20% withholding tax on distributions from my Irish domiciled ETFs

I took Friday off and have just been celebrating my birthday and Father’s Day with family & friends over the long weekend. It’s nice to know dining in will resume from tomorrow onwards but in groups of 2 and not 5. May arrange a dinner just with my wife to celebrate my birthday by ourselves. Gyms will also be reopening so it would be good to get some variation in my exercise activities. Work from home is still the default arrangement and I look forward to the time when we can head back into the office at least for a few days each week.

Anyway, I decided to write about this topic because I have yet to figure out whether something or nothing has changed. The value of our Irish domiciled ETF holdings is the biggest position in our investment portfolio. I chose to invest in them via our Stan Chart online equity trading accounts because there was 0% withholding tax on the distributions from these Irish domiciled ETFs. This is what I remember and now in the process of confirming whether this is the case for my past distributions from the Irish domiciled ETFs.

Reason being I recently received corporate action emails from Stan Chart providing more information on the upcoming Jun 21 distributions from my Irish domiciled ETFs. I was surprised to see a 20% withholding tax being applied to them. I started to ask myself whether this was always there, meaning my previous understanding of 0% withholding tax on the distributions from Irish domiciled ETFs was wrong and nothing has actually changed. Or something is different and the 20% withholding tax on these distributions are being applied for the first time.

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I decided to read the corporate action emails from Stan Chart in more detail (used to just browse through them quickly). Turns out they don’t facilitate the granting of reduced Double Taxation Agreement (DTA) withholding rates on distributions. My guess is because Stan Chart uses an omnibus account structure with their global custodian and they don’t collect sufficient documentation from each client to be able to facilitate the granting of reduced DTA withholding rates on distributions. Does this mean that I shouldn’t be paying the 20% withholding tax on distributions from my Irish domiciled ETFs and now need to find a way to claim a refund on them from the relevant tax authority?

I asked my Stan Chart RM about this and I have one because of my privileged banking relationship with them. His reply was that Stan Chart doesn’t provide tax advice and I should refer to the relevant documents (or seek tax advice myself) on why a 20% withholding tax has been applied to such distributions. This is not helpful at all but I expected it. Working in a bank the past few years has taught me an important lesson that everyone should know and remember. No matter what banks say and do, they will rarely put the interests of their clients/customers above their own interests.

You know what’s the best part about this. I work in the taxation field (both in practice and industry settings) and can be considered somewhat of a tax advisor. The irony of this situation has not been lost on me. While I’m not a specialist in international withholding tax matters, I’m annoyed and frustrated at myself for not being able to work it out. After all, I have been reading up on the topic but I’m having trouble applying the concepts to this live issue. Looks like I’m going to have to ask around my peers that are international tax specialists for assistance.