Which Royal Dutch Shell Shares To Buy To Avoid Paying Dividend Withholding Tax – RDSA Vs RDSB


There are a number of companies that are dual listed i.e. there stocks are traded in different countries. For the biggest companies, the price of the stock is usually the same on the two or more exchanges the stock is listed on. One might think that it does not really matter on which countries exchange you buy the stock. But as an individual investor, it is imperative you buy a stock you are after on the right exchange – by this I mean buying the stock in the country with a lower dividend withholding tax rate for instance.





Let’s take Royal Dutch Shell for instance. It is a dual listed company. The A shares (RDSA) are listed on the AEX in Netherlands and the B shares (RDSB) are listed on the London Stock Exchange in the UK. The A and B shares have the exact same voting rights, ownership stakes and dividends declared. As a UK based investor, it makes economic sense for me to buy the B shares as opposed to the A shares even though. This is because the A shares being based in Netherlands pay their dividends after deducting withholding tax of 15% for non EU residents. With Shells current dividend of $1.88 a share, this essentially means that A shares pay $1.60 whilst B shares pay the full $1.88. Most investors make this simple mistake of buying Shell A shares instead of Shell B shares.

(For American investors, it would make sense to buy the US listed rds.b instead of rds.a)

To see how much big a difference buying London listed RDSB shares as opposed to RDSA shares, let’s look at an example based on my existing Royal Dutch Shell shareholding.

I currently own 320 shares in Shell B shares (RDSB). For this, I get a total dividend of £360 a year. If I had made the mistake of buying Shell A shares (RDSA), I would have received only £306 in dividends a year as £54 would de deducted ins withholding tax. I would lose out on £54 simply by buying the wrong shares. This is huge and this is why it is important you buy the right shares in dual listed companies.

The basic tenant of this is that if you are a European Union resident, buying RDSA or RDSB shares does not make a difference for you. This is because there is no dividend withholding tax within EU countries so you do not lose out.

 

If on the other hand you are an American, Canadian, UK, Australian or any other non EU resident investor, buy the B shares. The London listed RDSB shares have no withholding tax applied to the dividend and thus you get the full dividend paid out by shares. If you are a non EU resident and buy the A shares (RDSA) you face paying a 15% withholding tax on dividends.





Royal Dutch Shell is the not the only company with a dual listed listing in London. Other companies with Dual listing are :

  • Unilever which has UK shares (LON:ULVR ) and Netherlands listed shares (Euronext: UNA)
  • RelX which has UK shares(LON:REL) and Netherlands listed shares (Euronext:REN)
  • BHP Billiton which has UK shares (LON:BLT), South African listed shares (JSE:BIL) and Australian listed shares ( ASK:BHP)

In all the above cases, as a UK based it is more advantageous for me to buy the London listed shares. This way I avoid paying withholding taxes on dividends and keep more money for myself.

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