Riga

Allied Irish Banks: With 9% Dividend, This Bank Could Thrive

The question raised by Mr. Johnson (i.e. "User 190898") is a fair one which I perhaps should have addressed inside the article.

Ireland does withhold 20% as per the EU norm, UK excepted, I believe. Canada does the same. However, it is very easily reclaimed on your tax filing irrespective of your tax bracket or filing status. That is to say, you still get 100% of the dividend, you just get some of it as a credit on your taxes. It takes the form of an entry in box 6 of form 1099-DIV from the brokerage firm indicating the foreign tax paid. This full amount is then entered for a credit on the second side of the standard 1040. On the 2007 verion of the 1040, it was line 51, titled, "Foreign Tax Credit." It is terribly easy to accomplish and, when dealing with publicly traded stocks, as opposed to control stakes in a private, foreign-domiciled businesses, there are no extra supplemental forms.

While easily done, I fully concede that a more rigorous analysis of AIB's pluses and minuses would entail a time value of money calculation taking into account some months of lost interest on that withheld 20%.

The Irish government's tax policy, a matter of remarkable clarity, is outlined in the link below.

Cordially,
DD


www.idaireland.com/upl...

Allied Irish Banks: With 9% Dividend, This Bank Could Thrive

The question raised by Mr. Johnson (i.e. "User 190898") is a fair one which I perhaps should have addressed inside the article.

Ireland does withhold 20% as per the EU norm, UK excepted, I believe. Canada does the same. However, it is very easily reclaimed on your tax filing irrespective of your tax bracket or filing status. That is to say, you still get 100% of the dividend, you just get some of it as a credit on your taxes. It takes the form of an entry in box 6 of form 1099-DIV from the brokerage firm indicating the foreign tax paid. This full amount is then entered for a credit on the second side of the standard 1040. On the 2007 verion of the 1040, it was line 51, titled, "Foreign Tax Credit." It is terribly easy to accomplish and, when dealing with publicly traded stocks, as opposed to control stakes in a private, foreign-domiciled businesses, there are no extra supplemental forms.

While easily done, I fully concede that a more rigorous analysis of AIB's pluses and minuses would entail a time value of money calculation taking into account some months of lost interest on that withheld 20%.

The Irish government's tax policy, a matter of remarkable clarity, is outlined in the link below.

Cordially,
DD


www.idaireland.com/upl...