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A dividend tax is a tax imposed by a jurisdiction on
dividend A dividend is a distribution of profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit ...

dividend
s paid by a corporation to its
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
s (stockholders). The primary tax liability is that of the shareholder, though a tax obligation may also be imposed on the corporation in the form of a
withholding tax Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, or a ''Prélèvement à la source'', is income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by t ...
. In some cases the withholding tax may be the extent of the tax liability in relation to the dividend. A dividend tax is in addition to any tax imposed directly on the corporation on its profits. Some jurisdictions do not tax dividends. To avoid a dividend tax being levied, a corporation may distribute surplus funds to shareholders by way of a share buy-back. These, however, are normally treated as capital gains, but may offer tax benefits when the tax rate on capital gains is lower than the tax rate on dividends. Another potential strategy is to for a corporation not to distribute surplus funds to shareholders, who benefit from an increase in the value of their shareholding. These may also be subject to capital gain rules. Some private companies may transfer funds to controlling shareholders by way of loans, whether interest-bearing or not, instead of by way of a formal dividend, but many jurisdictions have rules that tax the practice as a dividend for tax purposes, called a “deemed dividend”.


History

In most jurisdictions, dividends from corporations are treated as a type of income and taxed accordingly at the individual level. Many jurisdictions have adopted special treatment of dividends, imposing a separate rate on dividends to wage income or capital gains. In the United States, the
Revenue Act of 1913 The Revenue Act of 1913, also known as the Underwood Tariff or the Underwood-Simmons Act (ch. 16, ), re-established a federal income tax in the United States Income taxes in the United States are imposed by the Federal government of the United ...
and 16th Amendment created a personal income tax of 1% with additional surtaxes of 1-5%, and exempted dividends from the general income tax but not the surtaxes which applied above the $20,000 level. This was to avoid the double taxation of income as there was a 1% corporate tax as well. After 1936, dividends were again subject to the ordinary income tax, but from 1954-1983 there were various exemptions and credits, taxing dividends at a lower rate. The 2003 tax cuts created a new category of
qualified dividend Qualified dividends, as defined by the United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It co ...
that was taxed at the lower long-term capital gains rate instead of the ordinary income rate.


Collection

In many jurisdictions, companies are subject to withhold obligations of a prescribed rate, paying this to the national revenue authorities and paying to shareholders only the balance of the dividend.


Debate

Taxation of dividends is controversial, based on the issues of
double taxation Double taxation is the levying of tax by two or more jurisdictions on the same income (in the case of income taxes), asset (in the case of Wealth tax, capital taxes), or financial transaction (in the case of sales taxes). Double liability may be m ...
. Depending on the jurisdiction, dividends may be treated as "
unearned income Unearned income is a term coined by Henry George Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform mov ...
" (like interest and collected rents) and thus liable for income tax.


Arguments in favor

A
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
is a legal entity separate from its shareholders with a "life" of its own. As a separate entity, a corporation has the right to use public goods as an individual does, and is therefore obligated to help pay for the public goods through taxes. Professor Confidence W. Amadi of West Georgia University has argued: Once it is established that a corporation is, for all important purposes, a separate legal entity, the issue becomes how transfers from one legal entity (corporations) to another legal entity (shareholders) should be taxed, not whether the money should be taxed. It can be argued that it is unfair and economically unproductive, to tax income generated through active work at a higher rate than income generated through less active means.


Arguments against

Critics, such as the
Cato Institute The Cato Institute is an American libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Ed Crane (political activist), Ed Crane, Murray Rothbard, and Charles Koch, chairman of the board and chief executive officer o ...

