Help recovering foreign taxes on stocks

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Mike_WW
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Joined: Thu Aug 09, 2018 10:35 am

Help recovering foreign taxes on stocks

Post by Mike_WW » Thu Aug 09, 2018 12:28 pm

Hi. I am an individual investor and own foreign stocks. Every tax year, Germany takes out 26.375% in foreign taxes instead of 15%. How can I recover the lost 11.375%. Are there any companies out there that I can hire to help me recover these foreign taxes from Germany? Is this something I can do myself by contacting Germany?

Thanks..

livesoft
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Re: Help recovering foreign taxes on stocks

Post by livesoft » Thu Aug 09, 2018 12:42 pm

Where do you live?

What country are you a citizen of?

Do you pay US income taxes?

Do you know what the foreign tax credit on Form 1040 is all about?
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Mike_WW
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Re: Help recovering foreign taxes on stocks

Post by Mike_WW » Thu Aug 09, 2018 1:01 pm

Live in USA, citizen of USA, pay USA taxes, I am aware of the 1040 foreign tax credit, but with Germany, they take out 11.375% above the standard 15% and I was informed that you will not get that 11.375% back unless you submit a tax recovery request to the country of Germany. I was wondering how difficult of a process it is to submit the paperwork myself to Germany or if there are any tax recovery service companies available for hire. I don't own too many shares, so if fees are excessive, it may not be beneficial for me to submit the request with outside help.

livesoft
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Re: Help recovering foreign taxes on stocks

Post by livesoft » Thu Aug 09, 2018 1:02 pm

You would get all 26.375% of the foreign tax credited to you by the IRS then. I wouldn't bother trying to do anything with German tax authorities.
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TedSwippet
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Re: Help recovering foreign taxes on stocks

Post by TedSwippet » Thu Aug 09, 2018 1:20 pm

livesoft wrote:
Thu Aug 09, 2018 1:02 pm
You would get all 26.375% of the foreign tax credited to you by the IRS then.
The IRS disagrees with you:
The amount of foreign tax that qualifies as a foreign tax credit is not necessarily the amount of tax withheld by the foreign country. If you are entitled to a reduced rate of foreign tax based on an income tax treaty between the United States and a foreign country, only that reduced tax qualifies for the credit. It is up to you whether you want to ask for a refund from the foreign country of the difference (excess) for which a foreign tax credit is not allowed.
The US/Germany tax treaty rate for dividends is 15%.
livesoft wrote:
Thu Aug 09, 2018 1:02 pm
I wouldn't bother trying to do anything with German tax authorities.
The reclaim form can be found on this page.

livesoft
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Re: Help recovering foreign taxes on stocks

Post by livesoft » Thu Aug 09, 2018 1:28 pm

I'm glad you responded and set the record straight. But if a taxpayer didn't file Form 1116 and claimed the foreign tax credit, would that 15% limit still apply?
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TedSwippet
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Re: Help recovering foreign taxes on stocks

Post by TedSwippet » Thu Aug 09, 2018 2:12 pm

livesoft wrote:
Thu Aug 09, 2018 1:28 pm
I'm glad you responded and set the record straight. But if a taxpayer didn't file Form 1116 and claimed the foreign tax credit, would that 15% limit still apply?
Apparently yes. From this IRS gem:
Exemption from the Foreign Tax Credit Limit
You will not be subject to the foreign tax credit limit and will be able to claim the foreign tax credit without using Form 1116 if all of the following requirements are met.

...blah blah blah...

CAUTION! This election exempts you only from the limit figured on Form 1116, not from the other requirements described in Publication 514. For example, the election does not exempt you from the requirement that the foreign tax be a nonrefundable income tax.

Mike_WW
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Joined: Thu Aug 09, 2018 10:35 am

Re: Help recovering foreign taxes on stocks

Post by Mike_WW » Thu Aug 09, 2018 3:44 pm

TedSw,

Thanks for info. I thought I'd have to speak with Germany to reclaim the 11.375%

1. Is filing this form a straightforward process (form, SSN, signature, Form 6166, direct deposit info, etc.) for an individual US citizen to do themselves and will they provide me updates along the way if I filed incorrectly or am missing information?
2. Do you know of any US tax recovery companies I might be able to use in the US (although their fees might not make it worth it)?

Thanks..

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: Help recovering foreign taxes on stocks

Post by megabad » Thu Aug 09, 2018 4:23 pm

Mike_WW wrote:
Thu Aug 09, 2018 12:28 pm
Hi. I am an individual investor and own foreign stocks. Every tax year, Germany takes out 26.375% in foreign taxes instead of 15%. How can I recover the lost 11.375%. Are there any companies out there that I can hire to help me recover these foreign taxes from Germany? Is this something I can do myself by contacting Germany?

Thanks..
I would just submit the form yourself. See Bundeszentralamt für Steuern website. Form is: Antrag auf Erstattund der deutschen Abzugsteuern auf Kapitalertrage. International full service brokers do this for you for no cost (except for the outrageous commissions on purchase), but it isn't that hard.

Mike_WW
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Joined: Thu Aug 09, 2018 10:35 am

Re: Help recovering foreign taxes on stocks

Post by Mike_WW » Thu Aug 09, 2018 5:20 pm

Ok, will do myself, thanks everyone for the input and info

FunnelCakeBob
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Re: Help recovering foreign taxes on stocks

Post by FunnelCakeBob » Thu Aug 09, 2018 11:28 pm

Interesting topic... So do I understand correctly that the initial 15% in this example can be recovered as foreign tax credit on the 1040 or form 1116, and the remaining 11.375% by filing a claim with the appropriate foreign tax authority?

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