What is withholding tax?

When a dividend (or royalties or interest) is paid internationally, the country from which the payment is made usually taxes the payment as it leaves, by 'withholding' a proportion of it, usually between 10% and 30%. If there is a double tax treaty between the two countries concerned, it is often possible to reduce the tax, or to reclaim some or all of the money. Some receiving countries allow the withheld tax to be set off against domestic tax liabilities.

Tags: dividend internationally payment receiving countries domestic tax