Cato Institute
, argue that a dividend tax is an unfair "
double taxation Double taxation is the levying of tax by two or more jurisdictions on the same income (in the case of income taxes), asset (in the case of Wealth tax, capital taxes), or financial transaction (in the case of sales taxes). Double liability may be m ...
". Cato's position is: Besides discussed above issues of whether taxing dividends is right and fair, a major issue is tax-induced distortions of economic incentives. For instance, quoting from:''Statement by the Members of the President’s Advisory Panel on Federal Tax Reform'' https://govinfo.library.unt.edu/taxreformpanel/04132005.pdf "Efforts to avoid the double tax on corporate earnings have created a misallocation of investment between the corporate and non-corporate sectors and rapid growth in the use of S corporations, partnerships, and other entities that do not pay corporate income tax." The taxpayers retain the post-tax income, while the whole pre-tax income, tax including, forms the national resources. A mismatch between the actual income as perceived by taxpayers and the
taxable income Taxable income refers to the base upon which an income tax system imposes tax. In other words, the income over which the government imposed tax. Generally, it includes some or all items of income and is reduced by expenses and other deductions. Th ...
distorts economic incentives by providing tempting ways to boost their difference. It promotes
tax planning Tax avoidance is the legal usage of the tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, inte ...
to maximize the post-tax income to the detriment of the pre-tax one: "We have seen how preferences in the tax code cause taxpayers to devote more resources to tax-advantaged investments and activities at the expense of other more productive alternatives." Shareholders control corporations and bear their tax burdens: "Economists at both the Treasury Department and the Congressional Budget Office assume that the burden of the corporate income tax is borne entirely by owners of capital."''Proposals to Fix America’s Tax System.'' Connie Mack, III (Chairman), John Breaux (Vice-Chairman), Jeffrey F. Kupfer (Executive Director), Members: William E. Frenzel, Elizabeth Garrett, Edward P. Lazear, Timothy J. Muris, James M. Poterba, Charles O. Rossotti, Liz Ann Sonders. https://www.treasury.gov/resource-center/tax-policy/Documents/Report-Fix-Tax-System-2005.pdf (They also note that, over time, capital flight may shift part of the combined tax burden onto employees and consumers.) Both corporate tax and personal taxes on dividends and capital gains in combination reduce shareholders
comprehensive income In a companies' financial reporting, comprehensive Income (or comprehensive earnings) "includes all changes in equity during a period except those resulting from investments by owners and distributions to owners". Because that use excludes the effe ...
R.M.Haig. ''The Concept of Income.'' In R.M.Haig(ed). ''The Federal Income Tax,'' 1921. which includes the change in their stock portfolio value. Changes of stock value are hard to legally define and timely tax.L.Levin. ''Taxation and Valuation.'' Tax Notes Federal, 164(7):1065-1067, section "Cash Taxes Cannot Avoid Distortion of Incentives" https://www.taxnotes.com/tax-notes-federal/tax-policy/taxation-and-valuation/2019/08/12/29rhnibid. section "Just One Issue in a Broader Scope". Parts of these changes have a legally recognizable source. E.g., cash earned by corporations can be taxed at the corporate level. But there are other "hidden" parts, e.g., when corporations gain valuable patents or see favorable markets shifts. They increase stock values but cannot be legally measured and timely taxed at the corporate level. These parts can be realized and taxed at the shareholders level when dividends are paid or stock trade yields capital gains. However, when owners take dividends from their shares (or gains from selling them) their cash portfolio grows but the value of their stock portfolio shrinks by the same amount, resulting in no net
comprehensive income In a companies' financial reporting, comprehensive Income (or comprehensive earnings) "includes all changes in equity during a period except those resulting from investments by owners and distributions to owners". Because that use excludes the effe ...
. Instead, the earlier growth of stock values gets legally recognized and (belatedly) taxed. However, this also includes growth that reflects previously taxed corporate income, resulting in double taxation. Many remedies have been discussed to reduce misallocation of investment, disincentive for trading shares and taking dividends that chills capital movement, and other distortions mentioned above. Some propose lower rates of taxes on dividends, capital gains, and corporate income or complete elimination of some of them. Others aim at a better match between undertaxed and overtaxed parts of income: "Dividends and capital gains taxes have low rates but apply largely to income already taxed at the corporate level. This is widely criticized. Making dividends paid from taxed income tax-free and allowing companies to deduct capital losses (up to per-share taxed income) on share repurchase would be more consistent than lower tax rates on dividends, capital gains, and corporate income.". Broadly accepted solutions to the problem are yet to be found; the issue remains highly controversial.


Dividend tax policy


OECD tax rates

Share buy-backs are more tax-efficient than dividends when the tax rate on capital gains is lower than the tax rate on dividends.


United States

In 2003, President
George W. Bush George Walker Bush (born July 6, 1946) is an American politician and businessman who served as the 43rd president of the United States The president of the United States (POTUS) is the head of state and head of government of the Un ...

