Kanchi tax

What US withholding tax takes from a dividend under your tax treaty, how to recover it, and which account to hold dividend stocks in.

Updated nowRefreshes every 5 minSouth Korea · treaty of 1979

Gross dividend

$100.00

Example payment

Treaty rate

15%

vs 30% default

Withholding

$15.00

Net after treaty

$85.00

Treaty saves

$15.00

$1,500.00 a year per $10K

With the South Korea tax treaty, your withholding drops from 30% to 15%. Make sure a W-8BEN is filed. Hold foreign dividend stocks in taxable accounts to claim the FTC.

Where the dividend goes

USD

Treaty and relief

Treaty benefit

Eligible

Rate reduction

15%

Valid W-8BEN form on file with your broker
Tax residency in South Korea
Beneficial owner of the dividends

Form: W-8BEN (individuals) or W-8BEN-E (entities)

Foreign tax credit (FTC)

Applies

Credit

$15.00

Foreign tax credit: claim $15.00 against your US tax liability.

Form: IRS Form 1116

Foreign earned income exclusion (FEIE)

Does not apply

The FEIE does not apply to dividend income, only to earned income.

Use the foreign tax credit (FTC) for dividend income. The FEIE does not apply to investment income.

Account placement

1 is best

Account placement for foreign dividends
			Recommendation	Tax treatment
1	Taxable brokerage	$85.00	Best for foreign dividends. Recover the withholding through the foreign tax credit.	Withholding of $15.00 is recoverable through the FTC. Qualified dividends are taxed at 0, 15 or 20%.
2	Roth IRA	$85.00	Acceptable if the treaty rate is low	Withholding of $15.00 is not recoverable. There is no FTC in tax-advantaged accounts.
4	Traditional IRA	$85.00	Avoid for foreign dividends. The FTC is lost and withdrawals are taxed as ordinary income.	Withholding of $15.00 is not recoverable. Taxed on withdrawal.