The Dividend Investing Blog

A few days ago I posted an article about dividend taxes in the United States.  We have enjoyed a reduced tax rate on dividends since 2003, but that could all come to an end in 2011.  However, I started to wonder how dividends are taxed in other countries?

Canada

Our neighbors to the North seem to have an affinity for dividends. There are several great blogs about dividend investing that originate from Canada. Canada taxes dividends as regular personal income. However, dividends paid by Canadian corporations receive special treatment in the form of the Dividend Tax Credit (DTC).

Canadians take the dividend received from Canadian corporations and increase it by 25% for reporting purposes. Then they receive a 13.33% tax credit on those dividends plus another provicincial tax credit. Some sites I looked at place the credit around 18%.  I’m sure some of our readers will clarify. 

United Kingdom

Our friends across the pond have a very nice dividend tax. Corporations must pay a 10% tax on dividends they distribute.  Tax payers that pay the basic income tax rate do not have to pay taxes on dividends. Higher-rate taxpayers must pay 22.5% on dividends. So if you make less than $68,000 in the UK, then your dividends are tax free.  

Australia

Our friends across the other pond are taxed at their normal income rate but they have something called dividend imputation. The forward thinking government in Australia realized that they were taxing citizens twice. In order to reduce the tax burden on individuals, the government attaches a franking dividend to dividends paid. This credit is equal to the tax already paid on the dividend. Thus reducing the amount of taxes due by the individual on the dividends.

Here are some dividend tax rates from other countries:

• Finland (50%)
• Netherlands (Flat tax 1.2% tax on the value of the shares.)
• Poland (19%)
• India (0%, companies must pay 12.5% on the dividend distributed.)