What is Dividend Withholding Tax?
When a company in one country pays dividends to investors in another country, the source country typically withholds a portion of the dividend as tax before it reaches you. This is called dividend withholding tax (DWT).
For example, if a Swiss company pays a $100 dividend and Switzerland has a 35% withholding rate, you'd only receive $65—the remaining $35 was withheld by Switzerland.
Double Taxation Concern
Without relief, you could pay tax twice—withholding tax to the foreign country AND income tax to your home country. Tax treaties and foreign tax credits help prevent this.
Common Withholding Tax Rates
Standard Withholding Rates (Before Treaty Reduction)
| Country | Standard Rate | US Treaty Rate | UK Treaty Rate |
|---|---|---|---|
| 🇺🇸 United States | 30% | — | 15% |
| 🇬🇧 United Kingdom | 0% | 0% | — |
| 🇨🇭 Switzerland | 35% | 15% | 15% |
| 🇫🇷 France | 30% | 15% | 15% |
| 🇩🇪 Germany | 26.375% | 15% | 15% |
| 🇨🇦 Canada | 25% | 15% | 15% |
| 🇦🇺 Australia | 30% | 15% | 15% |
| 🇮🇪 Ireland | 25% | 15% | 15% |
Tax Treaties & W-8BEN
Tax treaties between countries reduce withholding rates. To qualify for reduced rates:
For US Stocks (Non-US Investors)
- File W-8BEN form with your broker to claim treaty benefits
- Without W-8BEN, you'll pay the full 30% rate
- Form expires every 3 years—brokers usually prompt renewal
For Non-US Stocks (US Investors)
- Treaty rates often applied automatically by foreign tax authorities
- Claim Foreign Tax Credit on your US tax return
- Credits reduce your US tax bill dollar-for-dollar (up to limits)
Reclaiming Excess Withholding
Sometimes more tax is withheld than required by treaty. You can reclaim the excess:
- Switzerland: File Form 89 to reclaim excess over treaty rate
- France: Complex process via Impots.gouv.fr
- Germany: File with Bundeszentralamt für Steuern
- Most countries: Process takes 6-24 months
Is It Worth Reclaiming?
For small dividend amounts, the paperwork may not be worth it. Consider it for larger holdings or where the difference is significant (e.g., Swiss stocks with 35% withheld vs. 15% treaty rate).
Frequently Asked Questions
W-8BEN is an IRS form that non-US investors file with their broker to claim tax treaty benefits on US dividends. Without it, US stocks withhold 30% of dividends. With W-8BEN, most treaty countries pay only 15%. The form is valid for 3 years.
In some cases, yes. UK stocks have 0% withholding. Holding stocks in tax-advantaged accounts (like ISAs in the UK or certain pension accounts) may qualify for exemptions. Some US-listed ADRs from certain countries also have reduced withholding.
US taxpayers report foreign taxes withheld on Form 1116 (or directly on Form 1040 for amounts under $300/$600 married). UK taxpayers report on the Foreign pages of the Self Assessment. The credit reduces your home country tax, preventing double taxation.