How to Deal with Crippling Foreign Withholding Taxes

Foreign Withholding Taxes Can Cripple the Yield of Your Dividend Growth Stocks

Living in a small country like Belgium definitely has its perks, mostly because you’re well-known for things that don’t matter in the grand scheme of things, such as beer, chocolate and waffles. The open economy of the European Union, of which Belgium is a founding member, furthermore succeeded in removing many of the downsides of small countries by allowing unprecented movement of people, goods and capital. As a result, investors of small European member states now get to enjoy the economic benefits of the big players like France, Germany and the UK.

Of course, that’s the theory. And while the theory holds true for many aspects of European life, dividend growth investing isn’t one of them. It’s a fact that it’s never been easier to become a shareholder of a French company like oil-giant Total (EPA:FP) or to invest in dual-listed British-Dutch Royal Dutch Shell (LON:RDS.A and RDS.B). However, the lack of a pan-European tax system for capital appreciation or income from capital creates many barriers for investors seeking to reap dividends from a profitable business abroad.

And it’s not just European investors that suffer from this problem. While EU countries at least share a certain level of harmonised regulation and legislation on taxation, hardly any legislative action has been taken at the international level. As a result, investors from the United States wishing to own a part of Unilever (LON:ULVR) have to jump through many tax hoops and hurdles to pick the right stock for them on either the London or Amsterdam Stock Exchanges.

Maybe you thought yourself smart by buying Unilever on the New York Stock Exchange? Well, there’s a 50% chance you bought the wrong ADR. The UL shares don’t withhold any taxes because they originate from the London-based shares, whereas the UN listed stock applies a 15% Dutch withholding tax.

Dividend growth investing can become complicated pretty quickly when you decide to look beyond your country’s borders for great investment opportunities. Citizens of small nation states like myself obviously have much less opportunities to invest at home, so it’s important that their knowledge of foreign withholding tax regimes is up to snuff when they pop over to a neighbouring country.

That’s why I decided to share the foreign withholding taxes that apply to the most popular countries to invest in. Ever since I became interested in following the dividend growth strategy I’ve been researching and looking for ways to reduce the tax pressure on my dividend income, sadly without much success. Belgium doesn’t offer tax credits for foreign taxes withheld on dividend income like the Netherlands or even the United States do.


Belgium – 15% or 25%

While Belgian citizens are always subject to a 25% tax rate on income from capital, international investors can apply for a reduced rate of 15%. From what I’ve heard many brokers automatically apply the reduced rate if you reside in a country that has a bilateral tax agreement with Belgium, such as the US.


Canada – 15% or 25%

Oh, Canada. I’m not even going to explain this one. It’s even more cumbersome than the German system described below for investors outside of North-America. Basically, you have to apply to the Canadian administration for a reduced rate of 15% that’s only valid for up to three years for every single purchase. In my personal experience, many brokers charge an outlandish fee for this service, so beware.


France – 15% or 30%

France is a tough one – no surprise there. As usual, the French thought it wise to introduce one of the highest tax rate on dividends of any developed country. At about 30% the taxes withheld on dividends would be a serious roadblock to creating a sizeable passive income stream, especially if you also have to pay taxes on dividends received in your home country.

Thankfully, investors who know their French and feel like dealing with the French administration – for many people the second hurdle will be much larger than the first – can apply for a reduced foreign withholding tax of 15%, which is in line with most other European countries. Some brokers offer this service for free, but remember that it can take several months before your application is succesfully dealt with by the French.


Germany – 15% or 26.375%

The Germans actually apply a 25% flat rate on income from capital, but introduced an extra solidarity rate of 5.5% not too long ago. As such, the foreign withholding tax on German stocks is 26.375%, which is rather high. Like in the case of Belgium and France, it’s possible to reduce that rate to 15%.

Weirdly enough the 15% rate cannot be applied automatically like in the case of Belgian stocks – very inefficient, Germany! Everytime you receive a dividend from a German company you’ll have to apply for a reduced tax rate, which is not only time consuming but rather expensive because most brokers charge a surplus for the labour intensive service.


Italy – 15% or 27%

With the current state of the Italian economy it may not look like it, but there used to be a time that the Italian stock exchange offered many great investing opportunities. At the moment very few investors hold Italian stocks, partly because of the high foreign withholding tax.

