Dividend Withholding Tax Rates for Different Countries Around the World – Foreign Stocks 4


Over the years, various studies have shown that investors tend to favour home stocks as opposed to foreign stocks. One of the reasons is that people are more familiar with companies that are based in their own country than abroad. As a UK investor, I would rather hold Uniliver in my portfolio over Clorox, or Royal Dutch Shell over Exxon Mobil. Whilst there is undoubtedly an element of home bias in favour of local stocks, I believe that one of the biggest deterrents in ownership of foreign stocks is taxes – in specific withholding taxes on dividends.

What are withholding taxes and how do they work?

A dividend withholding tax is a tax that is automatically taken off by the government of the country where the company you are invested in is based. Dividend withholding taxes affects foreign owners of stocks whilst local owners are largely immune to it. So as a UK investor, if I was to invest in Apple, whose annual dividend is currently is $2.03, I would only be paid $1.43 as the US government automatically withholds or takes out 0.6 or 30% of the dividend amount (Note that this can be reduced to 15% as seen below). On the other hand, a US based investor will get the full $2.03 in dividends.

Offsetting withholding taxes

Whilst you can offset the withholding tax paid against your income tax as seen by my article on ‘the new dividends tax rules’, you can’t offset the full amount. You can only offset the withholding tax up to the banding of you home country. For example, the UK allows an individual to receive £5,000 worth of dividends per year tax free. So if I receive gross dividends of £4,000 from Johnson & Johnson and had 15% of the dividend withheld at the US treaty rate of 15%, and this is the only dividend income I have received, I would not be able to offset the £600 I gave up to withholding tax against my taxable income. In essence, that £600 is lost forever.

Looking at another example, let’s say I have used up my £5,000 tax free amount against UK dividends. As a basic rate tax payer, dividends over this amount are taxed at 7.5%. So, If I receive gross dividends from Nestle of £3,000, the withholding tax on Switzerland stocks is 35% meaning I would have paid £1050 in withholding taxes. As the UK dividend tax rate is only 7.5%, I can only offset £225 against mu UK income. Thus £825 is essentially lost in withholding taxes.

Additionally, if you invest in foreign stocks using your ISA, you cannot reclaim or offset any dividend withholding taxes.

To learn more about this, read my article on ‘the new dividend tax rules’ and how foreign income was taxed under the old rules.

If too much withholding taxes have been deducted from your foreign dividends you are able to reclaim the overpayment. Doing so involves writing to the tax authorities in the country that the company is based in and asking for a refund.

Dividend withholding tax rates for countries around the world.

The following is the dividend withholding tax rates for various countries worldwide. The withholding taxes are applied to the gross dividend paid. Withholding taxes are payable by non-resident investors. The country refers to the country of incorporation for the relevant company. The withholding tax rates listed below are taken from third party. In some instances, the rates may be outdated so it is your responsibility to verify the accuracy – I take no responsibility for any of the rates below. If in doubt, always talk to a tax accountant.
The treaty rates listed below are for UK investors)

Rates by Country:

    • Argentina : 20%
    • Australia : 30%
    • Austria: 25%
    • Bahamas: 0%
    • Bahrain: 0%
    • Bangladesh: 20%
    • Belgium: 25%
    • Bermuda: 0%
    • Bosnia: 5%
    • Botswana: 7.5%




    • Brazil: 0%
    • British Virgin Islands: 0%
    • Bulgaria: 5%
    • Cambodia: 14%
    • Canada: 25% (Treaty rate of 15% using NR301 form)
    • Cayman Islands: 0%
    • Chile: 35%
    • China (A,B, H shares): 10%
    • China (P, red Chips): 0%
    • Colombia: 0%
    • Cote d’Ivoire (Ivory Coast): 10%
    • Croatia: 12%
    • Curacao: 0%
    • Cyprus: 0%
    • Czech Republic: 35%
    • Denmark: 27%
    • Ecuador: 0%
    • Egypt: 10%
    • Estonia: 0%
    • Faroe Islands: 35%
    • Finland: 30%
    • France: 30% (Treaty rate of 15% using Form 5000)
    • Georgia: 5%
    • Germany: 26.375% (Treaty rate of 15% using Kapitalertragsteuerstattung claim form)
    • Ghana: 8%
    • Gibraltar: 0%
    • Greece: 10%
    • Guernsey: 0%
    • Hong Kong (local) : 0%
    • Hungary:0%
    • Iceland: 18%
    • India: 0%
    • Indonesia: 20%
    • Ireland: 20%
    • Isle of Man: 0%
    • Israel: 25%
    • Italy: 26%
    • Jamaica: 33.33%
    • Japan: 15.315%
    • Jersey: 0%
    • Jordan: 0%
    • Kazakhstan: 15%
    • Kenya: 10%
    • Korea: 22%
    • Kuwait: 15%
    • Latvia: 0%
    • Lebanon: 10%
    • Liberia: 15%
    • Liechtenstein: 4%
    • Lithuania: 15%
    • Luxemburg: 15%
    • Macedonia: 10%
    • Malaysia: 0%
    • Malta: 0%
    • Marshall Islands: 0%
    • Mauritius: 0%
    • Mexico: 10%
    • Morocco: 15%
    • Namibia: 20%
    • Netherlands: 15%
    • New Zealand: 30%
    • Nigeria: 10%
    • Norway: 25%
    • Oman: 0%
    • Pakistan: 10%
    • Panama: 10%
    • Peru: 4.1%
    • Philippines: 30%
    • Poland:19%
    • Portugal: 25%
    • Puerto Rico: 10%
    • Qatar: 0%
    • Romania: 16%
    • Russia: 10%
    • Saudi Arabia: 5%
    • Serbia: 20%
    • Singapore: 0%
    • Slovakia: 0%
    • Slovenia: 15%
    • South Africa: 15%
    • Spain: 20% (Treaty rate of 15% with form 210)
    • Sri Lanka: 10%
    • Sweden: 30% (Treaty rate of 5% with form SKV3740)
    • Switzerland: 35% (Treaty rate of 15% using Form 86)




    • Taiwan: 20%
    • Thailand: 10%
    • Trinidad & Tobago: 10%
    • Tunisia: 5%
    • Turkey; 15%
    • United Kingdom (REIT): 20%
    • United Kingdom (Corporations): 0%
    • United States: 30% (Treaty Rate of 15% using W-8BEN form)
    • Ukraine: 15%
    • United Arab Emirates: 0%
    • Venezuela: 34%
    • Vietnam: 0%
    • Zambia: 15%
    • Zimbabwe: 10%

     

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