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Posted Sun, 17 Oct 2021 16:43:56 GMT by Czarek
I am Polish and I’ve been living and working in England for 7 years without a break. I am here with my wife and son. I am just filling in a Self-Assessment Tax Return to report the dividends I received from Polish companies by investing in them through a Polish brokerage house. In Poland, I paid 19% tax on dividends. I want to use the Foreign Tax Credit Relief option to avoid paying double tax in the UK. When filling in the "Dividends from foreign companies" subsection in the "Fill in your return" section, I entered the amount of the dividend received in sterling (“Amount of income arising or received before any tax taken off”), which exceeds the Dividend Allowance, and I also entered the amount of tax paid in Poland (“Foreign tax taken off or paid”). Then under "Do you wish to claim foreign tax credit relief?" I chose the "Yes" option. Then, from the option "Rate of tax credit relief allowed", I chose the rate of 7.5%, because this is how much of the dividend tax I would have paid in the UK above the Dividend Allowance. When I want to save the changes, I get the error: "WARNING: Make sure you have selected and entered the correct amount of Foreign Tax Credit Relief, Select the percentage rate from the list provided." Please explain to me what this error is and what should I do next in order not to pay double tax in the UK.
Posted Tue, 19 Oct 2021 09:57:34 GMT by HMRC Admin 9
Hi, 

The rate for allowable Foreign Tax Credit Relief on dividends from Poland would be10% as per the double taxation treaty.

Please see here:

UK/Poland Double Taxation Convention

Thank you. 
Posted Wed, 20 Oct 2021 14:44:18 GMT by Czarek
Dear Admin, Thank you for your reply. Will it be 7.5% for the basic tax rate?
Posted Wed, 20 Oct 2021 16:24:17 GMT by HMRC Admin 9
Hi, 

Any additional tax due on the dividends would either be at the basic rate or the higher rate, dependant on your level of income.

Please see guidance here: 

Tax on dividends

Thank you. 
Posted Wed, 16 Feb 2022 19:46:17 GMT by Czarek
Dear Admin, I am a UK tax resident, but I have a brokerage account in a Polish brokerage house. Do I pay tax in Poland or in the UK when earning income from the sale of shares in Polish companies that are regularly traded on the Polish Stock Exchange? I am asking this because Article 13 (Capital gains) is not clearly understood by me. I asked the same question in the National Tax Information in Poland, but I did not receive a satisfactory and unambiguous answer. Thank you in advance for your answer. UK / POLAND DOUBLE TAXATION CONVENTION SIGNED IN LONDON ON 20 JULY 2006 ARTICLE 13 Capital gains (1) Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 of this Convention and situated in the other Contracting State may be taxed in that other State. (2) Gains derived by a resident of a Contracting State from the alienation of: (a) shares, other than shares in which there is substantial and regular trading on a Stock Exchange, deriving their value or the greater part of their value directly or indirectly from immovable property situated in the other Contracting State, or (b) an interest in a partnership or trust the assets of which consist principally of immovable property situated in the other Contracting State, or of shares referred to in sub-paragraph (a) of this paragraph, may be taxed in that other State. (3) Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State. (4) Gains derived by a resident of a Contracting State from the alienation of ships or aircraft operated in international traffic by an enterprise of that State or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State. (5) Gains from the alienation of any property other than that referred to in paragraphs (1), (2), (3) and (4) of this Article shall be taxable only in the Contracting State of which the alienator is a resident . (6) The provisions of paragraph (5) of this Article shall not affect the right of a Contracting State to levy according to its law a tax chargeable in respect of gains from the alienation of any property on a person who is, and has been at any time during the previous six fiscal years, a resident of that Contracting State or on a person who is a resident of that Contracting State at any time during the fiscal year in which the property is alienated.
Posted Thu, 17 Feb 2022 11:06:00 GMT by HMRC Admin 2
Hi,

As a UK resident, you are required to report your capital gains on the sale of shares to the UK.

If Poland decide to tax this as well then you can claim for foreign tax credit relief in the UK so that you are not taxed twice on the same income. The gain may be taxed in Poland as well.

Foreign tax credit relief and capital gains (Self Assessment helpsheet HS261)

Thank you.
Posted Sat, 19 Feb 2022 23:58:29 GMT by Czarek
Dear Admin, Regarding the reporting of capital gains in the UK - as I mentioned in the above question - I purchase and sell shares of Polish companies listed on the Polish stock exchange through a Polish brokerage house. A brokerage house issues an annual report on my income. This report is also received by the Polish Tax Office, which issues me a document on the annual income from capital gains to be taxed. Pursuant to Polish tax law, I can deduct losses from previous years from this income in order to reduce the taxable income. 1) Can I report to the English Tax Office (HMRC) such income reduced by me in accordance with Polish tax law, corresponding in the amount of Polish zlotys to the income I report to the Polish Tax Office, or rather the income report without this adjustment? What is the exchange rate for the pound then used in my calculations? Is it the average annual rate for the tax year, or is it the rate on the last day of the year for which the report was issued by the Polish brokerage house in Poland? Do I have to report capital gains income in the UK if the capital gains income reported to the Polish Tax Office has been reduced by me to zero by previous losses, in accordance with Polish tax law? 2) Or rather, I report this income in the UK taking into account the exchange rate of sterling on the day of the share purchase, then the rate on the day of sale of the shares and thus calculate myself the transaction value in sterling and then the profit or loss for each share separately? Do I then take into account the pound sterling exchange rate on the day of the transaction or on the day before the day of the transaction? So we basically have two cases here: a) I report the income from capital gains to HMRC on the basis of the annual report to the Polish tax office (taking into account the pound exchange rate - annual average or on the last day of the tax year), or b) I calculate my losses or gains myself, based on the value of the trades and the corresponding pound sterling exchange rates at the trade date. Which way is the right one?
Posted Mon, 21 Feb 2022 14:42:07 GMT by HMRC Admin 2
Hi,

You can choose to either report the capital gains using the monthly exchange rate or the annual exchange rate. You can use either.

