How do handle Non residence tax on dividends.

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rmerrin

08 Apr, 2015 05:18 PM

Which is the best way to record this.

  1. 1 Posted by rmerrin on 08 Apr, 2015 06:16 PM

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    I have looked at the original statements and the NRT (Non residence Tax) which is tax taken by the country that the income originates is all handled as part of the dividend payment. Dividend - NRT = Dividend Payment

  2. 2 Posted by dwg on 08 Apr, 2015 09:55 PM

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    In some countries it is called withholding tax.

    I can think of two ways of recording it.

    1. Record the gross dividend then do a xfr of the Tax to an appropriately named category

    2. Record the net dividend and for the Tax use a DivXfr transaction with a category on each side of the transaction i.e one category in the transfer field and another in the category field

    As for which approach to take i think it depends on which you prefer and even perhaps how the institution presents the data to you. Some of the data I get tends to lead me to use method 2, as they just give me the net figures.

    Des

  3. 3 Posted by ljb on 09 Apr, 2015 12:00 AM

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    Why not (3), just record the dividend as a Div with fee. The fee category is your Tax expense category, and the fee amount is the tax. Doesn't that work?

  4. 4 Posted by rmerrin on 09 Apr, 2015 12:04 AM

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    I had the idea of using the misc exp and using the income dividend as the category. Seeing the gross dividend and the NRT is also on the statement with both being on the same line. Being that they are all recorded as dividend income and against the same stock it should work. Any thoughts on this?

    On Apr 8, 2015 5:55 PM, dwg <[email blocked]> wrote:

    // Please reply above this line
    ==================================================

    From: dwg

    In some countries it is called withholding tax.

    I can think of two ways of recording it.

    1. Record the gross dividend then do a xfr of the Tax to an appropriately named category

    2. Record the net dividend and for the Tax use a DivXfr transaction with a category on each side of the transaction i.e one category in the transfer field and another in the category field

    As for which approach to take i think it depends on which you prefer and even perhaps how the institution presents the data to you. Some of the data I get tends to lead me to use method 2, as they just give me the net figures.

    Des

    On Wed, Apr 08 at 06:16 PM, rmerrin wrote:

    I have looked at the original statements and the NRT (Non residence Tax) which is tax taken by the country that the income originates is all handled as part of the dividend payment. Dividend - NRT = Dividend Payment

    Having trouble reading this? View this discussion online: How do handle Non residence tax on dividends..

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  5. 5 Posted by rmerrin on 09 Apr, 2015 12:49 AM

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    ljb it sounds like it could work but how it shows up on reports also counts. I am thinking of recording it as a misc exp from a security. Any thoughts on that?

    On Apr 8, 2015 8:00 PM, ljb <[email blocked]> wrote:

    // Please reply above this line
    ==================================================

    From: ljb

    Why not (3), just record the dividend as a Div with fee. The fee category is your Tax expense category, and the fee amount is the tax. Doesn't that work?

    On Wed, Apr 08 at 09:55 PM, dwg wrote:

    In some countries it is called withholding tax.

    I can think of two ways of recording it.

    1. Record the gross dividend then do a xfr of the Tax to an appropriately named category

    2. Record the net dividend and for the Tax use a DivXfr transaction with a category on each side of the transaction i.e one category in the transfer field and another in the category field

    As for which approach to take i think it depends on which you prefer and even perhaps how the institution presents the data to you. Some of the data I get tends to lead me to use method 2, as they just give me the net figures.

    Des

    Having trouble reading this? View this discussion online: How do handle Non residence tax on dividends..

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  6. 6 Posted by ljb on 09 Apr, 2015 01:46 AM

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    Suppose you have a dividend of 50 (whatever currency) and your tax is due (withholding-type tax, as dwg said) of 5. You record this as a dividend paid by the security of 50, income category "Dividends", with a fee of 5 and let's call the fee category an expense category "NR Tax". Your account's cash balance increases by 50-5=45. (Or, you could do the same thing with a DivXfr and transfer the net of 45 right out of your investment account into another account.)

    Reports will show an income of 50 from category "Dividends" and an expense of 5 to category "NR Tax", with a single transaction. Because it is a single transaction, right? That's the idea of withholding: it isn't like you get the dividend first, then you pay the tax on it.

