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Where Taxpayers and Advisers Meet

Withholding tax - Dividend Income Mexico

Sign
Posts:2
Joined:Sat Sep 18, 2021 8:51 am
Withholding tax - Dividend Income Mexico

Postby Sign » Sat Sep 18, 2021 9:03 am

Hi.

I have earnt in total £3000 sterling in dividend income tax year 20/21 from a company registered in Mexico. The authorities have withheld 10% of this dividend income, so I have received £2700, hence they have withheld £300.

Can I ask, can I offset this £300 paid in tax against tax owed to HMRC? I have tried many times in my self assessment without any luck. I have tried under foreign income, but I can never seem to get £300 tax less owed.

Thanks

darthblingbling
Posts:417
Joined:Wed Aug 02, 2017 9:09 pm

Re: Withholding tax - Dividend Income Mexico

Postby darthblingbling » Sat Sep 18, 2021 11:56 am

The double tax agreement with Mexico seems to only allow taxation on dividends in the country where the taxpayer is resident. This would mean that no FTC would be allowed and you would need to claim a refund in Mexico as you have likely been overtaxed.

Seems the only exception to this is if you carry on a business in Mexico.

Sign
Posts:2
Joined:Sat Sep 18, 2021 8:51 am

Re: Withholding tax - Dividend Income Mexico

Postby Sign » Sat Sep 18, 2021 1:25 pm

darthblingbling cheers buddy.

I've just done a dummy run on my tax return. I did input £3000 foreign dividend income received from Mexico and £300 foreign dividend tax paid in Meixco.

Put in a 10% tax relief credit. Put in country of Mexico. It gave me £225 credit against tax owed to the HMRC. So not the full £300 but better than nothing.

Are you saying it is an offence or fraud to fill in the foreign income section in the SA form?

maths
Posts:8283
Joined:Wed Aug 06, 2008 3:25 pm

Re: Withholding tax - Dividend Income Mexico

Postby maths » Sat Sep 18, 2021 5:56 pm

Something seems to be awry.

Under the UK/Mexico DTA dividend income from Mexico is in principle exempt from Mexican tax; only the UK can levy its tax.

The Mexican tax withheld therefore needs to be reclaimed back from Mexican tax authorities. There is no foreign tax credit available in the UK.

Of the £3,000 gross income UK tax is levied at 7.5% (assuming you are a basic rate taxpayer) on £1,000 as there is a £2,000 dividend allowance ie tax on £3,000 less £2,000 ie £1,000 taxed at 7.5% giving a liability of £75.


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