If I short sell a stock XYZ to Buyer B and I am short the stock on the ex-dividend date, I pay the lender the dividend. The dividend tax rate is 20%.
Does the lender have to pay the dividend tax on the dividend that I pay them, even though the company pays Buyer B the dividend for the borrowed shares I sold? And Buyer B pays the 20% dividend tax on their dividend as well?
Am I correct in thinking that two dividends are being paid but the company is paying only the one dividend to Buyer B and I am paying the lender the gross dividend too?