Not too long ago Italy did introduce the same withholding tax recovery as France has in place, which remedies some of the reservations against investing in oil company Eni (BIT:ENI), for example. As a result it’s possible for international investors to reduce their withheld taxes from 27% to 15%.


Japan – 7%

Personally I haven’t invested in a Japan-based company yet even though the Japanese authorities offer dividend growth investors relatively straight-forward guidelines. If you received Japanese dividends you’ll be 7% out of pocket.


Luxembourg – 15%

Many European banks are based in Luxembourg because of its favourable tax laws. Luxembourg also hosts many international corporations or shell companies because of tax optimization schemes. If you buy into a Luxembourg-based company you’ll have to take into account a 15% foreign withholding tax.


Switzerland – 15% or 35%

Switzerland, the country of personal tax evasion and massively profitable banks, withholds 35% on any dividends from Swiss companies by default. If you thought investing in Novartis (VTX:NOVN) or Nestlé (VTX:NESN) was a smart decision, you might want to reconsider.

Thankfully, the Swiss also introduced a way to recover 20% of your dividend payment through very much the same system as the French. Many brokers offer this service for free because it’s not as cumbersome as the German one, but make sure to check when you decide to invest in Swiss companies. US-based ADR holders of Nestlé, for example, immediately receive a reduced withholding tax rate.


The Netherlands – 15%

The Dutch certainly own their fair share of succesful international companies with many offering a great dividend policy. Again Unilever and Royal Dutch come to mind, but also the now British-Dutch Reckitt Benckiser (LON:RB). Sadly, though, the Dutch government introduced a 15% foreign withholding tax on almost all dividends in 2012.


The United Kingdom – 0%

If you’re looking to invest in a British company, don’t worry. The Brits don’t apply a foreign withholding tax on dividends, so you’re not losing any income at the source. That’s why it’s important to purchase most dual-listed stocks on the London Stock Exchange rather than on any other exchange.

The previously mentioned Royal Dutch Shell and Unilever are two great examples of companies that are best bought in the UK rather than in the Netherlands. As a matter of fact, for Shell the situation is even more complicated because both the A and B shares are listed in London and Amsterdam, but only the A shares withhold any foreign taxes. Another popular dividend growth stock that’s a safer buy in London than South Africa is BHP Billiton (LON:BLT).


The United States of America – 15% or 30%

The most capitalistic country of all time withholds 30% on dividends – what? That is if your government hasn’t put a bilateral tax agreement in place, which is the case for almost all Western and Northern European countries. My purchases on the New York Stock Exchange, for example, are immediately subject to a 15% tax rate.



As you can see, there are a ton of different tax rates and systems out there. Please bear in mind that the withholding taxes described above are general rules of thumb, which may differ from one country of residence to another. Like I already mentioned, Belgium is the only country in Europe that taxes dividends twice, both in the country of origin and again in Belgium. As such, my effective tax rate on most dividends is 37.5%.

When you compare that to the example of a Dutch resident who is able to reclaim foreign withheld taxes in his personal income tax, he’ll be ahead about 22.5% every single dividend payment. That’s a lot of money in the long run.

If you’re looking to add foreign companies to your portfolio, be sure to read up on the applicable laws and rules before dumping your money in a stock that yields next-to-nothing because of crippling tax arrangements. I’m really glad that I’ve never had the misfortune of running into a situation like that. Have you?


  1. Nice read, thanks a lot. Unfortunately from a German perspective it is not always that easy.
    Witholding tax for a german tax-payer is indeed 26,375% if you receive more than 801€ a year ( the first 801€ are tax free ). But mostly you cannot claim foreign taxes back. Therefore my US investment income is reduced by 15% in the US and additional 26,375% here in Germany.
    As I am holding some Statoil % I have to claim the foreign withholding tax as well. So it is as inefficient as Germany in that case, I guess both are hoping we are not claiming and they can keep some of the income.

    One thing I am wondering, why aren’t you e.g. talking about Munich Re, they have a strong dividend history, their view on dividends is to either raise or keep dividends the same and they are buying back shares as if there is no tomorrow. BTW Warren Buffet is hold quite a bunch of shares.

    1. Lars,

      Thank you for sharing the German perspective.

