When private individuals invest in regulated financial instruments Notes, we are legally required to deduct a withholding tax from their interest income.
The process of tax withholding works in the following way:
- You invest in a Set of Notes.
- The borrower of an underlying loan or the lending company makes an interest payment (interest, delayed interest, pending payment interest).
- The full amount of the interest payment due to you is credited to your account.
- At the same time, a part of the interest payment is automatically deducted from your account as withholding tax based on the applicable tax rate.
- When you declare your income in your country of tax residence, you can usually reduce the total tax payable by the withheld amount, so your effective tax rate will be the same as it would be for investments in claims. There should not be a situation where you will be double taxed.
You can see the withheld amount as a separate entry in the account statement. The total withheld amount is visible on the Overview page and will also be available in your tax report. Mintos also issues tax statements to each investor that will serve as evidence for the withheld tax. Please note that no withholding tax is deducted for legal entities.
The rate of withholding tax depends on your country of tax residence and can be checked in the Tax details section of your account settings. Currently, the following rates are applicable:
- For all investors, the standard withholding tax rate is 20%. The rate can be reduced if the investor provides a tax resident certificate (learn more). Please see the full list of reduced applicable tax rates.
Example: Both Investor 1 and Investor 2 have invested €100 each in Notes and earned €10 in interest. Investor 1 is a tax resident of an EU country and has provided a tax residence certificate (reducing his applicable tax rate to 10%), and Investor 2 is a tax resident of a country outside the EU and has not provided a tax residence certificate. A 10% withholding tax (€1.00) will be deducted from Investor 1’s interest income, while a 20% withholding tax (€2.00) will be deducted from Investor 2’s interest income. Investor 1 and Investor 2 will receive €109.00 and €108.00 in repayments, respectively. Both investors will be able to offset the withheld amount against the total amount of tax payable in their tax declaration according to the tax laws of their country of tax residence.