{"id":21643,"date":"2011-06-13T10:24:23","date_gmt":"2011-06-13T14:24:23","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=21643"},"modified":"2011-06-13T10:24:23","modified_gmt":"2011-06-13T14:24:23","slug":"the-legal-tax-loophole-for-income-investors","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/06\/13\/the-legal-tax-loophole-for-income-investors\/","title":{"rendered":"The Legal “Tax Loophole” for Income Investors"},"content":{"rendered":"

Article courtesy of DividendOpportunities.com<\/a><\/span><\/p>\n

The \t\t\t\tLegal “Tax Loophole” for Income Investors<\/strong><\/span><\/p>\n

Did you know<\/span> the United States withholds a portion of dividends paid to \t\t\t\t\tmany foreign investors?<\/span><\/p>\n

This amount comes right off the top, before the payment even \t\t\t\t\thits an investor’s account. Even after this cut, the foreign \t\t\t\t\tinvestor will still have to pay taxes on what’s left.<\/p>\n

<\/span><\/p>\n\n\n\n
<\/ins><\/ins><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/span><\/p>\n

But the United States isn’t just being greedy. Just about \t\t\t\t\tevery nation does something similar.<\/span><\/p>\n

Switzerland withholds up to 35% of dividends paid to foreign \t\t\t\t\tinvestors… Israel withholds up to 25%… Canada takes 15% \t\t\t\t\toff the top.<\/p>\n

Typically the higher yields found abroad can make up the \t\t\t\t\tdifference. For instance, the high yields on foreign \t\t\t\t\tutilities \t\t\t\t\tcan still make them worthwhile to most investors, even with \t\t\t\t\tthe withholding.<\/p>\n

And truth be told, you can get this withheld money back. \t\t\t\t\tInvestors filing for a foreign tax credit via IRS Form 1116 \t\t\t\t\tcan reclaim foreign dividends withheld. But you won’t \t\t\t\t\treceive this cash until you file your tax return, sometimes \t\t\t\t\tup to a <\/span><\/em> year<\/em><\/span> after the actual dividend has \t\t\t\t\tbeen paid.<\/p>\n

But there’s also a legal<\/span> tax loophole you can use to \t\t\t\t\tyour advantage. And it can mean more income in your pocket \t\t\t\t\timmediately, without the hassle of filing additional tax \t\t\t\t\tforms and waiting to get your money back.<\/p>\n

A Select Cadre of ZERO-Tax Nations<\/strong>
\nFor decades the United States has wanted to attract foreign \t\t\t\t\tinvestment. Likewise, many countries crave American capital.<\/p>\n

To promote mutual investment, the United States has \t\t\t\t\t\t\tsigned tax treaties with about 50 countries that \t\t\t\t\t\t\treduce the taxes withheld on your dividend payments.<\/p>\n

While the treaty terms vary from nation to nation — \t\t\t\t\t\t\tSwitzerland, for example, withholds only 15% of \t\t\t\t\t\t\tdividends paid to American investors — there is a \t\t\t\t\t\t\tselect cadre of nations where the dividend \t\t\t\t\t\t\twithholding tax is \t\t\t\t\t\t\tzero<\/span>. Every cent paid by \t\t\t\t\t\t\tthe foreign company makes it into your account.<\/p>\n

In total, fewer than two dozen countries either have \t\t\t\t\t\t\ttax treaties with the United States that result in \t\t\t\t\t\t\t0% withholding or \t\t\t\t\tsimply don’t withhold dividends paid to foreign \t\t\t\t\tinvestors. Of those, many are smaller nations that aren’t \t\t\t\t\texactly hotspots for income investing.<\/p>\n\n\n\n
But there are a few gems that offer attractive dividends \t\t\t\t\t and<\/span><\/em> zero withholding…<\/span> <\/p>\n

Brazil doesn’t withhold a dime of dividend income. It’s also \t\t\t\t\tone of the best growth stories in the world. And Brazilian \t\t\t\t\tstocks pay some of the world’s highest dividend yields. In my \t\t\t\t\t High-Yield International<\/strong> <\/a> <\/em>portfolios, \t\t\t\t\tfor instance, I hold a Brazilian power company yielding 8.0%.<\/p>\n

Meanwhile, Hong Kong, the gateway to investing in China, \t\t\t\t\tdoesn’t withhold any dividends either. And the United \t\t\t\t\tKingdom, where my \t\t\t\t\tHigh-Yield International<\/em> subscribers had a chance to \t\t\t\t\tinvest in \t\t\t\t\ta mining giant paying 13.2%, lets \t\t\t\t\tinvestors keep every penny paid to them in dividends.<\/span><\/td>\n

\n\n\n\n\n\n\n\n\n\n\n\n
Notable \t\t\t\t\t\t\t\t\tCountries Withholding 0% for U.S. Investors<\/span><\/strong><\/td>\n<\/tr>\n
Argentina<\/span><\/strong><\/td>\n<\/tr>\n
Brazil<\/span><\/strong><\/td>\n<\/tr>\n
Hong Kong<\/span><\/strong><\/td>\n<\/tr>\n
India<\/span><\/strong><\/td>\n<\/tr>\n
Mexico<\/span><\/strong><\/td>\n<\/tr>\n
Singapore<\/span><\/strong><\/td>\n<\/tr>\n
South Africa<\/span><\/strong><\/td>\n<\/tr>\n
United Kingdom<\/span><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


\nNow I’m not saying to ignore any country that withholds \t\t\t\t\tdividends — that would be like going to a restaurant and \t\t\t\t\tlimiting yourself to only one side of the menu. There are \t\t\t\t\tsimply too many high yields out there that are attractive, \t\t\t\t\teven if a little is taken off the top.<\/span><\/p>\n

But if maximizing short-term income is your primary goal, \t\t\t\t\tthen this “tax loophole” should be one of your favorite \t\t\t\t\ttools.<\/p>\n

[Note:<\/strong> Right now 95 profitable companies yielding 13% \t\t\t\t\tor more are found abroad… versus 16 here in the U.S. \t\t\t\t\tThat’s good news if you invest abroad. To help, I’ve put \t\t\t\t\ttogether a brief memo<\/a><\/strong><\/span> outlining some of the benefits of \t\t\t\t\tinternational high-yield investing. Be sure you don’t miss it<\/a><\/strong>.<\/span>]<\/p>\n

Good Investing!<\/span><\/span><\/p>\n

\"\"<\/span><\/span><\/span><\/p>\n

 <\/p>\n

Paul Tracy
\nCo-Founder — StreetAuthority<\/em><\/span>
\n<\/em>Chief Investment Strategist — High-Yield International <\/em><\/span><\/p>\n

<\/em>P.S. — Don’t miss a single issue! Add our address, \t\t\t\t\tResearch@DividendOpportunities.com<\/a><\/span>, to your Address Book or Safe List. For instructions, go here<\/a><\/span>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Article courtesy of DividendOpportunities.com The Legal “Tax Loophole” for Income Investors Did you know the United States withholds a portion of dividends paid to many foreign investors? This amount comes right off the top, before the payment even hits an investor’s account. Even after this cut, the foreign investor will still have to pay taxes … <\/p>\n

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