George W. Bush
proposed the elimination of the U.S. dividend tax saying that "double taxation is bad for our economy and falls especially hard on retired people". He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a Trust law, trust or partnership) that is registered by the corporation as the ...
on the same profits." Soon after, Congress passed the
Jobs and Growth Tax Relief Reconciliation Act of 2003 The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA", , ), was passed by the United States Congress The United States Congress is the legislature A legislature is an deliberative assembly, assembly with the authority to ...
(JGTRRA), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law,
qualified dividend Qualified dividends, as defined by the United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It co ...
s are taxed at the same rate as long-term
capital gain Capital gain is an economic concept defined as the profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial an ...
s, which is 15 percent for most individual taxpayers. Qualified dividends received by individuals in the 10% and 15% income tax brackets were taxed at 5% from 2003 to 2007. The qualified dividend tax rate was set to expire December 31, 2008; however, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) extended the lower tax rate through 2010 and further cut the tax rate on qualified dividends to 0% for individuals in the 10% and 15% income tax brackets. On December 17, 2010, President
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician and attorney who served as the 44th president of the United States The president of the United States (POTUS) is the head of state and head of government ...

Barack Obama
signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The legislation extends for two additional years the changes enacted to the taxation of dividends in the JGTRRA and TIPRA. In addition, the
Patient Protection and Affordable Care Act The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act, and colloquially known as Obamacare, is a United States U.S. federal law, federal statute enacted by the 111th United States Congress and signed ...
created a new Net Investment Income Tax (NIIT) of 3.8% that applies to dividends, capital gains, and several other forms of passive investment income, effective January 1, 2013. The NIIT applies to married taxpayers with modified adjusted gross income over $250,000, and single taxpayers with modified adjusted gross income over $200,000. Unlike the thresholds for ordinary income tax rates and the qualified dividend rates, the NIIT threshold is not inflation-adjusted. Had the Bush-era federal income tax rates of 10, 15, 25, 28, 33 and 35 percent brackets been allowed to expire for tax year 2012, the rates would have increased to the Clinton-era rate schedule of 15, 28, 31, 36, and 39.6 percent. In that scenario, qualified dividends would no longer be taxed at the long-term capital gains rate, but would revert to being taxed at the taxpayer's regular income tax rate. However, the
American Taxpayer Relief Act of 2012 The American Taxpayer Relief Act of 2012 (ATRA; ) was enacted (January 1, 2013) and was passed by the United States Congress on January 2, 2013, and was signed into law by US President Barack Obama the next day. The Act centers on a partial resolu ...
(H.R. 8) was passed by the United States Congress and signed into law by President Barack Obama in the first days of 2013. This legislation extended the 0 and 15 percent capital gains and dividends tax rates for taxpayers whose income does not exceed the thresholds set for the highest income tax rate (39.6 percent). Those who exceed those thresholds ($400,000 for single filers; $425,000 for heads of households; $450,000 for joint filers; $11,950 for estates and trusts) became subject to a top rate of 20 percent for capital gains and dividends.


Canada

In Canada, there is taxation of dividends, which is compensated by a dividend tax credit (DTC) for personal income in dividends from Canadian corporations. An increase to the DTC was
announced An announcement (ANN) is a Usenet, mailing list or e-mail message sent to notify subscribers that a software project has made a new software release, release version. Newsgroup announcement recipients often have a name like "comp.''somegroup''.anno ...
in the fall of 2005 in conjunction with the announcement that Canadian
income trust An income trust is an investment that may hold equities, debt instruments, royalty interests or real properties. They are especially useful for financial requirements of institutional investor An institutional investor is an entity which pools ...
s would not become subject to dividend taxation as had been feared. Effective tax rates on dividends will now range from negative to over 30% depending on income level and different provincial tax rates and credits. Starting 2006, the Government introduced the concept of eligible dividends. Income not eligible for the Small Business Deduction and therefore taxed at higher corporate tax rates, can be distributed to the shareholders and taxed at a lower personal tax rate.


India

In India, earlier dividends were taxed in the hands of the recipient as any other income. However, since 1 June 1997, all domestic companies were liable to pay a ''dividend distribution tax'' on the profits distributed as dividends resulting in a smaller net dividend to the recipients. The rate of taxation alternated between 10% and 20%Indian dividend distribution taxes are subject to a surcharge since 2000 and an education cess since 2004 — the effect is to increase the tax to 1.133 times the rate, as per the sub-sections (4), (11) and (12) of the section 2 of the   until the tax was abolished with effect from 31 March 2002. The dividend distribution tax was also extended to dividends distributed since 1 June 1999 by domestic
mutual fund A mutual fund is a professionally managed investment fund An investment fund is a way of investment, investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the ri ...
s, with the rate alternating between 10% and 20% in line with the rate for companies, up to 31 March 2002. However, dividends from open-ended equity oriented funds distributed between 1 April 1999 to 31 March 2002 were not taxed. Hence the dividends received from domestic companies since 1 June 1997, and domestic mutual funds since 1 June 1999, were made non-taxable in the hands of the recipients to avoid double-taxation, until 31 March 2002. The budget for the financial year 2002–2003 proposed the removal of dividend distribution tax bringing back the regime of dividends being taxed in the hands of the recipients and the Finance Act 2002 implemented the proposal for dividends distributed since 1 April 2002. This fueled negative sentiments in the Indian
stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in whic ...

