Tax
Withholding tax is deducted at source in the country of origin on dividends and interest; double taxation agreements limit how much of it can be credited back.
Withholding tax is deducted directly on dividends or interest in the issuer's country. For German investors holding foreign securities, this means a double tax burden: foreign withholding tax plus German flat-rate tax.
Double taxation agreements (DTAs) limit the creditable withholding tax. A typical case is 15% US withholding tax on dividends, credited against the German flat-rate tax. Without a reduction application (W-8BEN form), 30% is withheld in the US.
ETFs domiciled in Ireland benefit from the Ireland-US DTA and reduce US withholding tax to 15% already at the fund level.
Related terms
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