      Quite interesting that the first €801 are not taxed. Some political parties in Belgium are thinking of introducing the same policy. I’d be much more interested in being able to recover the foreign taxes I payed though. In the long-run that’ll make a huge difference.

      Munich Re is definitely on my radar, but I have yet to really dig into their business model and financials. Especially when I talk about a company on my blog I need to feel confident about their business.

      Best wishes,

  2. NMW,

    since Lars already added some aspects from a German point of view, I will limit myself to my “international” thoughts.
    I believe the most important statement you made is that it has never been easier to invest in stocks. Even though complex taxation is annoying, we are blessed with a lot of transparency, opportunities and relatively low transaction costs.
    I guess the withholding tax is manageable, too. But it is not worth the effort to claim every single penny. I try to invest in countries with favourable withholding tax legislation. Luckily there is still a lot to choose from. I mostly invest in stocks from the US, GB and my home country anyway.

    Thanks for your thoughts and the summary.

    1. Stef,

      It’s true that we have almost unlimited tools at our disposal to become succesful stock market investors. The withholding taxes are annoying, but since there’s a lot of legislative transparency from most countries, it’s easy to deal with them, like you said.

      Just like you I try to invest in countries with favourable taxation policies, but of course that’s not my only requirement. When I find a great company in Germany with a decent yield, you can bet on it that I’ll eventually add it to my portfolio.


    1. Henry,

      We don’t pay capital gains taxes on anything, period. It doesn’t matter whether the stocks are domestic or international. Too bad flipping stocks isn’t my thing! Also, we’re discouraged from doing that because of a transaction tax (0.25%). That’s not much, but if you lose around 0.5% from you gains just because of transaction taxes (+ costs), it’s often not worth the risk or hassle.


  3. Yeah things can be quite complicated with foreign withholding.

    One of the things I learned a couple of week ago is that the US also has something it calls “80/20” companies, these are companies that generate the majority of their income outside the US. For companies that qualify for this special tax status, there’s no US withholding tax on the percentage of the dividend that was earned outside the US.

    The most well known example of this is Philip Morris (PM), for 2014 there’s no US withholding tax on 98% of their dividend. The other 2% is taxed at the usual rate.

    1. Thomas,

      I didn’t know that! Definitely have to dive into US legislation now. I don’t believe there will be many companies that qualify for the 80/20 treatment, but at least it’s good to know they’re there.

      Thanks for sharing, really interesting,

  4. I’m a Dutchman and I absolutely hate to pay taxes on my dividends, especially because in a way it is taxed twice: first when you receive it 15% is withheld and at the end of the year you have to pay ‘vermogensbelasting’ (wealth tax) which is 1.2% of your wealth (so €12 per €1000 invested, €100.000 invested means €1200 taxes, etc.). It’s sad but there is nothing to do about it.

    1. Robert,

      I’ve read about the wealth tax in the Netherlands. It starts at about €22,000 for a single-person houshold if I’m correct? That’s a big drain on your wealth and growth potential over time. At least you’ll be able to build your dividend income stream much faster than us.

      Best of luck,

  5. Thanks for the nice summary NMW!
    I feel somehow lucky to be in Switzerland as we thankfully have quite a lot of prosperous and wealthy companies that prevent me to invest all my savings out of my home country.

    Your article is anyway very useful to me as I do need to diversify my investments.

    Have a nice end of year mate!!!

    1. MP,

      You do have large multinational companies with excellent dividend paying histories, so that’s awesome. However, if I were you, I would also look at foreign companies for the sake of diversity.

      How do you feel about currency fluctuations? I know the Swiss Franc is quite stable compared to the Euro, for example, but personally I sometimes worry about owning too much foreign currency equities.

      Happy holidays to you too!

      1. Thanks for the reply! I also diversify my portfolio to international companies with this ETF: ISHARES MSCI WORLD HEDGED (IWDC) (ISIN = IE00B8BVCK12)

        This way I’m also protected against currency variations – which are quite like roller coaster this last decade in the CHF world 😉

        That’s a bit the pain point of living here that frustrate me to not be able to invest more in US companies.

        As my golden goal would be to spend early retirement half in Switzerland and half in Canada, this might change the game with bank account currencies diversification 😉

        But so far, I’m sticking to my portfolio vision which is the focus on CH market and mainly bonds until we manage to buy our first home.

