Understanding Dividend Withholding Tax (DWT) for Irish Company Shareholders

Introduction

Dividend Withholding Tax (DWT) is an important consideration for Irish companies that distribute dividends and for the shareholders who receive them. Whether you’re an investor, business owner, or corporate shareholder, understanding how DWT works is essential to remain compliant and avoid unnecessary tax liabilities.

In this guide, we explain what DWT is, who it applies to, how exemptions work, and what steps are required for filing and reclaims.

1. What Is Dividend Withholding Tax (DWT)?

Dividend Withholding Tax (DWT) is a tax deducted by Irish resident companies when they pay dividends to shareholders.

The current rate of DWT is 25%, which companies are required to withhold and pay directly to Revenue on behalf of the shareholder.

2. Who Is Liable to Pay DWT?

Irish Resident Shareholders

DWT applies automatically on dividends paid to Irish resident individuals and entities.
The withheld tax is considered a credit against the recipient’s final income tax liability for the year.

Non-Resident Shareholders

Non-residents are generally subject to DWT unless they qualify for an exemption under Double Taxation Agreements (DTAs) or other provisions.

Example:

Brian holds shares in an Irish tech company. He receives €10,000 in dividends. The company withholds €2,500 (25% DWT), paying him €7,500. Brian can declare this income on his tax return and use the €2,500 as a credit against his income tax liability.

3. DWT Exemptions and Reliefs

Certain shareholders can claim exemption from DWT:

Irish resident companies
Non-resident pension funds
EU resident companies
Charities
Collective investment schemes

Required Documentation for Exemption:

Form V2A or V2B, depending on the nature of the shareholder
Certificates of tax residency (if applicable)

Pro Tip: To avoid DWT being withheld, ensure exemption forms are submitted to the company before the dividend payment date.

Example 1:

ABC Ltd, a French parent company, owns 100% of an Irish subsidiary. Under the EU Parent/Subsidiary Directive, ABC Ltd qualifies for DWT exemption—provided they submit Form V2B and a tax residency certificate to the Irish company.

Example 2:

Green Fund, an Irish approved pension fund, holds shares in an Irish company. As a pension fund, it qualifies for DWT exemption. They file Form V2A before dividends are issued.

4. Company Responsibilities for DWT

Irish companies must:

Deduct DWT at 25% before paying dividends
Submit a DWT return (Form DWT) by the 14th day of the month following the dividend payment
Pay the withheld DWT by the same deadline
Maintain accurate records of all dividend payments and DWT deductions
Deduct 25% DWT from dividend payments
Submit Form DWT and remit tax to Revenue by the 14th day of the month after the dividend payment

Example:

XYZ Ltd declares a dividend on March 1st and pays shareholders on March 15th. XYZ Ltd must submit Form DWT and pay the deducted tax by April 14th.

5. How to Reclaim DWT

Shareholders who have had DWT deducted unnecessarily can reclaim it by:

Completing the Dividend Withholding Tax Refund Claim Form (Form IC6)
Providing supporting documents, such as residency certificates or exemption declarations
Submitting claims within four years of the dividend payment

Pro Tip: Start the reclaim process early to ensure all documentation is in order and to avoid delays.

Example:

Anna, a resident of Germany, received €5,000 in dividends from an Irish company. €1,250 (25%) was withheld as DWT. Under the Ireland-Germany Double Taxation Agreement, the rate is reduced to 15%. Anna can reclaim the 10% difference by submitting Form IC6 and proof of German tax residency.

Refund claims must be made within 4 years of the dividend payment year.

6. Implications for Irish Company Owners

If you own an Irish company and pay dividends to yourself or shareholders, ensuring DWT compliance is vital.

Ensure proper declarations are on file
Regularly review shareholder statuses to confirm exemption eligibility
Maintain up-to-date records of dividend payments and DWT submissions

Conclusion

Understanding Dividend Withholding Tax (DWT) is essential for Irish company owners and shareholders. Whether you’re managing dividend payments or receiving them, ensuring compliance and making use of exemptions where applicable can save time, money, and avoid potential penalties.

👉 Need guidance on DWT compliance or refunds? Contact Intax.ie today for expert advice and tailored support.