WSOEW! That's very steep tax!

I believe so ... but let the sifus who had experience in ASX confirm...

For Aus tax residents it is good cos the franked portion of the dividend can be deducted against ur personal income tax ..eg: if franked dividend is 100% and ur personal income tax in aus is 40%, u will pay only 10% tax on the dividend u received cos 30% tax is alreaady incurred on the dividend at corporate level...not sure I used the right terms above, but something like that...

This post has been edited by Vector88: Feb 3 2017, 04:52 PM

Further reading on the withholding tax for dividends received from ASX stocks, I am getting conflicting info... In the Australia tax office website, it says this:

https://www.ato.gov.au/Individuals/Internat...-and-royalties/

It seems that only unfranked dividend is subject to 30% withholding tax, franked dividend may not be the case??

any sifu can enlighten on this matter?

Bro,

If u refer to post #80, sifu Hansel did mention the following :

"Bro,.. if you are not a resident of Australia, don't worry abt the franking part ! LIke I said previously, only if you're ready to stay in Australia do you think abt the franking credits."

Should be thankful only 30%. If resident earning 37k-80k, they pay 2.5% more than you. 80k-180k pay 37% and >180k they pay 45% tax

But they enjoy the benefits given by the government...

Yes auto deducted as they are the few countries still using the 2 tier franking system.

So if the gross dividend yield is 9% like NAB now, the net yield is 6+%. Lower than many Sreits.

For dividend stock, Sreit may be better

For volatility, ASX may have more opportunity

Unfranked dividend means gross dividend before tax. franked means net. So for non-resident, you get 70% of the declared dividend and call it a day. Don't even need to file tax returns.

Even the tax resident there received net dividend (ie. 30% less). Then in their tax returns they impute the gross dividend into their declare income and recalculate the tax payable.

If the chargeable income is <37k, then they enjoy the franking credits and can claim back/offset the chargeable income to reduce tax payable. But if more than 37k, they have to top up the tax because the tax rate is >30%

Therefore, it may not be a good investment frontier for foreigners, unlike US mkts where we are not taxed.

For dividend, if have option for SGX like >6% yield, then may not be good in ASX.

For trading / growth stock / diversification, depends on the person's choice.

If bought bank stock like NAB ANZ last year, the gross yield was like 11%. So even after tax, it is still very good. But now is different

Not so easy to get 11% yields, especially for banks.
However, there are many stocks in US dishing out more than 10% yields.
In the end, it's probably down to geographical asset allocation strategy.

Thank you so much for the clarification.
Temporary will stick to SGX first.

bro..how come this link from Aus tax office says that foreigners do not need to pay withholding if it is a franked dividend?

https://www.ato.gov.au/Business/PAYG-withho...eign-residents/

You must issue a statement to your shareholder or payee that indicates the extent the dividend is franked or is conduit foreign income. You do not have to withhold tax if the dividends you pay have been fully franked or they are conduit foreign income.

confused

A franked dividend means 30% tax/franking credit has been deducted. By disallowing non-tax-resident claiming the franking credit, it means the foreigner has paid the 30% tax. Same effect as 30% withholding tax on unfranked dividend

Are you familiar with 2 tier dividend system ? Malaysia and Singapore only changed to 1 tier dividend system not long ago. For malaysia I think it was introduced in 2009, and made compulsory since 2013. It is better to understand the 2 tier franking credit dividend system in order to understand how ATO treats the dividend income for both tax-resident and non-tax-resident.

I still remember for my malaysian company dividend income prior to the 1 tier system, we have to prepare a list of dividend income from the dividend vouchers receive via snail mail. If you receive 50 dividends vouchers, then you have a long list. Unlike now our submission is online, the tax computation last time was very thick with all the supporting documents including all the dividend vouchers

Now 1 tier dividend, we just throw away the dividend vouchers. As there is nowhere for us to declare dividend income in the tax returns anymore.


As for conduit foreign income, it is the income earned by the company overseas. For Australian tax, this foreign income earned and paid to a non-tax-resident is exempted (ie. no withholding tax). Hence the word "conduit". The company will segregate the conduit foreign income declared as dividend and the on-shore income declared as dividend. So, there is no tax to non-tax-resident for dividends declared from overseas income, and 30% tax for dividends declared from on-shore income.

But for tax-resident, although the amount is unfranked (ie gross), the gross dividend has to be included as income in the tax computation to arrive at the chargeable income and be subjected to tax




If you still feel confused, that may be because you don't understand 2 tier dividend franking system. Try to understand that first and then everything will clear up

Bro...it's indeed a blessing to have such experts here to guide us.
Presumably with the tax application by Aus, Msia does not have a tax treaty with Aus?

Thanks bro... !! so bottom line, for non tax residents, we will need to take 30% off the dividend declared, whether franked or not... right?

If like that, better I go the US way with only 15% with holding tax if bought via LSE. Or the HK way where it's tax free. Anyone please correct me if I am wrong.

Ram

So far, I have not experience any withholding tax from US authorities investing in stocks.
Have you signed the W BEN8 forms ?

what is LSE?

Did you invest directly in NYSE/Nasdaq? The tax is on the dividends.

London stock exchange

To Showtime,... Thank you very much for the great advice ! Cleared-up quite some confusions on my end too !