Hi, is there a simple explanation to what "withholding tax" is? I would like to get into investing, but I hear this term and the high numbers (15/30% etc) and I'm wondering what is the implication? - Seedly
 

Investments

Stocks Discussion

Asked by Anonymous

Asked on 21 Jan 2020

Hi, is there a simple explanation to what "withholding tax" is? I would like to get into investing, but I hear this term and the high numbers (15/30% etc) and I'm wondering what is the implication?

Want to invest, but not sure if I would misjudge a good investment due to this thing called "withholding tax". How to avoid it or be mindful of it?

0

Answers (2)

Sort By

Most Upvote

  • Most Upvote
  • Most Recent
Yixiong Chang
Yixiong Chang
Level 7. Grand Master
Updated on 21 Jan 2020

It is a UPFRONT tax, paid directly at source. It is usually levied on foreigners. They scared foreigners will run away, so they 'withhold' the tax upfront.

The withheld tax rate is typically the highest tax rate. The foreigner will need to declare his tax status to the government, and will receive refund (thus the term, 'withholding') of the tax money held earlier according to his tax treatment.

For example, if u were paid $1 in dividend by the company u invested in. If there is a 30% withholding tax, only 70cents will be paid directly to u. 30cents will be paid to the government.

To get back any of the 30cents, u will need to file a claim with the government.

Depending on the tax treatment between our 2 countries, u can claim for reduced or exemption of withholding tax. ​​​

2 comments

0
Question Poster

21 Jan 2020

Thanks for the response. Is it a regular practice for some small fry like me to claim exemption of withholding tax? Or is there only very special/specific reasons to do so?
Lky
Lky

21 Jan 2020

Nothing stopping you but the tax forms are pretty cumbersome and difficult to understand and fill up. Some roboadvisors file them on your behalf but not sure how much you can claim back. You can only claim back assuming you filled up all the tax forms correctly and the government owes you taxes.
Wilson Nid A Break
Wilson Nid A Break
Level 8. Wizard
Answered on 21 Jan 2020

Its simply a tax government levy upon dividends paid by local corporation to foreign investers.

Implication : it just reduced your starting dividend yield

1 comment

0
Question Poster

21 Jan 2020

Thank You!