Dividend Tax or Withholding Tax in Various Countries

Getting dividends from stocks is in important aspect of investing. A number of great investors have supported the importance of dividends in their success. Not just the investors, even great companies find it good to distribute dividends among shareholders. Essentially, everyone loves dividends. So, why wouldn’t the government?! Governments all over the world levy taxes on dividends. Some countries tax the dividend amount before it is distributed. Such a tax is often referred to as the dividend distribution tax or withholding tax. In contrast, some other countries tax the dividend amount in the hands of the investor — and call it the dividend tax. And then there are some jurisdictions that do not tax the dividends at all! Let’s examine how various countries are taxing dividends.

Dividend Tax in United States

The United States government does not charge capital gain tax or dividend tax from taxpayers whose overall income lies below the 22% tax bracket. This means if your income is under $80,0000 — then you don’t have to pay capital gain tax or dividend tax. In case your taxable income crosses this limit you will have to pay tax on dividends received.

If your taxable income is between $80,000 and $441,449 — you will pay dividend tax at the rate of 15%

If your taxable income is $441,450 or above — you will pay dividend tax at the rate of 20%

Dividend Tax in India

Indian government used to levy dividend distribution tax (DDT) on the companies. However, in the Budget 2020-2021, this tax was abolished. Instead, the Indian government started taxing dividend income in the hands of investor according to income tax slab rates. Therefore, you will pay 30% tax on dividend income if your taxable income lies in 30% tax bracket.

Dividend Tax in the UK

The British government offers a dividend allowance. Currently the dividend allowance in UK is £2000 — meaning you don’t need to pay tax on dividend if it is less than £2000. Over and above this limit, investors have to pay tax on dividend as per their income tax slab.

Dividend Tax in Japan

In Japan, a retail investor has to pay 20% tax (15% for Nation, 5% for Region) on dividend income from listed stocks. On the dividend income from unlisted stocks, the same 20% tax is paid but all of it goes to the Nation.

Dividend Tax in China

Chinese government levies 20% tax on dividend income. However, 50% of dividend income is exempted from tax. So, effectively, 10% tax is levied.

Dividend Tax on France

In France the taxpayer chooses either a tax of 30% on dividends, or to include the dividend in his income tax calculation with a 40% rebate, plus 17.2% social tax.

Dividend Tax in Australia, Chile and New Zealand

These countries entitle shareholders to claim a tax credit for the franking credits attached to dividends, being a share of the corporate tax paid by the company. A recipient of a fully franked dividend on the top marginal tax rate will effectively pay only about 15% tax on the cash amount of the dividend. In effect, when distributed as dividends, the profits of a company are taxed at the average of the shareholders’ marginal tax rates; otherwise they are taxed at the corporate tax rate.

Dividend Tax in Brazil, Hong Kong, Iran, Singapore

These governments do not levy dividend tax on investors who receive dividends from Brazilian companies.