Withholding Tax on US Dividends
By default, the US withholds 30% tax on dividends paid to foreigners. With the W-8BEN form and the double-taxation treaty this falls to 15% — and those 15% are fully credited against the capital-gains tax in your country of residence. Here you will learn how the mechanism works, what your broker handles automatically, and where you need to pay attention yourself.
The problem: 30% is gone before you ever see it
Anyone holding US stocks such as Coca-Cola, Realty Income or Apple receives dividends — but the US levies a withholding tax on them. The statutory standard rate for foreigners is 30 % and is withheld directly at the source, that is, before the money ever reaches your account. Without any further steps, this US tax would come on top of the capital-gains tax in your home country — genuine double taxation. This is exactly what the double-taxation treaty (DTT) between your country and the US prevents, in combination with the W-8BEN form.
W-8BEN: how 30% turns into just 15%
The W-8BEN is a declaration to the US tax authority (IRS) stating that you are not a US taxpayer and are tax-resident in your home country (e.g. Germany). This triggers the reduced treaty rate of 15 % for portfolio dividends. The good news: at German and most EU brokers (Trade Republic, Scalable Capital, comdirect, ING, Interactive Brokers) the W-8BEN is filed automatically in the background when you open an account — you usually do not have to fill in anything manually. The form is valid for three years and is renewed by the broker.
$100 US dividend — with and without W-8BEN
| Without W-8BEN | With W-8BEN (DTT) | |
|---|---|---|
| US withholding tax | $30 (30 %) | $15 (15 %) |
| Creditable at home | only $15 | the full $15 |
| Tax effectively lost | $15 taxed twice | $0 — fully credited |
Crediting at home — how double taxation is avoided
In Germany, dividends are subject to the flat capital-gains tax of 25 % (plus the solidarity surcharge and, where applicable, church tax, together roughly 26.375 %). The 15 % withholding tax already paid in the US is treated as creditable foreign withholding tax and is offset directly against this domestic tax — your German broker usually handles this automatically. The bottom line: you pay 15 % to the US and only the difference to Germany, not both in full.
€1,000 US dividend through a German broker (simplified)
| Step | Amount |
|---|---|
| Gross dividend | €1,000 |
| US withholding tax 15 % (with W-8BEN) | −€150 |
| German flat capital-gains tax 25 % | −€250 |
| of which US tax credited | +€150 |
| Still due in Germany (25 % − 15 %) | −€100 (+ surcharge) |
| Total tax burden | ~€263.75 (not €400) |
US ETFs vs. Irish ETFs — the domicile trick
With individual US stocks the W-8BEN mechanism applies directly. With ETFs the fund domicile is what matters. An ETF set up in Ireland (recognizable by the ISIN starting with IE) benefits from the US–Ireland treaty and pays only 15 % instead of 30 % on US dividends at the fund level. With accumulating Irish ETFs, no second withholding tax falls on you as an investor — which is exactly why Irish ETFs are tax-efficient for US-heavy indices such as the S&P 500 or MSCI World. More on this in our detailed article on Irish ETFs.
Not every US distribution is settled at 15 %. For certain income — such as portions of REIT distributions (e.g. Realty Income) or interest-like payments — a higher US rate may apply. Check your income statement: if it shows a US withholding above 15 %, a reclaim from the IRS may be necessary. When in doubt, a tax advisor can help.
Tax treatment by country
Germany: 15 % US withholding tax is credited automatically against the flat capital-gains tax (25 % + surcharge). Austria: the KESt is 27.5 %; here too the 15 % US withholding tax is creditable, with the difference remaining in Austria. Spain: dividends belong to the base del ahorro (19–28 %); double taxation is avoided through the deducción por doble imposición internacional up to the treaty rate. Italy: for private investors, foreign withholding tax on dividends is generally not creditable — the 26 % imposta sostitutiva is levied on the amount after US tax, which results in an effectively higher burden; a refund of the difference under the treaty is possible but cumbersome.
FAQ — withholding tax on US dividends
How high is the withholding tax on US dividends?
The statutory US standard rate for foreigners is 30 %. With the W-8BEN form and the double-taxation treaty it drops to 15 % for portfolio dividends. These 15 % are fully credited against the capital-gains tax in your home country, so no genuine double taxation arises.
Do I have to fill in the W-8BEN form myself?
Usually not. German and most EU brokers such as Trade Republic, Scalable Capital, comdirect, ING or Interactive Brokers file the W-8BEN automatically in the background when you open an account. The form is valid for three years and is renewed by the broker. Only with some US direct brokers do you have to submit it yourself.
Is US withholding tax credited at home?
Yes. The 15 % US withholding tax reduced via W-8BEN counts as creditable foreign withholding tax and is offset directly against the German flat capital-gains tax of 25 %. Your German broker normally handles this automatically. You therefore pay roughly 26.375 % in total, not 15 % plus the full 25 %.
Are Irish ETFs better for tax on US dividends?
For US-heavy indices, yes. An ETF set up in Ireland (ISIN starting with IE) pays only 15 % instead of 30 % on US dividends at the fund level thanks to the US–Ireland treaty. With accumulating Irish ETFs no second withholding tax falls on the investor, which makes them tax-efficient for the S&P 500 or MSCI World.