        Happy first day of 2015 to you all!!!

        1. MP,

          Interesting to see you use a CHF hedged ETF, never seen anyone do that before. I think most people aren’t aware that they’re exposed to currency fluctuations if they buy an foreign equities ETF in their own currency.

          I wish there were more quarterly and increasing payouts for European countries. There are very few companies in the EU that actually try to consistently increase their dividend. Most Belgian businesses also only pay a dividend once a year, which makes the compounding effect much slower.

          Living both in Canada and Switzerland might make things more complicated, but that shouldn’t be a problem! When one currency goes down, you can maybe go live in the other country for a while… 😀

          Happy New Year to you too! Hope you have a fantastic year,

          1. I know by experience that currencies are a risky market. When we landed in Switzerland, 1 euro was worth CHF 1.5 and few years later, the government was forced to introduce a currency floor rate to preserve the economy (we went down to 1 euro = CHF 1 and the floor brought it up to CHF 1.2).

            On the other hand, for long term investors as we are (except myself until I bought our home), hedge fund doesn’t seem to be that much necessary as this article explains it well:
            I will see how I adapt my portfolio accordingly once we are there.

            Like you, I also feel that Europe isn’t investing-minded as what we see in the US. At least we have the good food instead 😉

            For the Switzerland/Canada, that’s exactly my point 😉 also, US are not far from Canada in case it gets really painful with Canadian dollar!!!


  6. This makes me really proud to be British. I deplore the high taxation of dividends, since we should be encouraging more people to invest in solid dividend paying stocks, rather than being penalised for the privilege by swiping a huge cut in tax.

    I count myself very blessed, as grow independent says, that we have many opportunities to invest on a pretty much worldwide basis nowadays, and cheaply! I’m also very happy that I can shelter £15,000 per year in a tax free investment account, get around £10,000 capital gains allowance if I invest in a taxable account, and I can also get a 25% top-up to any money I put in my retirement account.

    I think it’s sad that governments tax dividend so highly in some places… Maybe we should start a campaign?!

    Thank you for the in-depth look at these tax régimes, it’s certainly a bit of an eye-opener isn’t it?!

    1. M,

      Hoist the flag! Gloria Britannica! 😀
      I wish the Belgian government had the same attitude towards stocks, but I also believe that there should be a fair balance in taxation between labour income and income from capital. That’s why I don’t mind paying taxes on my dividends. I just don’t like being taxed more than once in multiple countries.

      £15,000 in a tax free investment account is a very sweet deal, I wish I could do the same. And the 25% top-up in a retirement account is even better! What are the rules for taking the money out of these accounts?

      The different taxation regimes definitely are an eye-opener. They also make me think that it’ll take a pretty long time before we’ll have a harmonised level-playing field in the EU.


      1. “but I also believe that there should be a fair balance in taxation between labour income and income from capital. That’s why I don’t mind paying taxes on my dividends.”

        Company profits are ALREADY taxed at the corporate level. Taxing them again when they are distributed as dividends is double taxation.
        Logically, company profits should be taxed either at the corporate level, or at the dividend level. Not both. The UK approach is reasonable.

  7. Just wanted to add something additional from the german perspective. The “socialist” Party SPD is thinking about increasing the withholding tax to the income tax the respective shareholder is paying or the combined income is going to be measured against the income/tax-table. So it is getting worse in Germany, I would need to pay roughly 50%. Luckily we do not have the “wealth” tax as the Netherlands but I am sure I can give you some more details about that in a couple of years.

    1. Lars,

      That would be a very bad situation for you to be in! I’d lose over 50% of my dividend income, rendering the strategy completely useless to me. Are they only counting income from capital or also capital gains? And what if you lose money in the stock market? Would you be able to substract that from your normal income tax?


      1. NMW,
        well, setting aside the 801€ from above we currently need to pay 26% on all “realized” capital income. No matter if it is dividends in € or stocks. If you “realize” capital gains you have to pay the above as well.
        In terms of losses we currently have two baskets; #1 for dividends and #2 for capital gains / losses. Honestly I do not know where derivates swaps etc belong to but capital losses are going into #2, these losses do not reduce tax payed for income in #1. So it is not that funny right now.
        They have not told us yet how the want to proceed but I am sure I am going to pay more not less taxes.

