Taxes on dividends from US stocks and how to reduce them
It's no secret that today, virtually all forms of investment income are subject to taxation, including interest on deposits and dividends on company shares.
Moreover, taxes on dividends depend on whose shares you buy; for example, if you buy shares of American companies, they will be taxed according to US law.
Today, dividends paid to foreign investors on American stocks are taxed at a rate of 30%.
This means that when dividends are accrued, you are automatically charged a 30% interest. For example, if you receive a $500 dividend payment on Pfizer shares, only $350 will be credited to your account.
But despite all this, there is one caveat: the double taxation agreement between the United States and a number of countries:
Ukraine, Kazakhstan, Poland, Belarus, Russia, Moldova, Azerbaijan, Armenia, Georgia, Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan, Germany, France, Italy, Spain, Japan, China, India, Australia, Brazil, Switzerland and others.
Therefore, if you are in the United States, you have the opportunity to reduce the tax to 15% by filing a W-8BEN return.
If you live in another country, there are still options for reducing taxes on dividends from US stocks, even if the tax rate in your country is lower than in the US:
| Country | Dividend tax rate | Agreement with the United States |
|---|---|---|
| Ukraine | 23% (18% personal income tax + 5% military tax) | ✅ Yes |
| Kazakhstan | 10% | ✅ Yes |
| Poland | 19% | ✅ Yes |
| Belarus | 13% | ✅ Yes |
| Russia | 13% | ✅ Yes |
| Moldova | 6% | ✅ Yes |
| Azerbaijan | 10% | ✅ Yes |
| Armenia | 5% | ✅ Yes |
| Georgia | 5% | ✅ Yes |
| Uzbekistan | 10% | ✅ Yes |
| Germany | 26,375% | ✅ Yes |
| Czech Republic | 15% | ✅ Yes |
| Spain | 19% | ✅ Yes |
I would like to point out right away that you do not receive a cash refund, but only a reduction in the tax amount for the reporting period.
Let's look at the example of such countries as Ukraine, Poland and Kazakhstan.
In Ukraine : Dividends from foreign companies are subject to personal income tax (PIT) at a rate of 18% and a military tax of 5%, for a total of 23%.
Crediting Tax Paid: The Double Taxation Agreement between Ukraine and the United States allows you to credit taxes paid in the United States when calculating taxes in Ukraine. This means you can reduce your tax by 7% when filing your tax return.
In Kazakhstan : Dividends from foreign sources are subject to individual income tax (IIT) at a rate of 10%.
Tax credit: The Kazakhstan-US tax treaty allows for a credit for taxes paid in the US when calculating taxes in Kazakhstan. If you file a tax return, you can reduce your dividend tax by 20%.
In Poland : Dividends and interest income are taxed at a flat rate of 19%.
Tax credit: The Poland-US tax treaty allows you to credit taxes paid in the US when calculating your taxes in Poland. After you report the taxes paid on your tax return, the credit will be 11%.
It should be noted that before filing a general tax return, there may be a requirement to file a declaration on income from foreign investments, for example, in Poland this is PIT38.
However, it's impossible to say with certainty that you'll get a full refund on your overpaid taxes, so you might want to consider another investment option: stocks.
Reducing taxes on stock dividends through CFDs
You can also buy dividend-paying shares using CFDs, which will pay dividends just like a regular purchase.
In this case, the taxation of received dividends will occur only at the rates of your country, since brokers do not charge taxes if you trade CFDs.
That means you'll receive $500 in dividends on Pfizer shares and pay not $150 in taxes, but depending on the country:
- In Ukraine - 115
- In Kazakhstan - 50
- In Poland – 95
- In Moldova 30
Which is almost always significantly lower than with a standard purchase of shares, even taking into account the fee for transferring positions (swap).
You can buy dividend stocks through contracts for difference from the following brokers – CFD brokers for stock trading
