Dividend taxation

[AlexGE]

Hello everyone,

Dividends are taxes at a different rate vs regular income (I know it's not the same way everywhere but in my case - yes)

But who's in charge to prove that certain income is dividend?
I mean if I received some dividends during this year, I have to report that I got X$ at a dividend,

at what point in time do I have to prove that it was a dividend, not a regular income?

Thank you.

 

[Sols]

If/when you are audited.

 

[AlexGE]

Thank you!

How can I prove‌ it in case of "if" ?

Something like "dividend resolution" from a company that issues‍ dividends?

 

[Sols]

Another way to word this question is: How do I go from a possibly excusable‍ error and just owing some back taxes to committing the kind of tax fraud that⁠ will land me in prison?

Yes, along with an entire company with audited financials and⁣ bank statements to prove the company made a profit from some activity, paid tax, and⁢ that you as a shareholder were paid an amount matching what you declared. You can︀ fake all this, but you're betting your personal freedom on you being better at faking︁ documents and records than the government is at detecting and using other channels to verify.︂

The tax man isn't dumb. Overworked, yes, which is why your scheme might slip through.︃ But it won't hold up to scrutiny. If you are audited, expect to have to︄ prove that the source is also legitimate.

 

[AlexGE]

What

What a︃ nice way to think about ppl you don't know 🙂

I own a share in a︄ PE fund, they do send out "Financial statements", but I don't see anything that looks︅ like a "bank statement" and a "paid tax".

are you sure they have to send︆ bank statements and some proofs of paid tax to each shareholder?

 

[fshore]

Is the dividends higher or lower⁢ taxed in your case?
Don't the fund send you any documentation on the payouts? Have︀ you tried asking them?

 

[AlexGE]

Dividends are taxed at 50% of my regular rate

They did send "Financial statements" and‌ an email like "We've sent you your dividends" but that's it.
I didn't ask them‍ yet, wanna make sure I know what to ask )

 

[CyprusLawyer101]

Depending on the type of distribution, as characterized by the distributing company's/entity's internal arrangements and‌ according to applicable tax laws in the country of distribution, the income is characterized accordingly.‍ Now from the recipient's end, the characterization of the income depends on the local tax⁠ laws of the country of the recipient's tax residence, if a different country. It is⁤ possible that the characterization between countries differs. Also double tax treaties become relevant here (⁣ if they exist) to ensure the avoidance of double taxation.

 

[EliasIT]

Don't you have a tax advisor that is able to sort⁤ this out. Usually it is a matter of an hour you have to pay him⁣ for such and you will keep the headache away.

 

[AlexGE]

I wouldn't ask here if⁠ I had one 🙂

 

[Sols]

It really depends on the nature of the⁤ dividend (your interest in and relation to the entity paying dividend) and the nature of⁣ the audit. Tax audits are usually hostile, because they are based on a suspicion. If⁢ you live in a jurisdiction where the burden of proof is reversed for tax crimes,︀ you may be presumed guilty until you prove yourself innocent.

In the case of receiving︁ dividend payment from a PE and you end up audited, it might be enough to︂ show the financial statement, a bank statement where you receive the dividend (and do the︃ initial buy-in, if any), and an agreement with the PE if you have one. Especially︄ if the PE is registered and/or well known.

If the tax authority has reasons to︅ doubt your story, you might need to ask the PE for additional proof.