Dividend tax on foreign income

[kebata]

I am a Hong Kong Permanent Resident currently residing in UK and non domiciled. I hold HSBC Holdings shares on the Hong Kong register. In view of the change in dividend tax rates for 2016/2017 I was wondering if HSBC dividends on the HK register are regarded as UK or HK assets from HMRCs point of view?

Grateful for advice - thank you.

[maths]

The new rules have no impact on determining the source of income (eg dividends).

Dividends on registered company shares possess a foreign source if the company is not resident in the UK.

I assume HSBC Holdings is not UK resident.

[kebata]

Thank you , Maths

As I understand it, HSBC Holdings has a dual listing on HK and UK exchanges but is domiciled in UK - hence my question. However, I think what you are implying is that dividend income arising on HK listed shares would be taxable on a UK resident.

This leads on to another curious anomaly that HK residents don't seem to pay UK IHT on HSBC Holdings shares in Hong Kong, at least I have never heard of HMRC pursuing this line. If that is the case then rationally dividends from HSBC Holdings in HK should also be regarded as foreign income.

[maths]

If HSBC Holdings Plc is registered/incorporated in the UK (and thus resident in the UK) then any dividend income on the company's ordinary shares will be UK, not foreign source, income.

With respect to IHT the situs of the ordinary shares is determined under common law; there are no specific IHT situs rules.
The common law rule is that the situs of ordinary shares is where title of ownership of the shares must be registered (ie where the register of members is located). Normally, for a UK registered company this would be in the UK. It would then follow that for IHT, shares in HSBC Holdings Plc would be UK situs.

However, you state:

This leads on to another curious anomaly that HK residents don't seem to pay UK IHT on HSBC Holdings shares in Hong Kong,

I cannot comment on whether this is true or not. It may be that a share register is also kept in HK and that shares can be dealt in HK.

[kebata]

Thank you , Maths.

With regard to IHT, yes HSBC Holdings have a dual listing, so shares are registered in Hong Kong, so maybe that explains the IHT issue.