Mine was in Zurich. I find it unfair to get the tax withheld but no way of getting it back. Thanks for your reply.
Was that with the 1042-s? Iâm fairly sure the tax treaty should apply, but maybe youâd need to pay professionals to convince them, which might cost more in the end.
I submitted the DA-1 form.
I contacted the cantonal tax authority and they were really helpful explaining their calculations. Unfortunately they said: âWe can consider only ordinary dividends with withholding taxâ.
From a legal point of view, which is the only one that matters, you never paid the tax.
I assume you didnât declare those as dividends, but other type of income subjected to withholding (as it is)? Anyway probably not cost effective to try to reclaim at this point.
I tried to declare them as dividends but they were rejected.
Only the ordinary dividends were accepted.
At the end I think it was considered ordinary income.
Well, the tax is still deducted from the payment, so who pays it âfrom a legal point of viewâ? The broker? In that case, itâs the same for all tax deductions for all dividends you get, so I donât understand your point.
Itâs true that this situation is a bit messy for tax reasons. There is a full article on tax implications (albeit with an American standpoint) available on taxprofessionals.com
Iâd say if it shows up on a 1042-S, I donât see how it canât be declared on DA-1, but you need to be ready to argue with the tax folks with the DTA in hand, potentially up to going to court, those things cost money, often more than what youâll recoup.
That said if you did declare it same as dividend, e.g. associated to your holding of that share, then I understand why they would not be happy about it.
Thanks for sharing that article. I was not aware that it was also an issue for Americans too.
Probably a judge would give us the reason but definitely not worth it for a couple of hundred.
I wonder is there is some precedent already that we could quote to the authorities.
this is interesting - I simply put in the DA-1 form the amount of stock I have, and the dividend is calcualted automatically, and then I put the 15% taxes. The tax office never sees the IB Stock Yield Enhancement Program. I simply give a screenshot of the dividend section of the IB report and it seems to work ok.
Interesting indeed. But those dividends also include the payment-in-lieu then? Iâm curious to see which specific report from IB you sent them. Because I have the feeling that the IB report shows a different number than the DA-1.
No you are right. In 2020 I started the program but very late in December and of course the dividend were all ânatural oneâ so I had no âpayment in lieuâ.
I simply used to send the yearly activity report as pdf. This year I see some âpayment in lieu ofâ so letâs see if it flies or not. Maybe I can attach only the trade report of the ETF transaction and omit the dividend report. See if they complain.
Let us know how that goes!
in any case this topic was timely. 2021 was the first year completely in the SYEP and it generated 10 usd of interest, mostly because I only have VTI and VXUS which I guess are not that in demand/ there is a large supply.
10 USD out of 200k-270k of ETFs. It seems low risk, but your stuff is loaned out and I am having trouble following all their terminology, so I am most probably stopping it in 2022. The 10 USD are not worth the risk IMO.
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In my case, for 2021 I had some individual stocks that were heavily shorted so it was around 260 chf with a smaller portfolio than yours. But it was probably a one time effect. Iâll have to do some calculations and see if it was worth it. The formula to calculate the withholding taxes returns is not the easiest one.
Hi there! I am bringing up this oldish topic to give you my experience with securities lending in Switzerland and the Interactive Brokers Stock Yield Enhancement Program (SYEP).
I had some CH securities lent out at the time of dividend payment and IB paid me dividends as âpayment in lieuâ (PIL), detracting 35% for the usual withholding tax. Too bad that I will not be able to recover the 35%, as it was not paid in my name, and that at the end of the year I will be paying taxes on those dividends at my marginal rate. So itâs 35% less, and then again taxes as usual.
So, my friends, if your CH stocks yield dividends, think twice before lending them out with IB as it could cost you a lot more than what the programs gives you back.
On the other side, if your experience is different, and you received an amount equivalent to the full dividend (without the 35% deduction), please do let me know â I tried bringing up the matter with IB, but without any result other than me opting out of the SYEP.
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Hi Koreba! Since the shares were lent out, dividends were paid to the borrower, who can not reclaim the withholding tax as it is not the beneficial owner (I am). On the other side, my IB statement does not show that I paid the withholding tax (which I did not, of course, since it was paid by the borrower), but only shows that I received a given amount for âpayment in lieu of dividendsâ (and this amount is 65% of the dividends). I live in Ticino, and I just canât see how can I claim back something that I never paid. As others I have said, I would need to discuss this with the help of a professional, and the costs are likely to overcome any benefit.
I think that the problem is with IB. They should forward 100% of the dividends, and the fact that the borrower can not reclaim the withholding tax should be just part of their risk. I have terminated participation in their SYEP since the unpredictable advantage is not guaranteed to cover the certain disadvantage of being heavily taxed.
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I expect the borrower to be someone who is shorting the stock. I.e. they sold the borrowed stock and thus, do not get any dividends. The buyer of the borrowed stock is unaware of this (shares are fungible) and will get regular dividends with withholding tax deduction.
I agree. It doesnât make sense to me at all that the borrower would only have to pay 65% of the dividends to you. Iâd expect them to be liable for the whole dividends. Have you already contacted IBKR support? I would simply report that the payment in lieu does not match the declared stock/ETF dividend and you expect a correction.
IBKR has the following on https://ibkr.info/node/1838
Do participants in the Stock Yield Enhancement Program receive dividends on shares loaned?
Stock Yield Enhancement Program shares that are lent out are generally recalled from the borrower before ex-date in order to capture the dividend and avoid payments in lieu (PIL) of dividends. However, it is still possible to receive a PIL.
Did you have a margin loan at this time? If yes, IB takes your shares as a collateral and then they lend it. Same if you bought shares less than 2 days ago and they had not been settled yet.
Run Activity statement for the ex dividend date and see what âCollateral for Customer Borrowingâ section says.
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