        Any German would now state that Lars is earning quite a lot if he is going to be / is in the 50% bracket. That might be true but to be honest I do not feel rich or super rich, I do not have a car, I do not go out shopping expensively, I do not go eat out expensively etc but still have to pay that “rich man extra tax”.

  8. Hi NMW,

    Nice write up. I have to agree sometimes investors can’t see the trees trough the forest because of all the regulations.
    I don’t like the dividend taxation but we don’t have a capital gains tax in Belgium. I use this to my advantage. If I did buy a stock and it goes up 20% in less then 2 months I sell it and reallocate the capital.

    And the goverment is looking to introduce a taxreduction when people invest in stocks.


    1. While it would be nice to see some tax reductions for stocks I’m quite sceptical, the Belgian government typically gives and then takes it away. Perhaps they’re considering a capital gains tax in combination with a tax reduction scheme, that would be a typical Belgian solution.

      Just the last decade or so they’ve shown very little love to stock investors. First they introduced and then increased the transaction tax multiple times and the previous government first increased dividend tax for VVPR shares before making the whole VVPR dividend tax reduction scheme obsolete.

      1. Thomas,

        You’re right that ‘lost revenue’ for the government in one place often means creating new sources of income. I also don’t believe tax reductions for stock owners are going to happen any time soon. If you’ve seen the public outcry of the past few weeks you know why.

        Of course, our new federal government is much more right-wing than the previous ones. They’ll definitely favour less taxes on capital gains and income from capital, so we’ll have to wait and see if they change anything.

        Best wishes,

    2. Geblin,

      It’s difficult sometimes to take everything into account when buying stocks. That’s why I decided to put this overview together. I’ll most likely use it quite often myself in the future.

      Too bad flipping stocks, just like Henry above mentioned, isn’t my thing. I’d rather buy and hold forever than to buy and sell constantly. That would also mean I had to monitor all my positions much more closely, something I don’t really want to be doing.

      I’ve read about another idea from the government to incentivize investing in stocks, but I don’t believe it will materialize soon. The current budgettary situation, political climate and public opinion don’t allow it.

      Best wishes,

  9. Hello NMW

    Great write up. Even though I am not in Europe, as an international investor (non US also) it is great to find out about tax treatment internationally. I was looking at Nestle at one point but the Swiss tax scared me away. I am now looking at purchasing a few more UK companies due to the dividend tax treatment.


    1. Lynx,

      Taking taxes into account definitely is a big part of being an international investor, as much as that sucks sometimes. It’s too bad that you can’t properly invest in Swiss companies because there are a lot of very good ones out there.

      If you’re looking for an easy solution to foreign withholding taxes, the UK definitely is the way to go!

      Good luck,

  10. Very interesting stuff, didn’t know there are so many different withholding tax rates. I try to avoid dealing with witholding tax rates by investing in registered accounts. Is this something you have in Belgium?

    1. Tawcan,

      We don’t have registered or non-registered accounts like you do over there since most people’s retirement saving is done by both the government and the company they work for. As such, there’s no ‘need’ to provide tax-advantaged investment accounts.

      I’m not entirely sure how your registered accounts work, but can you also fully recover any taxes applied by a foreign government? That seems rather illogical to me.


      1. At least here in Germany we are discussing demographically changes (more older people than younger / baby boomers) and from the discussions going on I see the need to have as much different income as possible because I do not believe in receiving that much from te governmental side. AND I expect Heavy taxation on every recurring income.

        Just my two cents 🙂


        1. Lars,

          There’s a lot of discussing going on for the past thirty years of so in Belgium, but very few action has yet been taking.

          Personally, I’m not counting on a big state pension anymore. As a 25-year-old civil servant I’m currently poised to be set up for life once I retire, but I think there will be some drastic cuts to my benefits in the near future.

          Let’s hope we don’t have to deal with heavy taxes on our passive income streams because that’s basically the only solution I see for myself to provide a financially secure retirement.


  11. Nice article and site! I am on the boat with you, 28 y.o and started investing a year ago. However, like you, I have the “small country” problem, being from Greece!

