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Take STD ADR for example

STD ADR Shareholder Remuneration

Since I will invest through local broking firm from my home country (Malaysia), it is not possible for me to claim back tax from US and Spain government. For ADR investor relationship website, it is clear that Spain government is going to tax 19% if I choose to receive cash.

I was wondering, will US government tax my received dividend again, after deduct from Spain government?

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This will have a complicated answer depending on your citizenship, residence (e.g. are you a permanent immigrant to the US), tax treaties between the three countries, etc. US citizens and permanent residents get credit for taxes paid to other countries on their US income tax returns; non-immigrants might or might not, and tax treaties will affect the answer. Dividends received by US citizens and residents are taxable income to them regardless of whether the dividends are received as cash or are re-invested. Spain and/or Malaysia might have a similar rules also. – Dilip Sarwate Mar 9 '12 at 19:51
up vote 2 down vote accepted

Surprisingly enough, this one isn't actually all that complicated. No, you will not be taxed twice.

Dividends are paid by the company, which in this case is domiciled in Spain. As a Spanish company, the Spanish government will take dividend witholding tax from this payment before it is paid to a foreign (i.e. non-Spanish resident) shareholder.

What's happening here is that a Spanish company is paying a dividend to a Malaysian resident. The fact that the Spanish stock was purchased in the form of an ADR from a US stock market using US dollars is actually irrelevant. The US has no claim to tax the dividend in this case.

One brave investor/blogger in Singapore even set out to prove this point by buying a Spanish ADR just before the dividend was paid. Bravo that man!

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Thanks. I usually try to bypass the tax, by choosing to receive dividend in term of shares, instead of tax. Yeah! – Cheok Yan Cheng Dec 20 '12 at 6:07

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