Jump to content

30% Withholding Tax On Dividends For Non-US Persons


MrPanda

Recommended Posts

Hi,

 

I am a citizen of Singapore who is interested in buying US stocks. However, just today I realised that there is a 30% withholding tax on dividends for non-US persons who buy American dividend-paying stocks. My question is : is it still worthwhile to buy and hold such stocks (American dividend-paying stocks) as a non-american considering there is a 30% tax on dividends? I am a value investor so dividends and reinvested dividends are very important to my long-run returns ... Thanks

Link to comment
Share on other sites

I’ll take your word for it but I’m pretty sure a w8ben form clears the withholding. If I am wrong then I guess it’s a similar jurisdiction to the islands like cayman and Bermuda were there’s no treaty and just straight 30% which sucks. But I’ve had managed accounts in Singapore before and don’t recall this being an issue.

Link to comment
Share on other sites

Depends on the location, and what the alternatives are, at least for taxable accounts: 

For example, I live in France. The French have a flat 30% tax rate on dividends. Therefore, for the most part, doesn't matter which stocks I buy, I'll still pay 30% one way or another. Just some variation on who and when I pay.

  • For US stocks, with W-8BEN, I pay 15% withholding tax (with a tax credit), and pay the remaining 15% (so 30% total) to France a year later.
  • For UK stocks, I pay 0% withholding, but 30% to France the next year. So only difference with US stocks being who gets the tax, and I benefit from an extra 15% for a year.

Since I'll pay 30% one-way or another, my choice is really about where the returns come from (after-tax dividends and/or price appreciation), rather than US vs. non-US.

 

To give another example, in Ireland, as far as I know, dividend income is considered under income tax. Therefore, anyone earning above €36,800 would essentially see their dividends taxed at 40%, so again, in that case, its a matter of looking at returns rather than US or non-US (as 0%, 15%, or 30% withholding wouldn't really matter).   

 

However, if your local tax rate is 0%, and you could avoid that 30% friction by choosing non-US stocks (all else being equal), then it would make sense to take that into account.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...