    One question about the ETFs, I always read that they should be “registered” in your country or else they will be invisible to the tax department and counted as offshore funds or something and might have a huge tax on them… do you have any idea about this? Cause no ETF is registered in my country except 2-3 very lame ones…

    1. Giorgos,

      Thank you for stopping by and taking the time to leave a comment. Love hearing back from visitors.

      Congrats on getting started with investing at such a young age. By starting so young we have a huge amount of time to take advantage of the long-run returns of the stock market. Sadly, Greece is the exact same size as Belgium. On top of that you have a problematic economy, so you’re definitely forced to look at options abroad.

      I am not entirely sure on how the legislator in your country deals with registered and non-registered accounts, but I’m pretty sure that you are allowed to buy ETFs that are ‘located’ outside your own country as long as they’re domiciled in another EU country. It’s possible, however, that for tax purposes you’ll have to mention owning non-registered investments abroad when you file your taxes at the end of the year. That way the national tax department knows you’re not trying to evade taxes.

      In Belgium we are allowed to buy ETFs abroad, be they registered or non-registered. Our broker then alerts the proper authorities in case it’s a non-registered fund, but only when there are tax implications. The same thing might happen in Greece, but it’s better to check your national legislation. It’s a good idea to ask your broker/bank. They’re usually on top of these things.

      I hope this was helpful! If you have any other questions, don’t hesitate to ask.

      Good luck,

      1. Thanks for the quick reply mate! My broker has no idea how these things work, everyone here falls in 3 categories:
        1: Doesn’t bother with investments and saving at all. (especially youngish people like us!)
        2: Is a day-trader speculator, aka gambler.
        3: He just buys into overpriced, with big annual fees, mutual funds from banks.

        So it’s very hard to find my way, but I will find someone specialized in taxes and ask.
        My plan is to use an online broker, like Degiro (custody) for accumulating ETF (so i’m not affected by their dividend fee) and a Greek broker for individual stocks with good dividends.

        Oh and I was planning from 1/1/2015 to start with investing/expenses tracking too. Your spreadsheets were godsend! Good job!

        Anyway, I will for sure be a frequent visitor here so… keep up the good work and stay the course!


        1. Giorgos,

          No problem, you’re welcome!

          Don’t worry, almost everyone in Belgium also falls in those three categories. Especially the expensive mutual funds are a Belgian favourite. 3% buy-in costs and yearly recurring costs of 1,5% are no exception. Such rates can cripple your returns hard.

          It’s a good idea to find someone who is specialised in taxes! It might cost you something now, but who knows how much it will save you in the long-run because you’re certain your doing everything by the book.

          Glad you liked my spreadsheets! I hope they’re of use to you. Let me know how your first investing steps go.

          Happy New Year,

        2. Awesome site with useful tips, an open forum for investing thinkers alike.

          I am a 32 y.o. Greek national who is, as Giorgos described, in the 3rd category of investors (overpriced with big annual fees mutual funds from banks).

          Not a while ago, I came across with dividend investing strategy and became fond of the idea of trying out myself rather than handing over my money to funds with excessive fees (our stock market is rather cheap but extremely volatile and totally submissive to political radical changes). So it became clear to me that if I want a more steady passive income in the long run, the best solutions are ETFs and stocks with low yield/high dividend growth the past decades. And that exists only in foreign stock markets, what a big surprise 🙂 !

          I don’t want to bubble so I will come right to the point. I am very much interested in the way you guys are thinking about frugality living and long term investing. I am planning to buy, as No more waffles and others may have, 2-3 ETFs (accumulative preferably) and individual stocks (europeans for a start) probably with DeGiro-custody account..

          My worries arise firstly in my knowledge of our tax system, in which I honestly can say, I lack adequate information and secondly there are surprisingly very few people that are interested in investing (at least with low risk/no gambling intents) so that I could discuss the who-what- how queries of mine.

          Consider me already as a fan and a frequent visitor to your blog. Keep on rocking!

          Giorgos, I would really like to get in touch with you since we are both Greeks, share mutual interest and face the same problems. Have you used DeGiro yet? Contact me whenever you want, my email is:

          1. Ioannis,

            Thank you for the kind words! I’m really glad that you found my blog useful. If you have any questions don’t hesitate to ask.

