So you have received dividends (or interest) from France, are not a French tax resident, were withheld the default rate (ie: 30% on dividends) even though your tax treaty entitles you to a lower rate? (as is often the case, ie 15% for Singapore)
There’s much paperwork ahead but you can get your money back. The process seems designed to discourage people from claiming their tax refund, but it’s not as arduous as it looks at first:
- At the beginning of the year, collect your French dividend and/or interest income you received the year before. Put this into a spreadsheet and compute how much withholding tax you paid, how much you should have paid, and how much you’ll be claiming back.
- Download the form 5000 ; and either the 5001 (for dividends) or 5002 (for interests). For this, go to the tax portal form search and look for forms with CERFA number 12816*01, which will list all available forms 5000, 5001 and 5002 in multiple languages (the code EN, FR, ES, etc. are language codes for English, French and Spanish)
- Fill out the forms. If you are going to do this every year, I suggest pre-filling them as PDF files that you can keep around for the following years and save time. Each form will be made in 3 versions: one to be kept by you, one to be kept by your local tax authorities and one for the French administration.
- Submit those forms to your local tax authorities, which will have to complete their part that certifies you are a local tax resident. For Singapore you’ll need to also submit the form to apply for a Certificate of Residence, to be included along with the rest.
- Once you get the forms properly stamped, you need to send them to the bank or financial company that collected the taxed dividends/interests.
I have been a unit-holder of Tower REIT, a small Malaysian office REIT, for a while. This morning I was pleasantly surprised to see the stock sharply up (+4.13%), after weeks of decline. Turns out there’s big news.
Tower REIT owns (only) 3 office towers and is selling one of them, Menara ING. The sale is done significantly above the Net book value: about MYR 132 Million vs 101 as of the end of last year. As is usual with REITs selling assets, the disposal is said to enable the trust to “repay bank borrowings” and to “pursue acquisition opportunities”.
What I think
This looks like a smart move on paper. The NAV will increase immediately as a result (by 5% per unit according to the press release) ; and this feels even more positive given that the trust is currently trading at a significant discount. The big question is of course how that money can be put to good use: the trust already had less than 20% leverage before the sale, so with the extra cash one or two acquisitions are possible, hopefully some accretive ones.
The issue however is that until some acquisition is made, the trust will be going with one third of its portfolio gone. This is seriously going to hurt the income. I had invested in this trust as I felt it offered a good yield with a safe, simple and boring profile. It’s turning out to be less boring than expected.
Disclosure: long Tower REIT
Two months ago, I was discussing investments with my banker, and the options I had available in this age of low rates. He casually mentioned one of his new bank products: a bond in Singapore Dollars that would offer 2.5% yearly. I reminded him that Singapore’s inflation was over 3%… in other words, I would actually loose money by investing in the bond!
It is interesting that a lot of, if not most, people do not think of inflation when considering investments and savings. This is a big mistake as in my previous anecdote, it can turn a profitable investment into a loosing one. It is a mistake encouraged by the whole financial industry as most performance numbers (stock index, fund performance, etc.) are given in nominal currency rather than inflation adjusted, making the numbers look bigger than they really are. Regular people will do this too, claiming they have made “this much money” by buying a house 30 years ago for pennies and selling it today. Yes, but how much are those pennies worth in today dollars?
Continue reading Investor’s Nemesis: Inflation