stock market
s causing stock prices to go down. However the next year there were wide expectations for the budget to be friendlier to the markets and the dividend distribution tax was reintroduced. Hence the dividends received from domestic companies and mutual funds since 1 April 2003 were again made non-taxable at the hands of the recipients. However the new dividend distribution tax rate for companies was higher at 12.5%, and was increased with effect from 1 April 2007 to 15%. Also, the funds of the
Unit Trust of India UTI Mutual Fund was carved out of the erstwhile Unit Trust of India (UTI) as a Securities and Exchange Board of India (SEBI) registered mutual fund from 1 February 2003. The Unit Trust of India Act 1963 was repealed, paving way for the bifurcatio ...
and open-ended equity oriented funds were kept out of the tax net . The taxation rate for mutual funds was originally 12.5% but was increased to 20% for dividends distributed to entities other than individuals with effect from 9 July 2004. With effect from 1 June 2006 all equity oriented funds were kept out of the tax net but the tax rate was increased to 25% for money market and liquid funds with effect from 1 April 2007. Dividend income received by domestic companies until 31 March 1997 carried a deduction in computing the taxable income but the provision was removed with the advent of the dividend distribution tax. A deduction to the extent of received dividends redistributed in turn to their shareholders resurfaced briefly from 1 April 2002 to 31 March 2003 during the time the dividend distribution tax was removed to avoid double taxation of the dividends both in the hands of the company and its shareholders but there has been no similar provision for dividend distribution tax. However the budget for 2008–2009 proposes to remove the double taxation for the specific case of dividends received by a domestic
holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
(with no parent company) from a subsidiary that is in turn distributed to its shareholders. Budget 2020-2021 saw abolishment of DDT(d''ividend distribution tax)'' and the d''ividend'' income being taxed in the hands of investor according to income tax slab rates.


Korea

Korea regulates the amount of possible dividends, payment time of dividends, and how to make decisions on dividends in the commercial law, since dividends are considered an outflow of profits from the company. Currently, 15.4 percent of dividend tax is collected as soon as the dividend is paid (private : 14% of the dividend income tax, residence tax : 1.4% of the dividend income tax). Separate taxation is possible below ₩20 million(€15 thousand) of dividend income, and if it is exceed, they become subject to total taxation. In addition, if the financial income (interest, dividend income) exceeds ₩20 million, a report of total income tax must be made. In the relationship between shareholders and creditors, the main principle of the commercial law is that the rights of company creditors should take precedence over those of shareholders who have limited liability to the property of the company. Stockholders always want to receive more money, but from the firm point of view, if they allocate too much money, the reduction of equity capital could lead to the failure of the company. That's why government regulates the possible amount of dividends.


Other countries

Australia, Chile and New Zealand have a
dividend imputation Dividend imputation is a corporate tax A corporate tax, also called corporation tax or company tax, is a direct tax Though the actual definitions vary between jurisdictions, in general, a direct tax is a tax imposed upon a person or property a ...
system, which entitles shareholders to claim a tax credit for the franking credits attached to dividends, being a share of the corporate tax paid by the corporation. A recipient of a fully franked dividend on the top marginal tax rate will effectively pay only about 15% tax on the cash amount of the dividend. In effect, when distributed as dividends, the profits of a corporation are taxed at the average of the shareholders' marginal tax rates; otherwise they are taxed at the
corporate tax A corporate tax, also called corporation tax or company tax, is a direct tax Though the actual definitions vary between jurisdictions, in general, a direct tax is a tax imposed upon a person or property as distinct from a tax imposed upon a tra ...
rate. In
Armenia Armenia (; hy, Հայաստան, translit=Hayastan, ), officially the Republic of Armenia,, is a landlocked country A landlocked country is a country A country is a distinct territory, territorial body or political entity. It is ...

