Are there any withholding taxes?

Tax (3rd edition)

Switzerland Small Flag Switzerland

Switzerland levies 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 to 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 cases, 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 allowed by an applicable tax treaty.

United States Small Flag United States

Yes. In general, non-US persons are subject to US tax only with respect to income from US sources. US source income that is “fixed or determinable annual or periodical gains, profits, and income” (FDAP) and that is not effectively connected with a US trade or business is generally subject to a 30 percent gross basis withholding tax, which is withheld at the source by the payor or the payor’s withholding agent.

FDAP includes, for example, dividends, interest, royalties, and rents. FDAP income generally does not include gain from the sale of property, however, certain gains from sales of U.S. real property interests are subject to tax as effectively connected income (or in some instances as dividend income) and subject to withholding of 15 percent on a gross basis.

Many types of income are either exempt from tax (e.g., portfolio interest) or subject to a reduced rate of tax under an applicable income tax treaty. To the extent that the withholding agent deducts and withholds an amount, the withheld tax is credited to the recipient of the income. If the agent withholds more than is required, and results in an overpayment of tax, the excess may be refunded to the recipient of the income upon filing of a timely claim for refund.

Finally, certain foreign financial institutions and other noncompliant entities may be subject to a 30 percent withholding tax under FATCA.

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”.

Austria Small Flag Austria

Apart from wage withholding tax at the progressive income tax rate, dividends paid to non-resident companies are, in general, subject to a withholding tax. Dividend withholding tax amounts to 27.5% (25% if paid to a corporate shareholder), unless a reduced rate applies under a tax treaty. Dividends falling under the scope of the EU Parent-Subsidiary Directive (company form listed in the Directive; at least 10% shareholding, retention period of one year) are exempt from any withholding tax, if the EU parent company has an active business and sufficient substance; otherwise a refund procedure can be operated with the Austrian tax authority.

Royalties paid to non-resident companies are subject to a withholding tax of 20%, unless a reduced rate applies under a tax treaty or are exempt from any withholding taxes pursuant to the EU Interest and Royalties Directive.

Loan interest payments to non-resident companies are currently not subject to WHT as long as the loan is not secured with domestic real estate. Interest on bank deposit or certain publicly issued corporate bonds may trigger Austrian withholding tax (25%/27.5%), if an Austrian paying agent or custodian is involved.

WHT of 20% has also to be levied on fees for technical or commercial advisory services, unless the rate is reduced or the payments are exempt under an applicable tax treaty.

As of 1 January 2019 a special withholding tax applies on income derived from the letting of rights on land to infrastructural enterprises in connection with transmission of energy or use of cables below or above the surface in the public interest (e.g. electricity, gaz, oil or heating), which amounts to 10% in case of individuals and 8,25% in case of corporations.

France Small Flag France

Dividends paid to a non-resident company are subject to a 30% withholding tax for non-resident company, 15% withholding tax for not-for-profit organization established in the European Union, in Island, in Norway or in Liechtenstein and a 12.8% withholding tax for non-resident individuals 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, Nauru, Brunei, Niue, Guatemala, Panama and Marshall Islands.

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 33.33% 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.

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.

Brazil Small Flag Brazil

Yes, Brazil imposes withholding taxes in relation to various types of cross-border remittances, such as:

  • Dividends: exempt
  • Interest payments: 15% WHT (non tax haven jurisdictions)/ 25% (tax haven jurisdictions)
  • Technical services: 15% WHT
  • Royalties: 15%
  • Interest on Net Equity: (non tax haven jurisdictions)/ 25% (tax haven jurisdictions)
  • Income from non-technical and personal services: 25% WHT

Please note that other taxes are usually applicable on remittances abroad.

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.

Ireland Small Flag Ireland

In general Ireland applies a 20% withholding tax to dividends, interest and patent royalties. The withholding tax is typically removed under domestic law, the EU Parent/Subsidiary directive or a DTA.

The primary domestic exemption for interest withholding tax applies for interest paid to a company resident in an EU or DTA partner jurisdiction.

The primary domestic exemption for royalty withholding tax applies to royalties paid to company in the EU or DTA partner jurisdiction in the ordinary course of a trade; or paid in respect of non-Irish patents (subject to certain conditions being satisfied and application to IrishRevenue).

Subject to appropriate declarations being in place, the primary domestic exemptions for dividend withholding tax applies to (i) individual resident in EU/DTA country; (ii) company resident in EU/DTA country and not under the control, (directly or indirectly) of an Irish resident; (iii) company under the control (directly or indirectly) of person(s) who are tax resident in an EU/DTA country (and not under the control of persons resident outside an EU/DTA country); (iv) company whose principal class of shares is substantially and regularly traded on a recognised stock exchange in an EU/DTA country; (v) company which is a 75% direct or indirect subsidiary of another company whose principal class of shares is substantially and regularly traded on a recognised stock exchange in an EU/DTA country.

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 23%) 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.

