U.S. Foreign Tax Credit On Stock Dividends
Governments of most countries try to recoup millions in taxes from dividends that are paid to foreign investors by companies located in their countries. For example, when a U.S.-based investor invests in France Telecom (FTE) ADRs, the French government will deduct 25% in taxes on all dividends paid. Hence, though FTE currently has a 6.98% dividend yield, the actual yield that this investor receives will be less. However, the IRS allows a foreign tax credit (filed with IRS Form #1116) to be taken using which this investor can deduct the taxes paid to the French government. This is done to avoid double taxation of dividends. There is a maximum limit to this tax credit. This foreign tax credit does not apply and may not be claimed when generated in a nontaxable account such as an Individual Retirement Account.
Read more about this topic: Foreign Tax Credit
Famous quotes containing the words foreign, tax, credit and/or stock:
“The American who has been confined, in his own country, to the sight of buildings designed after foreign models, is surprised on entering York Minster or St. Peters at Rome, by the feeling that these structures are imitations also,faint copies of an invisible archetype.”
—Ralph Waldo Emerson (18031882)
“In 1845 he built himself a small framed house on the shores of Walden Pond, and lived there two years alone, a life of labor and study. This action was quite native and fit for him. No one who knew him would tax him with affectation. He was more unlike his neighbors in his thought than in his action. As soon as he had exhausted himself that advantages of his solitude, he abandoned it.”
—Ralph Waldo Emerson (18031882)
“Laws remain in credit not because they are just, but because they are laws. That is the mystic foundation of their authority; they have no other.”
—Michel de Montaigne (15331592)
“There exists, between people in love, a kind of capital held by each. This is not just a stock of affects or pleasure, but also the possibility of playing double or quits with the share you hold in the others heart.”
—Jean Baudrillard (b. 1929)