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bigduckontax, Accountant
Category: Tax
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I have fiscal residence in Andorra. We have been paying

Customer Question

I have fiscal residence in Andorra. We have been paying ourselves dividends from a UK Company in which we are the sole shareholders. We paid ourselves from a UK company, deducted notional tax of 10% and paid the residue through to Andorra. The tax rules have changed and notional tax is gone. However, we have been told that the only change as far is we are concerned will be to deduct 7.5% from our dividend leaving us to pay whatever tax is now levied in Andorra. Is this correct?
Submitted: 6 months ago.
Category: Tax
Expert:  bigduckontax replied 6 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

As far as the UK is concerned you are on the right track. However these days, since 16/17, the first 5K of dividend income is tax free. Also, if you are a citizen of an EEA country, you are entitled to a Personal Allowance of 11.5K [17/18 rates] which would reduce your liability even further. Above that then the 7.5% rate of taxation is correct unless you go into higher rate taxation in which case the percentage rockets. The UK has no Double Taxation Treaty with Andorra.

I do hope that you have found my reply of assistance..

Customer: replied 6 months ago.
No. I don't think you've understood the question and maybe this isn't something you are familiar with. We don't accept any allowances in the UK, and dividends from their own companies to foreign residents used to be free of UK tax apart from a notional the notional tax of 10% if they were not accepting allowances. The tax is now 7.5%, but the notional tax has gone. Previously we paid the dividend to ourselves net of 10% leaving the tax of 10% in the company. All details of the dividend were declared to the revenue and complied with tax law of the past 10 years
.What do shareholders abroad i(.e. company owners) now do when they pay themselves a dividend out of their own company. If this is not something you are familiar with, I doubt if you're in a position to answer it but I'd be pleased if you could. I've already had an answer from my own accountant that I hope is correct but I'm by no means certain that it is.
Expert:  bigduckontax replied 6 months ago.

I am quite familiar with the situation both pre and post 16/17. Before that date dividends carried a notional tax credit. That is, post 16/17, no longer the case and they are paid gross. As far as UK taxation is concerned anything over 5K is taxed at the recipient's marginal rate of tax and as far as you are concerned you have a Personal Allowance of 11K [16/17] and 11.5K [17/18] to offset any such income. As Andorra, a tax haven outwith the EU, has no Double Taxation Treaty with the UK there is a possibility that this income can be taxed in both jurisdictions.