Share This
« Back to Glossary Index
Categories: General Tax Terms

Foreign Withholding Tax:

A Foreign Withholding Tax is a tax imposed by a foreign government on income earned by a non-resident, such as dividends, interest, or royalties. This tax is typically deducted at the source before the income is remitted to the recipient.

For example, if a U.S. investor receives a dividend from a Canadian company, the Canadian government may withhold a certain percentage of that dividend as tax. The investor may be able to claim a foreign tax credit on their U.S. tax return for the amount withheld, thereby mitigating the risk of double taxation on the same income.

« Back to Glossary Index