Malaysia Small Flag Malaysia

Yes. Subject to the country of non-resident in question and whether there are Double Taxation Agreements in questions, withholding tax is imposed on payments made to non-residents for:

(a) Contract payments;

(b) Interest;

(c) Royalty;

(d) Non-resident public entertainers in respect of services performed or rendered in Malaysia;

(e) Special classes of income deemed to be derived from Malaysia (services rendered in connection with the use of property or rights belonging to, or the installation or operation of any plant, machinery or other apparatus purchased from non-resident; technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; rent or other payments made under any agreement or arrangement for the use of any moveable property);

(f) Interest paid by approved institutions (e.g.: banks, Islamic banks, co-operative society);

(g) Income of certain unit trusts;

(h) Profits distributed or credited out of family fund, family re-takaful fund or certain general funds;

(i) Where payer is liable to make payments to non-resident for gains or profits falling under Section 4(f) derived from Malaysia.

Mexico Small Flag Mexico

Yes, withholding taxes apply to a wide array of payments. For instance, financial institutions must withhold taxes from interest payments made to individuals or legal entities. In most cases, withholding taxes apply upon payments made to foreign residents that are considered to be sourced in Mexico.

Even though preferential rates could apply based on tax treaties, the withholding rates provided in the Mexican Income Tax Law are as follows:

Payment

WHT (%)

Wages and pensions

0/15/30

Professional fees and board members’ remunerations

25

Lease of real property and movable property

25

Lease of containers imported on a temporary basis, airplanes, and ships authorized by the Mexican Government to be commercially exploited

5

Chartering services

10

Capital gains

25 (or 35 on net gain) 

Sale of shares through a  recognized stock exchange

10

Derivative transactions

25

Dividends

10

Interest

4.9/10/15/21/35 

Royalties

5/25/35 

Construction services

25 (or 35 on net gain) 

Norway Small Flag Norway

In general withholding taxes are not levied in Norway, with the exemption of dividend withholding tax on distributions other than those to corporate shareholders resident in the EEA that have an "actual establishment" and conduct real business activity in the relevant jurisdiction (unless an exemption is provided under a tax treaty).

Panama Small Flag Panama

Payments made to beneficiaries not resident in the Republic of Panama are subject to withholding tax, on 50% of the amount invoiced, at the applicable corporate income tax rate 25%. WHT will apply when the payment relates to services rendered in and abroad Panama, interest and income from intellectual property rights, royalties, know-how and alike.

No WHT will apply on service, royalty o know how payments, if the local entity considers that the expense incurred is not deductible for tax purposes, or if the foreign entity obtains a Panamanian taxpayer identification number and directly pays the tax.

Dividends – Dividends paid to a non-resident on nominal shares are subject to a 5% or 10% withholding tax, depending on the source of the dividends; the rate is 20% for bearer shares.

Interest – Interest paid to a non-resident is subject to a 12.5% (50% of the interest is subject to the general 25% corporate tax rate) withholding tax.

Royalties – Royalty payments made to a non-resident are subject to a 12.5% (50% of the general 25% rate) withholding tax if the payments benefit a Panamanian resident or if the expense has been deducted in Panama.

Service fees – Services paid to a non-resident are subject to a 12.5% withholding tax (50% of the general 25% rate).

Branch remittance tax – A branch of a foreign corporation must pay 10% of its after-tax income as a dividend tax in addition to the corporate income tax.

Philippines Small Flag Philippines

Yes, the Philippines tax system has final and creditable withholding taxes. The rates vary depending on the nature of the income payment and the recipient.

Portugal Small Flag Portugal

Portuguese law foresees withholding taxes both for CIT and PIT purposes.

In general, when applied to income obtained by non-resident entities, such withholding tax is definitive and liberates such entities from the obligation of filing a tax return in Portugal.

For resident entities, the withholding tax usually corresponds to a payment on account of the final tax due by the taxpayer which will only be assessed with the filing of the respective annual tax return, after which he can either have to pay more tax or receive a tax refund.

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. A WHT exemption may be obtained where the Parent Subsidiary Directive applies;
  • Interest: interest payments made to non-resident companies are usually subject to a 26% WHT which may be reduced by the applicable double tax treaty. 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. A WHT exemption may be obtained where the Royalties Directive applies;
  • Royalties: royalties paid by Italian companies or individuals to nonresident beneficiaries are usually subject to a withholding tax rate of 22.5% (i.e.: 30% of 75% of gross royalties) which may be reduced by the applicable double tax treaty. A WHT exemption may be obtained where the Royalties Directive applies.

Turkey Small Flag Turkey

Withholding is a well-established method of taxation in Turkey as it is easier for the tax authority to collect taxes by this method. In particular, income tax on wages, dividends and royalties paid to non-resident companies, as well as many other types of payments, is subject to withholding.

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 currently levies dividend withholding tax (DWT) at a rate of 15%. In September 2018, the Dutch government published a proposal for the partial abolishment of the existing DWT of 15%, and replacing it with a new withholding tax regime based on which DWT would be levied on distributions paid to related entities in low-tax jurisdictions and in cases of abuse as of 1 January 2020. The DWT tax rate is proposed to be equal to the CIT rate. It is not certain that the partial abolishment will occur, as political discussions are ongoing.

Currently, the Netherlands does not impose withholding tax on payments of royalties or interest. The Netherlands wants to introduce a withholding tax on interest and royalty payments (WHTIR) as of 1 January 2021. The WHTIR will be introduced for interest and royalty payments to low-taxed or EU-black listed countries and in cases of abuse. A legislative proposal is expected be published in 2019.

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

Gibraltar Small Flag Gibraltar

Except in the cases of payments to subcontractors in the construction industry and payments to employees under the PAYE system, there are no withholding taxes in Gibraltar.

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).

Updated: October 12, 2018