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I am planning to open an account to trade or a fund, and I am looking for a very specific legal structure.

Basically, I am looking for a legal structure that allows me to receive the gross dividend of the stock (US or European stocks), with no withholding tax. At the end of the fiscal year I will pay the taxes for my total gains, including the dividends.

For example, if the stocks perform 10%, and from the dividends I get 4%, I will pay taxes for the whole 14%. But if the stocks perform -10% and the dividends 4%, I don't pay taxes, as my net result is negative.

I am living in UK, but I may be able to open the account (or the fund structure) in other countries.

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    Tax questions require a country tag. Sep 2, 2014 at 22:56
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    In many countries, the "performance" of stocks by 10% (meaning that the stock price increased by 10%) does not create a taxable event; only realized gains (which would occur when you sell the stock) are taxable. Which is your country? Sep 2, 2014 at 23:07
  • You seem to be making up your own tax laws. Sep 3, 2014 at 1:48
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    Not possible. All trading accounts give you net dividends. Else what is stopping you from closing the account and moving to a different broker, just before the financial year ends. The tax man will visit the broker and they will have to pay out of their pocket.
    – DumbCoder
    Sep 3, 2014 at 9:13
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    A SIPP or an ISA will let you trade tax-free in general but they come with their own restrictions on what you can do with them. You might want to look into CFDs (Contracts for Difference) or TRSs (Total Return Swaps). Sep 3, 2014 at 10:53

2 Answers 2

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No such account exists as capital gains aren't realized until holdings are sold.

For example:

  1. Year starts.
  2. Buy $1000 of XYZ
  3. Receive dividend of $40
  4. XYZ raises price to $1100
  5. Year end - you own the same amount of stock initially purchased.

OR

  1. Year starts.
  2. Buy $1000 of XYZ
  3. Receive dividend of $40
  4. XYZ lowers price to $900
  5. Year end - you own the same amount of stock initially purchased.

Both scenarios would result in you owing the appropriate taxes on a $40 gain from the dividends. The $100 gain or $100 loss that isn't realized (you haven't sold the stock) isn't accounted for until the year of sale.

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  • Alex, I understand that this is the normal procedure. But I know that certain structures (e.g. ISA account) allow you to reduce your taxes, and also the dividend taxes. I wanted to find such a structure.
    – Escachator
    Sep 3, 2014 at 20:51
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    The ISA reduces your tax due on capital gains also, but you would only see the benefit when you realize those capital gains. Paper gains (or losses) are not taxed.
    – Alex B
    Sep 3, 2014 at 21:48
  • How does the ISA treat the dividend tax (on UK stocks and foreign stocks, understanding foreign as non-UK)?
    – Escachator
    Sep 3, 2014 at 22:06
  • I would ask that as a separate question to give it the best attention.
    – Alex B
    Sep 3, 2014 at 23:25
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Income and Capital are taxed separately in the uk.

You probably can't get dividends paid gross even in ISA's you pay the basic rate of tax on dividends only higher rate tax payers get tax benefit from dividends.

What you could do is invest in splits (Spilt capital investment trusts ) in the share class where all the return comes as capital and use up some of your yearly CGT allowance that way.

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