Dividend Withholding Tax Refunds Explained: How to Recover What’s Yours from Foreign Payments

Dividend Withholding Tax Refunds Explained: How to Recover What’s Yours from Foreign Payments

January 16, 2025 – 6 minute read

🌍 Investing abroad: are you paying too much tax?

You finally started investing internationally — maybe through shares in a company abroad or an employee stock program. Everything seems great… until you notice a chunk of your dividend payment missing. 💸

That deduction? It’s called Dividend Withholding Tax (DWT). And the good news is — you might be able to claim a refund of the excess tax withheld!

Let’s explore what DWT is, why it’s charged, and how you can recover part of what you’ve paid.

💡 What is Dividend Withholding Tax (DWT)?

Dividend Withholding Tax is a tax many governments charge on dividends paid to nonresident investors.

If you live in one country but own shares in a company based in another, the government of that company’s country usually takes a portion of your dividend before it reaches you.

It’s their way of collecting tax from foreign investors who earn income within their borders.

💰 Why do governments impose DWT?

The goal is simple: to ensure that foreign investors contribute to the local economy.
Each country sets its own rate — and sometimes these rates can be surprisingly high.

Here are some examples of standard DWT rates across different countries:

However, these are statutory rates — and in many cases, you’re entitled to pay much less thanks to tax treaties between countries.

📄 Example: how tax treaties reduce your DWT

Let’s say you’re a US resident receiving dividends from a Swiss company. Switzerland withholds 35% tax from your payment.

But because there’s a tax treaty between the US and Switzerland, the correct rate for US residents is 15%.

That means you’ve overpaid 20%, and you can claim that amount back from the Swiss tax authority through a refund application. 🎉

🧾 How much could your refund be worth?

It depends on two key factors:

1. The country that withheld the tax, and

2. The country where you reside.

For instance, if Germany withheld 26.375% on a €4,000 dividend, you’d receive €2,945 after tax.
If the tax treaty reduces your rate to 15%, you could be eligible for a refund of roughly €455.

🇺🇸 Does the US charge DWT?

Yes — the US imposes a 30% withholding tax on dividends paid to nonresidents.

However, this rate is often reduced by tax treaties. For example, if you’re from a country that has a tax treaty with the US, you may owe only 15% instead of the full 30%.

If too much was withheld, you can apply for a DWT refund directly from the IRS or through your broker.

🌐 Who can claim a DWT refund?

You can request a refund if:

• You’re a resident of a country with a tax treaty with the country where your dividends were taxed.

• The treaty provides a lower rate than what was withheld.

• You can provide proof of residency and dividend documentation.

⏳ How long do you have to file your refund claim?

The deadline varies depending on the country. For example:

• Germany: 4 years

• France: 2 years

• Switzerland: 3 years

• Japan: 5 years

Always check your investment country’s “statute of limitations” for refund applications.

🧩 What documents do you need?

Typically, you’ll need:

• Proof of residence (Tax ID or certificate)

• Dividend statements from your broker

• Bank details for the refund

• A completed refund application form

Some countries may also request a copy of your income tax return or proof of foreign tax credit claims.

💭 Final thoughts

If you invest internationally, chances are you’ve been paying more Dividend Withholding Tax than necessary.
By checking your tax treaty eligibility and filing the right refund application, you can recover money that’s rightfully yours.

A little paperwork today could mean a nice surprise in your bank account tomorrow. 💵🌍