Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?
Yes. If the income being paid to the individual is in the form of consultancy fee, directors’ fee, non-compete fee, salary, commission, fees for technical services, rent of plant and machinery, interest payments, rent of land or building, royalty payments (provided if such income exceed a certain threshold) then the same would be subject to withholding tax. Further, if the individual is a non-resident, then any kind of remittance will be subject to withholding tax, unless the remittance is not taxable under the IT Act or under the applicable double taxation avoidance agreement with the country of residence of the non-resident individual and India.
It is pertinent to note that if the individual does not have the Indian tax registration number viz., the Permanent Account Number (“PAN”), then the withholding tax rate will be 20% or the rates specified under the IT Act or the rates in force. A non-resident is exempted from the requirement of obtaining PAN and thereby the consequences of not having one, if he submits details in prescribed form (which includes tax residency certificate, tax registration number of the individual in which he is a resident of, address, etc.)
Certain types of income paid to Bulgarian tax residents and tax non-residents are subject to withholding tax (“WHT”).
Interest, royalties, remuneration for consultancy, rental of immovable property located in Bulgaria2 accrued/paid by Bulgarian residents in favor of Bulgarian tax non-residents not having Bulgarian fixed base (“FB”) are subject to withholding tax at the rate of 10%.
Dividends and liquidation proceeds payable by Bulgarian companies to foreign individuals are subject to Bulgarian withholding tax at the rate of 5%.
Pay-As-You-Earn (“PAYE”) – Employed persons are subject to a form of withholding tax called PAYE in respect of their employment income, such that income tax is deducted at source.
Dividend Withholding Tax (“DWT”) - DWT applies at a rate of 20% on the payment of certain dividends. An exemption from DWT may be available where the recipient individual is resident in a jurisdiction with which Ireland has a DTA or in another EU Member State.
Deposit Interest Retention Tax (“DIRT”) – DIRT at a rate of 39% is deducted at source by deposit takers from interest paid or credited on deposits. A non-Irish resident can receive Irish deposit interest free from DIRT.
A buyer must withhold CGT when paying consideration in excess of EUR 1 million to a seller in relation to the sale of certain assets, mainly Irish immoveable property, and pay the withheld amount to the Revenue Commissioners.
Withholding is required for US Persons and nonresidents on all salary income earned in the US. There is no set withholding rate, but generally withholding must be sufficient to cover 90% of income tax for the year to avoid an interest charge. Self-employed individuals and salaried individuals with other non-salaried income (such as bank interest, dividends, royalties, etc) are not required to withhold income taxes on such income, but must pay estimated taxes on a roughly quarterly basis. For nonresidents, there is a 30% withholding (15% under certain tax treaties) on most US-source interest, dividends, rental and royalty income. Interest on bank deposits is not subject to withholding.
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.
Swiss withholding tax is relevant to individuals to the extent they receive income deriving from Swiss movable property, such as dividends and interests, prizes from Swiss lotteries and certain insurance payments. The Swiss debtor of the taxable income is liable for the withholding tax (e.g. a bank), which means that the withholding tax must be deducted by the debtor from the amount due to the individual recipient. The rate of the withholding tax is in principle 35%. Provided that certain conditions are met, in particular if income and capital are properly declared at the level of the beneficiary of the income, Swiss recipients can ask for a refund of the tax withheld. For non-Swiss resident taxpayers, a partial or total refund may be granted only if a Double Taxation Agreement applies. Interests on loans are not subject to Swiss withholding tax at the level of the debtor, except if loans qualify as bonds according to a Swiss tax law. Royalties are not subject to Swiss withholding tax.
Swiss withholding tax has to be distinguished from income tax levied at source, as they are two different taxes. Income tax is generally paid by the individual as a taxpayer and beneficiary of the income. However, in some cases, income tax has to be paid at source by the debtor of the benefit. A typical case where income tax could be levied at source is when a salary is paid by a Swiss company to an employee having his/her tax residence abroad or to a foreign national living in Switzerland and who do not hold a permanent resident permit. Rates also take into consideration certain standard deductions. Income tax at source is then actually only a mechanism of payment of the income tax.
3.1 Income tax (§2.1) and national insurance contributions (§2.5) are generally deducted at source from the income of an employment. The obligation to make these deductions normally falls on the employer, but many employers delegate compliance with this regime to an agent. An employee who has suffered such deductions at source does not normally have to file a tax return unless he has other kinds of income or capital gains for the tax year (§2.13).
3.2 Income tax (§2.1) must prima facie be deducted from payments of rent for UK real property to a non-UK resident (§1.5-1.7) landlord. However, under an arrangement known as the "non-resident landlord scheme", it is possible for such a landlord to apply to HMRC to receive the rent gross, provided that he can satisfy HMRC that he has complied with all his UK tax obligations, including the obligation to file tax returns and pay the income tax due on the rent.
3.3 Income tax (§2.1) must generally be deducted at source from royalty payments.
In particular with respect to investment income involving, a withholding tax applies generally amounting to 27.5% (in special cases such rate is reduced to 25%). Equally, income tax on salaries and wages is imposed by way of a wage withholding tax.