You will report your capital gains to the UK based on the UK rules and not Polish rules.

You can find guidance on working out capital gains here

CG14200C - Introduction and computation: computation: contents

You can find exchange rates here:

Exchange rates from HMRC in CSV and XML format

Thank you.
Posted Tue, 22 Feb 2022 04:55:36 GMT by Czarek
Dear Admin, As a UK tax resident, do I report capital gains for the UK tax year (for example: Tax year 6 April 2020 to 5 April 2021), even if they were achieved in a country that has a different tax year?
Posted Tue, 22 Feb 2022 09:34:00 GMT by HMRC Admin 17

Hi,
 
Yes you would need to report your worldwide income for the year, including any taxable capital gains.

You would report this in the year in which the date of disposal occurred.

See link:

Capital Gains Tax   .

Thank you.
Posted Wed, 23 Feb 2022 01:27:04 GMT by Czarek
Dear Admin, You wrote : "If Poland decide to tax this as well then you can claim for foreign tax credit relief in the UK so that you are not taxed twice on the same income." Will I be able to claim for foreign tax credit relief even if the tax paid relates to a slightly different period due to the difference in counting the months in the tax year of these two countries? (Poland - the tax year is the calendar year, UK - the tax year is counted from April of the previous year to April of the next year)
Posted Wed, 23 Feb 2022 15:02:56 GMT by HMRC Admin 17

Hi,
 
You would need to apportion the tax paid in Poland to coincide with the tax year for the UK.

Guidance on working out foreign tax credit relief can be found here :

Relief for foreign tax paid (Self Assessment helpsheet HS263)   .

Thank you.
Posted Thu, 24 Feb 2022 04:26:17 GMT by Czarek
Dear Admin, What forms and guidance will I need from the HMRC website to calculate and report overseas capital gains as well as capital losses from the sale of shares on the stock exchange? Can I get internet links to them?
Posted Fri, 25 Feb 2022 21:11:25 GMT by Czarek
Dear Admin, You wrote: "You would need to apportion the tax paid in Poland to coincide with the tax year for the UK." In other words: for the purpose of calculating the FTCR, I calculate the tax I paid in Poland on the capital gains from the sale of shares on the Polish stock exchange in the tax year corresponding to the UK. Do I understand it correctly ? Thank you in advance for your answer.
Posted Tue, 01 Mar 2022 09:08:41 GMT by HMRC Admin 19
Hi,

You can see the following guidance regarding capital gains and shares.

You would use UK rules to work out the foreign gains and the exchange rate to convert figures to UK sterling.

Shares and Capital Gains Tax (Self Assessment helpsheet HS284)

Exchange rates from HMRC in CSV and XML format

Thank you.
Posted Tue, 01 Mar 2022 10:43:10 GMT by HMRC Admin 17
Hi,
 
Please see additional guidance here on capital gains tax and FTCR:

Foreign tax credit relief and capital gains (Self Assessment helpsheet HS261) .

Thank you.
Posted Tue, 01 Mar 2022 23:51:53 GMT by Czarek
Dear Admin, You wrote: "You would use UK rules to work out the foreign gains and the exchange rate to convert figures to UK sterling." When asked if I could use the currency exchange rate quoted by the Bank of England on the dividend day, I was answered in the affirmative. Can the exchange rate quoted by the Bank of England be used also for the day of purchase and sale of shares? Thank you in advance for your answer.
Posted Wed, 02 Mar 2022 17:08:10 GMT by HMRC Admin 10
Hi Czarek

Yes as long as you can show where you have obtained the exchnage rate from you do not need to use HMRC figures. 

Thankyou.

Regards.
Posted Fri, 04 Mar 2022 03:46:09 GMT by Czarek
Dear Admin, I asked you: "Will I be able to claim for foreign tax credit relief even if the tax paid relates to a slightly different period due to the difference in counting the months in the tax year of these two countries? (Poland - the tax year is the calendar year, UK - the tax year is counted from April of the previous year to April of the next year) " You replied: "You would need to apportion the tax paid in Poland to coincide with the tax year for the UK." My question, to understand clearly your answer is now: When calculating the tax paid in Poland, should I calculate it according to Polish rules but for the period of the tax year in the UK? Thank you in advance for your answer.
Posted Fri, 04 Mar 2022 16:51:25 GMT by HMRC Admin 10
Hi

You would take the amount of tax paid in e.g 2020 and apportion this to 9/12 of the amount for 20/21 year and 4/12 for 19/20 year. 

Thankyou.

Regards.

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