Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?
Traditionally French resident taxpayers have reported in their annual return their income received during the preceding year. The tax bill was assessed by the French tax authorities and paid in three instalments during the following year the income was received.
This tradition is progressively repealed. Social contributions on wages and salaries are already levied by the employer, dividends and interest are subject to withholding taxes which are considered as a prepayment of income tax. Some capital gains on the sale of real estate properties are also subject to withholding tax upon the sale.
Finally, as from January 1st 2019, employment income, pensions, self-employment income and rental income will also be subject to withholding taxes considered as prepayment for income tax purposes.
As already developed in §2.2. non-resident taxpayers are subject to withholding taxes at rates varying depending on the nature of income or capital gains received.
Final withholding taxes generally apply to income and gains from financial assets. Such withholding taxes are generally levied at the 12.5% rate for income and gains from public bonds issued by Italy or white listed States, and at the 26% rate for income and gains from most of the other financial assets. However, certain financial assets do not qualify for final withholding taxes: this is the case for e.g. substantial (in general terms, more than 20 per cent ownership or, if the shares are listed, more than 2 per cent ownership) shareholdings (income and gains from substantial shareholdings are computed in the total taxable income subject to progressive tax rates, but benefit from a partial exemption) or non-EU investment funds.
Any person who pays or is responsible for the payment of certain types of income (for which mandatory withholding tax at source obligation applies) shall, when the payment is made, withhold tax from the amount paid and transfer it to the assessing officer.
Employers are required to withhold tax at source when paying a salary, and thereafter to transfer the tax amount withheld to the assessing officer. The same withholding process applies to the payment of social security premiums.
Dividends distributed by resident companies to individuals from regular profit distributions are generally subject to withholding at a rate of 25%, which increases to 30% if at the time of the distribution or at any time during the 12-month period preceding the distribution, the recipient of the dividend is, or was, a “Substantial Shareholder”. A reduced tax rate will apply to dividends distribution made out of preferred enterprise under the Law of encouragement of capital investment.
Interest payments on government bonds issued to residents are generally subject to withholding tax at a rate of 25%. (25% from 1 December 2012 onwards; 35% before 8 May, 2000, 15% until 2006, 20% from 2006 to 2011).
Interest payments on private sector traded bonds (debentures) where interest is paid to residents, as well as, interest payments on residents’ foreign currency bank deposits are generally subject to withholding tax at a rate of 15% (for an asset not linked to the consumer price index or to a foreign currency) and 25% (for an asset linked to the consumer price index or to a foreign currency).
Royalties are generally subject to withholding at a rate of 20% if the recipient is certified as maintaining proper bookkeeping and filing tax returns, and 30% otherwise.
Rental income on real estate is generally subject to withholding tax at a rate of 35%, and other rental income is generally subject to withholding tax at a rate of 20% if the recipient is certified as maintaining proper bookkeeping and filing tax returns, and 30% otherwise.
Payments to non-Israeli residents when no other rules applies, such payments are generally subject to 25% withholding tax, but may be eligible for reduced rates of withholding under a tax treaty.
Employment, pension and investment [except property leases] income tax is generally withheld -and exhausted at the tax rates mentioned above- at source.
If, however, source does not withhold tax [usually applies to certain foreign sources of income], tax is withheld by Greek paying bank [or other Greek paying agency].
A withholding tax of 26,375% (+ church tax where applicable) will apply to dividends paid by German corporations and income or gains from capital investments in custody with a German bank. Also salaries for dependent services are subject to withholding tax at the rate of the prospective individual tax rate. Where a non-resident receives income from German sources, withholding taxes may apply in certain other cases (e.g. income from licensing or board memberships).
In principle, income from movable property is subject to withholding tax if paid in Belgium. Since 1 January 2017 a rate of 30% applies to most dividends and interests.
Employers must withhold withholding tax on the wages and salaries they pay to their employees.
British Virgin Islands
The BVI is subject to the EU Savings Tax Directive.
Interest, dividends and royalties with a New Zealand source received by a non-resident will be subject to income tax. Such payments will generally be subject to a final withholding tax imposed at the following rates (subject to the operation of any applicable double taxation agreement):
Broadly, non-resident withholding income comprises:
- dividends 30% (non-imputed);
- royalties 15%; and
- interest 15%.
Unimputed dividends are taxed at the rate of 30%. There are certain exemptions for interest paid by the approved issuer to a non-associated recipient company, imputed non-cash dividends and certain insurance transactions. All other non-resident withholding income is taxed at a rate of 15%.
The deduction of non-resident withholding tax must be made by the person making the payment. Where a New Zealand agent receives income on behalf of the person by whom the tax is due, the agent is responsible for making that payment.
Individuals domiciled in Monaco are not subject to income tax (except for French citizens who are taxable in France as if they were resident there), therefore withholding taxes do not apply.