It is January 2019, and we have now launched the first version of the Tax Deducted at Source Calculator tool. In this primary version, we have included the tax treaties where the countries Bulgaria, Croatia, Denmark, Estonia, Germany, Greece, Italy, Portugal, Spain, Sweden and United Kingdom are parties. However, we are not including all tax treaties, but focus on the bilateral agreements between the EU28 (before Brexit), and other major economies in the world, such as China, the U.S., Russia, Brazil, Singapore and Australia.
But why is this calculator for calculating the source tax (not to be confused with withholding tax) at all useful?
We are developing this source tax calculator for the two reasons. First of all, we are strong advocates of each and everyone’s personal finance. To be able to meet the global demographic challenges the world is facing, each individual must take responsibility to save and invest, to ensure he or she will have sufficient finances to retire and to live well. A key when investing is diversification, and we encourage portfolio diversification between markets. It is simply too risky to have the whole portfolio exposed to only your home market and your own country – it is vital to also invest in companies in other countries.
Secondly, we believe in an open market, where capital, people, and companies can freely trade and move across borders without barriers. Considering the current streams with populists in EU challenging the unification of Europe project and trade wars between the U.S and China, this question has never been as important. Companies create wealth by employing millions of labourers, but also provide vital services to all members of the society. The same companies need financing and funding, and should have access to investors from other countries than where they happen to reside or be listed on the stock market.
To meet these to important goals, we create and develop this calculator. When you invest internationally, your gains such as dividends or received interest may be taxed in both countries. The tax is, thanks to bilateral tax treaties between many of the world’s countries, split between the parties to an agreement, and thus, you as an investor will not be taxed twice for the same income.
However, the tax rate to e withheld at the source vary to a vast extent from a tax treaty to another. Common rates to be held in the country (where the company you have invested in resides), could be 7%, 8%, 10%, 15% or 25%. There is no general rule, which is why we have to date already reviewed and examined hundreds of tax treaties and created a comprehensible Tax Deducted at Source Calculator.
We hope you will have great use of this tool, and wish you great fortune in your international investments.