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I made a rather stupid mistake recently, as an American. I put $30k or so of my Roth IRA into BMW stock, since it was paying something close to 8% annual divide
by noduerme 2y ago
I made a rather stupid mistake recently, as an American. I put $30k or so of my Roth IRA into BMW stock, since it was paying something close to 8% annual dividends. Once a year. I suppose I should have looked at this more closely. When the dividend was paid, the German government took about 30% of it right off the top in taxes... for a foreign investor. Still not a bad return, but I won't be buying any German stocks going forward.
That's my Yelp review of investing in German businesses, if it helps anyone. I've had more or less the same experience dining in Seattle and accidentally tipping 20% on top of an included 20% tip that was already included but not specified in the bill.
- lifestyleguru 2y agoThe EU stock exchanges withhold the most aggressive dividend tax disregarding bilateral agreement with country of your tax residence. If you think that German 26% is bad, the Swiss withhold 35%.
- noduerme 2y agoI had assumed that if I were a German citizen, I'd probably pay the same amount in taxes on that dividend. Would I actually pay less?
- brtkdotse 2y agoFWIW it’s the same thing if you buy an American stock from a EU country, the dividends are taxed in the US. That why global index funds are probably the best way to invest for non-professionals
- anal_reactor 2y agoI spent some time trying to learn about investing as an average person, and from what I understood, the entire knowledge could be summarized into "pick your favorite global index fund and hold"
- lima 2y agoYou can get it reimbursed in some cases.
- reisse 2y agoYou know that US taxes the same 30% on dividends for non-residents, right?
- noduerme 2y agoI didn't know that, but it sounds like a terrible policy.
- ml-student 2y agoYou're probably entitled to get all of that back due to double tax treaties. You just need to file for a refund.
- noduerme 2y agoTricky, maybe, because it was bought in a Roth IRA - which is not taxed. And therefore, I think, not eligible for tax refunds. I probably should have bought it in a normal trading account.
- lifestyleguru 2y ago> You just need to file for a refund. FORGET ABOUT IT. You'd have to send traditional letters back and forth between your local tax office and the tax office of the dividend origin country. Usually the foreign tax office demands their form be rubber stamped by your local tax office. Obviously your local tax office will not rubber stamp a form by foreign tax office in a foreign language, but they don't care.
- mrks_hy 2y agoSorry to "but actually" you, but that is just because you did not claim the treaty benefits. Pedantic, it is also 26%, not 30%. You should be able to get 15% tax on dividends, which also count towards your US taxes which you stil have to pay. It is also exactly the same for foreign investors from Germany investing in US companies. We have to file a W-8BEN, otherwise the US takes 30% on dividends and even on capital gains!
- noduerme 2y agoIs that true if it's in a Roth?
- mrks_hy 2y agoNot from US, so can't comment on what it does for tax credit, but the treaty benefits should still apply. Also, you should've mentioned that in your OP. Why would a foreign country's tax system care about another country's tax-advantaged investing account? The tax withholding is seperate from any home countrystax obligations, if that helps to understand it. There are treaties to avoid double taxation that then allow claiming these unavoidable taxes at your tax residency. If you don't pay taxes there, usually you're out of luck.