Armenia
there hasn't been a dividend tax until the recently adapted tax law upon which citizens of Armenia pay 5% and non-citizens 10% of the annual income. In Austria the KeSt (Kapitalertragsteuer) is used as dividend tax rate, which is 27.5% on dividends. In Belgium there is a tax of 30% on dividends, known as "roerende voorheffing" (in Dutch) or "précompte mobilier" (in French). In Brazil, dividends are
tax-exempt Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduc ...
. In Bulgaria there is a tax of 5% on dividends. In China, the dividend tax rate is 20%, but since June 13, 2005, 50% of the dividend is taxed. In the Czech Republic there is a tax of 15% on dividends. Government in 2012 wanted to reduce double taxation on corporates income, but this did not pass in the end. In Estonia, the regular dividend tax rate is 20%. Since a new law was conducted in 01.01.2018, companies can pay dividends with a tax rate of 14% ONLY to resident and non-resident juridical persons. In Finland, there is a tax of 25,5% or 27,2% on dividends (85% of dividend is taxable capital income and capital gain tax rate is 30% for capital gains lower than 30 000 and 34% for the part that exceeds 30 000). However, effective tax rates are 45.5% or 47.2% for private person. That's because corporate earnings have already been taxed, which means that dividends are taxed twice. Corporate income tax is 20%. In France the taxpayer chooses either a tax of 30% on dividends, or to include the dividend in his income tax calculation with a 40% rebate, plus 17.2% social tax. In Germany there is a tax of 25% on dividends, known as "Abgeltungssteuer", plus a solidarity tax of 5.5% on the dividend tax. Effectually there is a tax of 26.375%. In Greece there is a tax of 10% on dividends for private persons. In Hong Kong, there is no dividend tax. In Iran there are no taxes on dividends, according to article (105). In Ireland, companies paying dividends must generally withhold tax at the standard rate (, 20%) from the dividend and issue a tax voucher to include details of the tax paid. A person not liable to tax can reclaim it at the end of year, while a person liable to a higher rate of tax must declare it and pay the difference. In Israel there is a tax of 25% on dividends for individuals and 30% for major shareholders (=above 10%). if a company receives a dividend, the tax it 0%. In Italy there is a tax of 26% on dividends, known as "capital gain tax". In Japan, there is a tax of 10% on dividends from listed stocks (7% for Nation, 3% for Region) while Jan 1st 2009 - Dec 31 2012, by tax reduction rule. After Jan 1st 2013, the tax of 20% on dividends from listed stocks (15% for Nation, 5% for Region). In case of an individual person who has over 5% of total issued stocks (value or number), he/she can not apply the tax reduction rule, so after Jan 1st 2009, should pay 20%(15%+5%). There is a tax of 20% on dividends from Non-listed stocks (20% for Nation, 0% for Region). In Luxembourg, only 50% of dividends paid out by corporations is subject to tax in the hands of an individual tax payer at the applicable marginal tax rate. Therefore, dividends are taxed at up to 20% if received from a corporation that is subject to tax and up to 40% if received from a corporation that does not satisfy the "subject to tax" test. In the Netherlands there's a tax of 1.2% per year on the value of the
share Share may refer to: * Share, to make joint use of a resource (such as food, money, or space); see Sharing * Share (finance), a stock or other financial security (such as a mutual fund) * Share, Kwara, a town and LGA in Kwara State, Nigeria Share ma ...