    I don't like MiscExp for this because it doesn't properly describe what is happening. But yes you could get the same effect.

    As per my above, I don't actually know how this tax works, so I don't know if my suggesting is appropriate.

  7. 7 Posted by dwg on 09 Apr, 2015 05:11 AM

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    What and how to record it can also be influenced by how you need to report the numbers for purposes such as Taxation so it can be useful to examine the reporting you need to gain an idea on the best way of recording information.

    Des

  8. 8 Posted by rmerrin on 09 Apr, 2015 03:41 PM

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    Actually I get the gross dividend before tax because that is what I earned. Then the tax is taken out. Now Canada will tax me on the gross dividend come up with tax payable and then subtract the tax paid to the USA.  Double taxation is disalowed under the tax treaty.

    On Apr 9, 2015 1:11 AM, dwg <[email blocked]> wrote:

    // Please reply above this line
    ==================================================

    From: dwg

    What and how to record it can also be influenced by how you need to report the numbers for purposes such as Taxation so it can be useful to examine the reporting you need to gain an idea on the best way of recording information.

    Des

    On Thu, Apr 09 at 01:46 AM, ljb wrote:

    Suppose you have a dividend of 50 (whatever currency) and your tax is due (withholding-type tax, as dwg said) of 5. You record this as a dividend paid by the security of 50, income category "Dividends", with a fee of 5 and let's call the fee category an expense category "NR Tax". Your account's cash balance increases by 50-5=45. (Or, you could do the same thing with a DivXfr and transfer the net of 45 right out of your investment account into another account.)

    Reports will show an income of 50 from category "Dividends" and an expense of 5 to category "NR Tax", with a single transaction. Because it is a single transaction, right? That's the idea of withholding: it isn't like you get the dividend first, then you pay the tax on it.

    I don't like MiscExp for this because it doesn't properly describe what is happening. But yes you could get the same effect.

    As per my above, I don't actually know how this tax works, so I don't know if my suggesting is appropriate.

    Having trouble reading this? View this discussion online: How do handle Non residence tax on dividends..

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  9. 9 Posted by dwg on 09 Apr, 2015 09:26 PM

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    Here in Australia, we get a tax credit for the taxation that is paid in Australia by the company, so I actually have to record the dividend I receive plus also I need to report on the Tax Credit that has already been paid, hence why I use my option 2 to record this Tax credit, I never have to report on the gross up figure.

    So we effectively do not allow double taxation within the country i.e, the company paying Tax on the profit then the investor paying Tax again on this profit when it is distributed, so it really becomes taxed at the individuals marginal rate at most, rather than being taxed at the corporate 30% rate then the entire profit again taxed at the investors full rate.

    BTW If you are using a mail response to post I would suggest not including the entire mail train it tends to make the entries long and repetitive when reading online.

    Des

  10. 10 Posted by rmerrin on 10 Apr, 2015 12:50 AM

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    dwg The Misc Exo is recorded against the security and recorded as a expense category Dividend NRT. This works because I don't have an account for the money and the money belongs to the government not me. Actually I think the best way to handle this is a split transaction as that is exactly what it is

  11. 11 Posted by dwg on 10 Apr, 2015 01:28 AM

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    Handling it that way works quite well when it is the gross dividend you have to report on and expensing the dividend to an appropriate category will also give the correct result there. I certainly would not use an account for a NRT, I think that should be a category

    Like I said it depends on how you need to report the transaction that can help determine the best way or ways of handling it, I was using my own example to highlight a different scenario where another approach works.

    Letting what end result you need help guide you to a good approach to take is a good way to look at a situation. Of course it also depends on what version of Moneydance you are using for example you could not use a split transaction in MD2012 in an investment account

  12. 12 Posted by rmerrin on 10 Apr, 2015 06:59 AM

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    dwg : You say we had split transactions in investment accounts in MD 2012. why where they eliminated? Split transactions would male life easier.

  13. 13 Posted by dwg on 10 Apr, 2015 09:06 AM

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    I said you could NOT use a split transaction in investment accounts in MD2012.

    MD2015 has support for split transactions when you are using the bank register. I do not recall if you could use split transactions in MD2014 and do not have a machine with that version on it at the moment to look.

  14. System closed this discussion on 19 Mar, 2016 04:55 AM.

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