            Before you start investing it’s probably a good idea to read up on your national tax laws and other practical things. Too bad I can’t help you with that! Hopefully Giorgos gets in contact with you.

            Also, I wouldn’t invest in the Greek stock market either. Sadly your country is currently too unstable for proper investing options. It’s crazy to see how much of an effect political decision – often ones from an international body – have on your stock indices.

            Good luck and let me know if you found a way to make either ETFs or dividend growth investing work for you!

            Best wishes,

  12. When I started dividend growth investing, Being a foreign investor, I bought US stocks (my first stock was KO: Coca Cola) and I was pleased with its 3%+ yield – only to find out later that I was taxed 30% and charged an additional $5.00 by the bank for receiving dividends! (service charge, so called).

    Every quarter, I was supposed to receive $20 in dividends from KO but after the various taxes and parasitic charges by the bank, I ended up with $4.00 nett per quarter.

    Then I realized that it made little sense to employ a dividend growth strategy by buying US stocks (as a foreign investor). So I tailored my strategy accordingly and only buy local stocks for dividends and US stocks for growth (capital gain).

    Works much better for me over here. Great point that you raised there NMW.

    Like squirmy leeches, foreign with holding taxes & miscellaneous charges can be hidden parasites.

    1. @Josh Collar:
      Very interesting real life usecase you present here!
      From which country are you originated?

      Sometimes I regret not being in the US as there are so much investing opportunities over there.
      But well, I have the chocolate and the Swiss watches instead 😉

  13. You seem to be misunderstanding some things. Some countries allow brokers to apply the lower rate directly. In that case, your identity needs to be known to someone in the country where the company is located. That means that your broker will reveal your identity to someone else (for example, the tax authority in the company’s country, or an intermediate broker in that country). Hopefully no big issue for you. With respect to some countries, you can’t have the right tax rate applied automatically, and you mention that you have to pay a high fee to your broker to have the money reclaimed. You do not actually have to pay that fee as you can apply for a refund directly from the foreign tax authority. On the website of the tax authority in the country of the company, you will usually find a form which you should print out and fill in. The form will be different for each country. After filling it in, send it to your own country’s tax authority. Your own country’s tax authority should confirm that you are resident in your own country for tax purposes (usually by stamping the form), and will then return the form to you. Now send the form to the tax authority in the country where the company is located. The tax authority in the country where the company is located will usually need evidence that dividend has been paid in the form of dividend statements from your broker, but the tax authority in your own country shouldn’t need these dividend statements. Cost: Two stamps (one domestic and one international). There are sometimes also bank transaction fees, in particular if the company is a non-European country. Check with your bank what kinds of fees your bank will charge for receiving money from abroad. Should be compared to the fees you currently are paying to have your broker do this on your behalf.

    Here in Sweden, we can deduct the foreign tax paid against the corresponding Swedish tax, but only under the condition that we do not have capital losses, such as mortgage interest, and we can only deduct the tax which can’t be reclaimed from the source country. If the source country (say, Denmark) charges 27 % but the tax treaty says 15 %, then only 15 % can be deducted from the Swedish tax, and the rest needs to be reclaimed from Denmark.

    1. Anonymous,

      Thank you for clarifying things to people who misunderstood what I was trying to clarify in my post. I believe you’re right in how the system works – at least, that’s how I understand things myself.

      Contacting the different tax authorities is a lot of hassle though, trust me. I’ve tried it and it’s not worth the effort. Not only does it take ages to get things sorted out, filling out your taxes becomes an absolute nightmare. If you’re broker doesn’t offer retrieving the withholding tax as a service, I wouldn’t bother.

      Pretty interesting system you have there in Sweden! Do you have to do all of this yourself or is it done automatically by your broker or tax authority?

      Best wishes,

      1. Swedish brokers report all foreign withholding tax automatically, so it is automatically sorted out by the tax authority. Dividend is taxed differently in Sweden depending on what kind of account you are using, but you do not need to report anything dividend-related yourself to the tax authority as the broker automatically reports everything needed for the account type used. If you use a foreign broker, then I’d assume that everything has to be reported manually by the investor.

        Contacting foreign tax authorities doesn’t seem to be very difficult to me. Fill in a simple form, print out a list of all dividends from your broker, send the form to your own country’s tax authority, wait for it to return and then send the form together with the list of dividends to the foreign tax authority. It takes some time the first year since you need to find the form and figure out how to do, but if you bookmark the form, you will easily find it next year. Many countries also allow you to request a refund for multiple years at the same time.

