Dividents tax fee?

Did is true on Trading 212 when you get dividents
from US companies you will also have withholding tax applied? And if yes what % how to count that?
And if yes did only US have this fee? Thanks.

Assuming your UK

Yes its correct. Withholding tax is 30% reduce to 15% if you have filling in W8-Ben (think this is now automated but not 100% sure) for US

A lot of countries have withholding tax.

Just to be clear this tax is on dividends

Also this is not trading212, any broker has to do this it’s the US law and applied at source.

The reducting to 15% is a government agreement between UK and US.

So basically is very low profit from dividents if you have 30% deduction , did is apply with any other country? What about UK stocks dividends? I already pay stamp.duty ,did is even more after that?

Its 15% with the right forms filled. It’s not to bad.

For the UK no Tax on anything with you ISA.

Out side your ISA no TAX on the first £2000, then you have to pay tax on anything above that. Used to be a lot higher but was reduced over the years.

The tax on anything above the 2k depends on you income

Basic- taxpayers pay 7.5%
Higher- 32.5%
Additional- 38.1%

In short Use the ISA

I’m confused with answer I’m using ISA for this moment , so I know I not get tax till 20k this following year ,but I still have on my ISA Allowance portfolio US dividends stocks 15% tax deductions right?
Or this only applies outside ISA? Thanks for your time.

@D3ivas

Using the ISA Account, you are restricted to depositing £20,000 each tax year, but the money you deposit has already had taxes paid and so no matter what money you earn in the ISA you will not need to pay more taxes. Earn is meant in the sense of profits made from all sources such as dividends and capital appreciation.

You will not face withholding tax deduction if you hold UK shares, you will just pay stamp duty. This is because the UK does not have a Withholding Tax.

The 15% charged to US dividends is the company withholding tax before paying the money to you, as companies have to pay taxes on their dividend payouts. Investors are then taxed for earning dividends and the double taxation treaty between the US and UK says this portion is 0% rather than another 15% because the UK does not charge their investors with withholding tax.

If you earn dividends outside of an ISA you have to pay taxes if you earn more than £2000 a year in dividends, hence the rates @DreamToBeFree mentioned. ISAs do not have this tax so you can earn as much dividends as you want without getting taxed on it.

This is why you have to pick carefully when choosing which markets to put your money in. You have the home advantage if you invest locally, however US companies are known for their large reach and business turnover, which often makes them a more profitable investment even after factoring in the tax deductions.

This is industry-wide and every broker will have it. it’s not exclusive to T212.

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Just to be clear, this tax is levied only on dividends paid to foreign shareholders. A “US person”, such as US citizen or resident, does see any 15% deducted from the dividend payment. They subsequenly may or may not pay some tax when they complete their annual 1040 US tax return. They pay 0% 15% or 20% depending on income level.

The good news for non-US persons (which is all Trading 212 customers) is that if held outside an ISA the 15% can be taken as a credit against local taxes, eg the 7.5% 32.5% or 38.1% tax UK charges on dividends, again depending on income.

The US UK tax treaty explanation for this is here
https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19867a

The treaty allows both the US and the UK to tax dividends paid to a resident of the other country but, subject to certain conditions, limits the tax the source country may impose to 5% or 15% of the gross amount of the dividend.

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It is worth noting that if you invest in US companies via a ETF such as the S&P 500 tracker VUSA then you have to accept some double taxation. Vanguard has to pay 15% on the dividends, and then you can pay 7.5% or 32.5% on what remains, with no possibility of taking the first 15% as a credit against the second tax. So the effective tax rate for a UK higher rate taxpayer can be 100-100*0.85*0.675 = 42.625%. The 15% withholding tax paid by VUSA explains why its yield is less than that of VOO (which is the same fund but available only to US investors).

Very true. The trading of US shares also has the great advantage of their being no stamp duty or other financial transaction tax. It is hard to consider moving in and out of a UK company share on any frequent basis given that one has to pay 0.5% tax on each purchase.

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How about withholding tax on dividends from USA MLP companies? Is it possible that the withholding tax on dividend in USA is 0?