reconstruction income surtax) when paid to nonresident individuals and foreign corporations.

Interest on debt securities issued by a Japanese corporation is subject to withholding tax at the rate of 15.315% (15% national income tax and 0.315% special reconstruction income surtax) when paid to nonresident individuals and foreign corporations. However, there are special taxation measures whereby interest on (i) Japanese government bonds, Japanese municipal bonds and Japanese corporate bonds each issued in Japan and traded and owned through the Japanese book-entry system and (ii) Japanese “eurobonds” (meaning bonds issued by Japanese corporations outside Japan and interest is paid outside Japan), which is paid to nonresident individuals and foreign corporations, is in principle exempt from Japanese withholding tax, subject to certain documentation and identification requirements being met.

Dividends paid on publicly traded shares of a Japanese corporation are subject to withholding tax at the rate of 15.315% through December 31, 2037 when paid to nonresident individuals and foreign corporations; provided that 20.42% withholding tax applies to an individual shareholder who holds 3% or more of the total issued shares. No exemption from or reduction will apply under Japanese domestic tax law to withholding tax on dividends.

If the nonresident individuals and foreign corporations have no permanent establishment in Japan, the Japanese taxation is finalized only by the withholding tax. The domestic law withholding tax rates as well as the source rules of income mentioned above may be modified by an applicable tax treaty. In particular, some tax treaties, e.g., that with the United States, totally exempt Japanese withholding tax on certain intercompany dividends and royalties paid to certain U.S. qualified residents, subject to limitation on benefits and other conditions being met. The tax treaty with the United Kingdom totally exempt Japanese withholding tax on interest, certain intercompany dividends and royalties paid to certain U.K. qualified residents, subject to limitation on benefits and other conditions being met.

The Netherlands Small Flag The Netherlands

The Netherlands levies dividend withholding tax at a rate of 15%. There is no withholding tax on royalties and interest, unless the loan is considered to be a hybrid loan.

Mexico Small Flag Mexico

Generally speaking, under certain circumstances taxpayers can be subject to income and value added tax withholdings. For instance, the Income Tax Law provides that employers ought to withhold income taxes due on their employees’ salary. Additionally, income tax due by a foreign tax resident that carried out a transaction with a Mexican tax resident is often required to be withheld by the latter.

Concerning value added tax, the following parties could be required to withhold taxes due:

(i) financial institutions that receive payments in kind or obtain goods by judicial or fiduciary allocation or awarding;

(ii) legal entities that: (a) receive personal independent services from or use goods leased to them by individuals; (b) acquire industrial waste used as consumables for their activities; (c) receive transportation services from individuals or other legal entities; (d) receive services from commission agents that are individuals;

(iii) individuals or legal entities that acquire, temporarily use, sell or lease to foreign tax residents without permanent establishments, tangible assets.

Norway Small Flag Norway

Norway levies withholding tax on dividends to foreign shareholders at a rate of 25 %, unless a lower rate applies under a double taxation treaty.

In addition, there is no withholding tax on dividend payments to corporate shareholders within the EEA under the exemption method. To qualify for the tax-exemption rules, the recipient of the dividends must fulfil certain substance requirements.

There is no withholding tax on interest or royalty payments. The Tax Commission's 2014 report on tax reform recommended that withholding taxes need to be implemented and applied on interests and royalties.

Germany Small Flag Germany

Germany levies withholding taxes.

There is a withholding tax on dividends distributed at tax rate of 25% plus solidarity surcharge, withholding tax on construction services performed in Germany at a rate of 15% plus solidarity surcharge and withholding taxes on royalties paid to non-resident taxpayers at a tax rate of 15% plus solidarity surcharge.

Unless a certificate of withholding tax exemption has been obtained, the German debtor of the remuneration has to withhold. Due to the German unilateral limitation on benefits provisions, this applies even if a double tax treaty or an EU directive provides for relief from the withholding tax unless further requirements are met.

Updated: October 18, 2017