  14. I am a Greek resident and I intend to maintain a securities account with Interactive Brokers (IB UK). Have you any idea on what tax I will be deducted at source on dividends or interest from a.) UK shares b.) USA shares and c.) corporate bonds traded in the Luxembourg Stock Exchange?

    They answered me «30% dividend or interest withholding in any case». I cannot understand it. I thought that withholding tax will vary based on the domicile of the stock issuing the dividend.

    Dividends from UK companies for instance (excluding distributions from Reits), are paid to UK brokerage accounts (based in UK) without any tax on the dividend being deducted at source. I maintain a brokerage account in the UK and they do not deduct at source any tax on dividends from UK shares. Similarly, other countries apply α withholding tax which is less than the 30 per cent. If I open an account with IB, why will they levy withholding tax 30% (at source) on the dividends from any country? It sounds strange.

    For instance If I receive dividends from UK shares, do they levy the USA withholding tax rate for dividend distributions? (As I said, I am not a USA resident).

    Furthermore, I have heard about IB that in general the withholding rate from other countries will be the highest withholding rate applicable and will not incorporate a reduction based on prevailing tax treaties.

    Has anybody experience with Interactive Brokers UK? Is this information accurate?

    Thank you in advance.

  15. Hello.

    You mention in your article ” Some brokers offer this service for free, but remember that it can take several months before your application is succesfully dealt with by the French”.

    Can I ask you what brokers offer to handle the refund of the witholding tax for free on your behalf in the case of the French or any other european authorities?

    It would be fantastic to compile a list of european brokers that handle this process either for free or for a fee.

    Thanks in advance for your reply.

  16. I’ve got a very specific question. I’m living in Germany, but buying stock in the US primarily. If I were to purchase ADRs of Swiss companies in the US, would I still have to pay Swiss withholding tax?

    1. I’m in the same situation! I think we would still have to pat the Swiss withholding tax. But I’m not sure.

      Someone has (or has had) ADRs from Switzerland?

  17. So it seems that as a Belgium investor you would rather buy stocks from the NYSE than any German stock exchange (Frankfurt for e.g) ? I live in Belgium and I am thinking of buying some Disney shares but I am not sure which stock exchange would provide efficient tax reduction on dividends. Any thoughts?

    1. SC,

      The stock exchange a share is listed doesn’t really matter. Rather it’s the home country of the share that counts, which you can look up through the ISIN code.

      Shell, for example, is listed in both the UK and the Netherlands through A and B shares (so four shares in total), but the A shares are Dutch while the B shares are British. As such, all A shares are taxed at 15% (even the ones on the London Stock Exchange), whereas the B shares are never taxed since they’re British.

      Also, never let taxes define your investment choice! Yes, it’s important to keep an eye on them, but when company A is a better pick than company B even though it’s taxed 15% higher, don’t be swayed to pick company B. At least, that’s my view on taxes.


  18. I am an individual living in North America who own stocks of corporation from many countries outside North America. My stockbroker (HSBC InvestDirect) is inept when it comes to ensure the adequate foreign withholding tax on dividends is applied. The general problem is:

    1-My stockbroker does not want to handle neither the Claim of Tax Treaty Benefits nor the Tax Refund Claim forms.
    2-The country where the company is located (for instance Korea) keeps telling me to go to my broker as they are suppose to handle it.
    3-My domestic country does not want to be involved and their tax agents have no clue.

    This seems to be a problem many investors face. I do not want to get too much into the specifics of my case at this point since it could be easy to get lost into the details.

    Questions 1- Is there a way for me to ensure I get the refund for the excessive foreign withholding tax, meaning above the tax treaty rate?

    Questions 2-Is anyone aware of a global stockbroker which will handle the paperwork as in #1, as opposed to simply give their customers the brush off.


    1. Sebas,

      If you want to be sure, you’ll have to do all the paper work yourself, I’m afraid. Another option is to find a broker that’s willing to do it for you (often at a hefty price).

      I’m afraid I can’t really help you with regards to the international aspect about your question. My knowledge is limited to Belgian brokers.


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