Dividend Tax Rate

As you might imagine, the dividend tax rate will differ from country to country.

There are some nations where an individual is not taxed on this form of income. However, our research leads us to believe that most of these locations are small and sunny islands rather than the major economic powers of the world. As such these payouts are not generally from companies listed on a major world stock exchange, but instead from privately owned businesses.

If you benefit from this situation, the chances are that you aready know this and established the business there for this very reason! For the rest of us, our dividend tax rate will mainly depend upon the top rate of income tax at which we pay our taxes. There are many different formulas and potential calculations, so this site shall not even try and do this.

Rates can vary amazingly. For example, there was a time once in the UK where a dividend payment was taxed at 98%. We would not have believed this if we had not been told and shown by a high level UK civil servant. It takes no skill to add that the rate at which taxes are charged to dividends will impact the total return on any stock investment.

It is worth pointing out though, that in most major nations, basic rates of income tax are deducted at source from the dividend. This means that the cheque you receive has probably had most or all of your tax liability already deducted. This does not mean that you have no responsibility to declare the income though.

As always, it is worth taking professional advice to help with you individual situation. The tax inspector, Inland Revenue, IRS or whomever, is not generally the organisation that you want to fall foul of.