Lai See

HSBC customer dismayed by tax treatment of Swiss dividends

PUBLISHED : Tuesday, 04 June, 2013, 12:00am
UPDATED : Tuesday, 04 June, 2013, 3:57am

We are saddened to bring to your attention another case of an unhappy HSBC customer. This tale is set against the background of the double tax treaty between Switzerland and Hong Kong that came into force on January 1. Based on that treaty, Switzerland is entitled to withhold a final tax of 10 per cent reduced from 35 per cent, on dividends paid to beneficial owners of Swiss companies.

Our reader writes that he recently received a dividend from a Swiss company via his custodian bank HSBC. Shocked at the size of the tax, he queried it with HSBC since he was aware of the tax treaty and inquired as to what recourse he had. He says HSBC, however, seemed to be unaware of the treaty.

Some two weeks after his initial inquiry he was told that as the dividends were paid by the company to HSBC's custodian bank in London, the bank had no way of knowing the jurisdiction of our reader's account and had withheld all of the tax. For a bank that transfers large amounts of money to and from accounts every day this seemed an absurd response.

However, following Lai See's inquiries HSBC's response level accelerated somewhat. Somebody else from the bank contacted him and advised that all he needed to do was to submit a tax reclaim form.

In Lai See's discussions with a senior media relations manager, it emerged that our reader had erred, according to the bank, in discussing his problems with someone from sales rather than somebody who dealt with custodian matters. She told us that HSBC had sent the necessary forms to our reader, noting: "Apparently ... [he] is satisfied with our arrangement."

Well, he may be now; he certainly wasn't earlier. Since he pays for the bank's custodian services you would have thought HSBC could at least have alerted him to the tax treaty and the need to apply for a refund. But that service probably requires an extra fee. Readers should check the amount of tax that is being withheld on their Swiss shares if you use HSBC as a custodian.


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