share
, regardless of the dividend, as part of the flat tax on savings and investments. Major shareholders (over 5%) are subject to a 25% dividend tax, they can deduct the 1.2% tax rate over the value, so 25% is their effective tax rate. In 2017 the
Third Rutte cabinet The third Rutte cabinet has been the cabinet of the Netherlands The cabinet of the Netherlands ( nl, Nederlands kabinet) is the main Executive (government), executive body of the Politics of the Netherlands, Netherlands. The current cabinet of t ...
announced that they would end the Dividend tax for minority shareholders only (under 5%). Afterwards, this proposal was cancelled. In Norway dividends are taxed as capital gains, at a flat 27% tax rate. However a "shelter deduction" is applied to the dividend income to compensate for the lost interest income. The size of the shelter deduction is based on the interest rate on short term government bonds and was 1.1% in 2013. For example, if NOK 100,000 has been invested in a company stock that gave a dividend of NOK 4,000, the shelter deduction is NOK 1,100 (1.1% of NOK 100,000) and the remaining NOK 2,900 is taxed at 27%. In Pakistan income tax of 10% as required by the Income Tax Ordinace, 2001 on the amount of dividend is deducted at source. A surcharge of 15% on income tax is withheld and will be duly paid by the company to Government of Pakistan as per Income Tax (Amendment) Ordinance, 2011. In Poland there is a tax of 19% on dividends. This rate is equal to the rates of capital gains and other taxes. In Romania there is a tax of 5% paid to private investors and 16% when paid to companies, on dividends since 1 February 2017. Additionally, private investors must pay a 5.5% healthcare tax on earnings from dividends. In Singapore, there is no dividend tax. In Slovakia, tax residents' income from dividends is not subject to income taxation in the Slovak Republic pursuant to Article 12 Section 7 Letter c) for legal entities and to Article 3 Section 2 Letter c) for individual entities of Income Tax Act No. 595/2003 Coll. as amended. This applies to dividends from profits relating to the calendar year 2004 onwards (regardless of when the dividends were actually paid out). Before that, dividends were taxed as normal income. The stated justification is that tax at 19 percent has already been paid by the company as part of its corporation tax (in Slovak "Income Tax for a Legal Entity"). However, there is no provision for residents to reclaim tax on dividends withheld in other jurisdictions with which Slovakia has a double-taxation treaty. Foreign resident owners of shares in Slovak companies may have to declare and pay tax in their local jurisdiction. Shares of profits made by investment funds are taxable as income at 19 percent. Resident natural persons have to pay 14% of received dividends as health insurance with maximum payment of €14,000, non-resident natural persons and companies are not subject of this "capital gain health tax". In South Africa there is a tax of 20% on dividends. In Spain, dividends are taxed between 19 and 23%, based on yearly dividend income. This tax rate is applicable between 2016 and 2019. In Belgium, as from 1 January 2018 dividends received is fully tax exempt (only 95% so far). In Sweden there is a tax of 30% on dividends. In Taiwan, the dividends are taken into account in the taxation of one's
gross income For households and individuals, gross income is the sum of all wages A wage is the distribution from an employer Employment is the relationship between two party (law), parties, usually based on a employment contract, contract where wo ...
, though varying from one stock to another, there is a specific deduction rate to the gross income tax if one holds this corresponding stock on the in-dividend date (once per year). Beginning from January 2013, there will be an additional 2% "tax" on all dividends, serving as the supplemental premium for the second-generation National Health Insurance (NHI) of Taiwan. In Turkey there is an
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
withholding of 15% on dividends. Dividend income from foreign sources are taxed at the marginal tax rates. As of 2020, highest marginal tax rate is 40%. In the United Kingdom, companies pay
UK corporation tax : ''Throughout this article, the term "pound" and the £ symbol refer to the Pound sterling The pound sterling (symbol: £; ISO code: GBP), known in some contexts simply as the pound or sterling, is the official currency A currency, ...
on their profits and the remainder can be paid to shareholders as dividends. From April 2018, the first £2,000 of dividend income is untaxed, regardless of the taxpayer's other income; dividends above this amount are taxed at 7.5% in basic rate income tax band, 32.5% in higher rate income tax band and 38.1% in additional rate income tax band.


See also

* Corporate tax: company shareholder taxation *
Passive income Passive income is income that requires minimal labor to earn and maintain. It is called progressive passive income when the earner expends little effort to grow the income. Examples of passive income include rental income Renting, also kno ...
*
Estate tax (United States) An inheritance tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interre ...
*
State income tax Most individual U.S. state In the United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North Americ ...
*
Double taxation Double taxation is the levying of tax by two or more jurisdictions on the same income (in the case of income taxes), asset (in the case of Wealth tax, capital taxes), or financial transaction (in the case of sales taxes). Double liability may be m ...
*
Taxation in the United States The United States of America The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. st ...
*
Withholding tax Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, or a ''Prélèvement à la source'', is income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer ...


References

{{Reflist


External links

;United States
Double Taxation Double Speak: Why Repealing Dividend Taxes Is Unfair
from
Dollars & Sense ''Dollars & Sense'' is a magazine focusing on economics from a progressive perspective, published by Dollars & Sense, Inc, which also publishes textbooks in the same genre. ''Dollars & Sense'' describes itself as publishing "economic news and anal ...
magazine
The new U.S. dividend tax cut traps
from Tennessee CPA Journal

;India

Tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act accord ...
Withholding taxes