Taxation of dividends and how to reduce it to a minimum

Investing in securities has long been one of the most attractive investment options.

After all, with the right choice of investment, you can profit not only from the share price appreciation but also from dividends.

Moreover, if you invest in a foreign company, you will receive dividends in a foreign currency, typically US dollars.

This type of income, like other personal income, is also subject to taxation, and this issue should not be ignored.

Dividend taxation is a rather complex topic, and it is often necessary to resolve this issue independently, without waiting for assistance from the relevant authorities.

Dividend tax rates

Currently, your income may be taxed at rates ranging from 0 to 30 percent, depending on the country in which you receive the payment and your country of residence:

In Russia , the tax rate is 13% for residents and 15% for non-residents of the Russian Federation.

In the United States, residents will have to pay up to 30%, although foreign residents will pay taxes in their home country.

In Ukraine , citizens and residents currently pay 5%, with plans to raise the rate to 18%.

In other countries , the range is quite wide, with dividend tax rates ranging from 0% to 40%.

How to pay, the technical side of the issue?

Once you know the tax rate you'll be paying on the money you receive, you still need to complete the technical process.

The easiest way is for an inversion fund or the bank through which you purchased the shares to do this for you. In this case, when the funds are transferred to your account, the intermediary company will withhold the required amount, and all you have to do is file a tax return.

If you need to pay the dividend tax yourself, you should find out the account number for personal taxes at your place of residence. Then, confirm with the tax office that you've learned everything correctly; there's usually a special phone number and consultation room at the tax office for this purpose.

Then, transfer the funds, making sure to indicate that this is a dividend tax and provide your personal information.

This must be done in the same month in which the income was accrued; otherwise, you'll be considered late in payment.

If this seems difficult, it's best to consult with a professional tax consultant. At least the first time, they can explain the process in detail and help you find the account number for payments.

Reducing Dividend Taxation:

One of the most popular ways to reduce taxes on received dividends is by residing in certain countries.

It is no secret that citizens of countries such as Saint Lucia, Antigua and Barbuda, Dominica, Grenada and many other island states exempt their citizens from paying taxes on dividends received outside of these countries.

This means that dividends are taxed at a 0% rate, as long as the shares are owned by a company not registered on the island where you are a citizen.

Citizenship in these countries can be easily purchased or obtained through real estate investment. The price tag starts at $100,000, and in just a couple of months, you become a citizen of the country and pay taxes according to its laws.

You don't have to renounce your native citizenship or reside in the country.

It's up to you to decide whether to pay a certain percentage tax on dividends or to purchase foreign citizenship and pay nothing. It all depends on the amount of taxable income and your preferences.