Tax, fees & accounts
Withholding tax
Tax deducted at source by a foreign country before a dividend reaches you.
How it works
A country taxing dividends paid to foreign investors withholds a percentage automatically. Tax treaties often reduce the rate, and part may be reclaimable or creditable at home.
Fund domicile determines the withholding a fund itself suffers on its holdings, which is deducted before any return reaches investors.
Where it misleads people
Withholding suffered inside a fund is invisible in the expense ratio and can exceed it. It is one of the largest hidden differences between otherwise identical funds.
Related terms
- Fund domicileThe country a fund is legally based in, which determines its tax treatment for you.
- DividendA cash payment a company makes to its shareholders out of its profits.
- Income tax on investmentsTax on dividends and interest, usually charged in the year received.
- Tracking differenceThe plain gap between a fund’s return and its index’s return over a period.
Mentioned in
More in Tax, fees & accounts
- Average cost
- Wash sale
- Capital gains tax
- Tax-loss harvesting
- Currency conversion fee
- FIFO and other lot methods
- Stamp duty
- Platform fee
All 11 Tax, fees & accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.