Whenever you request guidance on how to invest to reach FIRE, you will often receive the comment you should invest in Emerging Markets e.g. through IWDA + EMIM. But should you?
Last Updated on April 28, 2019 by Mr. FightToFIRE
It’s that time of the year again. Time to fill in my tax return and either get some money back at the end of the ride or pay some additional taxes. It’s not open yet but I expect it to be in the coming days. Based on the info I could find online, it’ll most likely be 2 May.
Since the tax return is always such a joy to fill in, I figured I go over the most important things to check as a retail investor. One of the new and important changes this year is the possibility to recuperate the withholding tax (WT) (Dutch: Roerende Voorheffing or RV) on dividends.
On 3 April, the government published information about the 2019 tax return (income year 2018). It now contains the box that allows you to recover the WT of 30% on the dividends received from shares in 2018. Box VII – income from capital and movable property under code 1437 – 18 & 2437 – 85 (box VII, A, 1, b) is intended for this purpose.
Notice that in this box you cannot enter the amount of dividends received in 2018 (max. 640 EUR / taxpayer), but you must enter the amount of the WT to be recovered (max. 192 EUR / taxpayer), in other words 640 x 30%. Since not all share dividends are subject to the 30% RD you should first reclaim the 30% WT before reclaiming 15%.
(more below the image)
Get that thirty first
15% is for specific REITs such as Aedifica that I have in my portfolio (and Care Property). Again, when filing your tax return, it is best to clear up which have a 30% WT.
E.g., if you received 740 EUR last year, of which 500 EUR is subject to the 30% WT and 240 EUR to 15%, take the 30% first, i.e. the 500 EUR. That gives you 150 EUR. The remaining 140 EUR gives you 21 EUR. Together this gives you 171 EUR.
In any case, you must start from the gross amount of 640 EUR. You should also know dividends of cooperative shares are now included in this amount. These can therefore no longer be declared separately.
No bank support
For the time being, it does not seem that the banks/brokers will be obliged to provide you with a tax certificate with the dividends received. It will, therefore, depend on the goodwill of your financial institution whether you get an overview or have to generate it yourself.
Even if it’s not mandatory, it would be nice if your bank or broker provided you with an overview that shows you exactly how many dividends you received in 2018. Unfortunately, this will not be the case (for the time being). I guess that would make it too easy.
Since we can’t expect any real support and the government expects us to fill it in ourselves, do not forget to check the boxes! Especially if you get a proposal for a simplified tax return as I got for the first time last year, be sure to fill in the correct field. It can bring in up to 192 EUR.
This new regulation has a strange side effect. Because it excludes (active or passive) funds and you can only reclaim individual stock dividends, the government is (partially) pushing investors to more risky investments.
By offering a fiscal advantage only on dividends from listed shares and on those from cooperative shares, the government is pushing savers towards investment products that should not be a first stock market investment for everyone.
It would be better to extend the benefit to dividends from (active or passive) investment funds. These offer good diversification, which is not the case with individual shares.