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I had purchased some UK stocks from London Stock Exchange. May I know, what is the dividend tax rate by UK government for UK stocks, on foreign investor (I am from Malaysia)?

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2 Answers

up vote 7 down vote accepted

The link provided by DumbCoder (below) is only relevant to UK resident investors and does not apply if you live in Malaysia. I noticed that in a much older question you asked a similar question about taxes on US stocks, so I'll try and answer both situations here.

The answer is almost the same for any country you decide to invest in. As a foreign investor, the country from which you purchase stock cannot charge you tax on either income or capital gains. Taxation is based on residency, so even when you purchase foreign stock its the tax laws of Malaysia (as your country of residence) that matter. At the time of writing, Malaysia does not levy any capital gains tax and there is no income tax charged on dividends so you won't have to declare or pay any tax on your stocks regardless of where you buy them from.

The only exception to this is Dividend Withholding Tax, which is a special tax taken by the government of the country you bought the stock from before it is paid to your account. You do not need to declare this tax as it his already been taken by the time you receive your dividend.

The rate of DWT that will be withheld is unique to each country. The UK does not have any withholding tax so you will always receive the full dividend on UK stocks. The withholding tax rate for the US is 30%. Other countries vary.

For most countries that do charge a withholding tax, it is possible to have this reduced to 15% if there is a double taxation treaty in place between the two countries and all of the following are true:

  1. The tax treaty covers dividends
  2. You have filled in the appropriate form for that country (in the case of the US the form you need is W8-BEN)
  3. Your broker is able to process the form for you and reclaim the tax on your behalf
  4. You renew the form every year

Note: Although the taxation rules of both countries are similar, I am a resident of Singapore not Malaysia so I can't speak from first hand experience, but current Malaysia tax rates are easy to find online. The rest of this information is common to any non-US/UK resident investor (as long as you're not a US person).

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Thanks for the good explanation! –  C. Ross Dec 17 '12 at 1:13
    
Thanks for good explanation. –  Cheok Yan Cheng Dec 20 '12 at 6:10
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FYI, I am assuming you are an individual investor.. The rates on the website may change, if the government decides so. Anyway it is a UK government website, so it would reflect the changes immediately.

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