Among individual investors of Plus500, especially those in the UK, where shares of the broker trade on the London Stock Exchange dealing with withholding taxes on dividend distributions has been an issue. As an Israeli-founded company, dividends issued by the broker are subject to the country’s 30% withholding tax. Non-citizens though, with tax treaties with Israel are able to receive a reduction on the tax rates depending on their country’s rules. In the case of UK investors, with which the country has a tax treaty with Israel, and a withholding tax rate of 15%, they are an entitled to receiving a refund on taxes initially collected on dividends. However, the process involves interaction with the Israel Tax Authority to receive the refund. For individual holders, the process adds an extra element of friction in collecting their full dividend distribution.
Per previous reports by Forex Magnates of an impending ease in the process for non-Israeli shareholders, Plus500 announced today that it has received a favorable withholding tax ruling from the ITA. According to the terms of the ruling, shareholders entitled to a reduced withholding tax rate will be able to sidestep their direct dealings with the ITA, and submit forms to ESOP Management & Trust Services Ltd which was appointed to serve as a processing agent for the benefit of the investors. While shareholders will continue to be required to submit documentation to identify their ownership as not subject to the ITA’s 30% withholding tax, the ruling provides Plus500 shareholders the ability to deal directly with ESOP, specializing in stock and options related activity, instead of opening dialogue with a foreign government tax office. Also, the ruling allows for shareholders to receive the tax immediately upon the issuance of the dividend distribution, without the need of retroactively claiming a refund.
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Beyond the broker’s stellar top and bottom line growth it has exhibited since becoming a public company last year, is Plus500’s large percentage of its profits being distributed to shareholders in the form of a dividend. As a result, the dividend has been an important factor of driving retail oriented demand for Plus500’s shares.