Investing abroad

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16. Dividends and withholding taxes

Foreign regimes are no less hungry for a tax bite out of your profits than Her Majesty's Government. How much they take, and whether it comes out of dividends, capital gains or both, depends on the various tax treaties they have with the UK.

For instance, at the time of writing, UK residents have to pay US taxes of 15% on any US dividends they receive. But if you make capital gains on US shares, any tax you owe will be payable to the Inland Revenue as specified by UK law, not to the American authorities.

Withholding taxes can often be reclaimed by filling in the relevant paperwork. Your broker will supply you with this before allowing you to start dealing abroad. Given the enormous variation in tax arrangements between the UK and other countries, it is impossible to give more specific advice than:

• Ask your broker for details of any taxes that will apply
• Check whether any tax can be reclaimed
• Request all the relevant forms
• Before returning them to your broker, make copies for your records.

1. Why invest abroad? 2. Risk and reward in foreign investment 3. Custody risk 4. Currency risk 5. UK companies are foreigners too 6. Foreign unit and investment trusts 7. Picking foreign trusts 8. How to make the most of trusts 9. Tracker funds for foreign markets 10. Foreign companies on the London exchange 11. American Depository Receipts 12. Investing in American companies 13. Investing in European companies 14. Investing in Asian companies 15. Investing in other markets 16. Dividends and withholding taxes 17. Markets go global 18. Conclusion

• Mobius on Emerging Markets