How much of a US dividend do I keep if I live in Finland?

Following a 100 $ dividend

A US company pays you a 100 $ gross dividend. Step by step:

• The US withholds 15 $ (15%) at source. 85 $ lands in your account.
• Finland taxes 85% of the dividend — 85 $. At 30% that is 25.50 $ of tax.
• The US tax is credited: 15 $ comes off 25.50 $, leaving 10.50 $ to pay in Finland.
• Result: 74.50 $ in your pocket, a total tax of 25.5% of the gross.

Assumptions: a listed company, and your capital income for the year stays within 30,000 € (the 30% rate). The amounts are in dollars to keep it readable; on the tax return both the dividend and the withholding go in euros, converted at the same day’s rate, so the proportions stay the same.

Why the US takes 15% and not 30%

As a general rule, most US-source income of a foreign person, dividends included, is taxed at 30%, withheld from the payment (IRS: NRA withholding). The US–Finland treaty caps it: under Article 10(2)(b) as amended by the 2006 protocol, at 15% of the gross for an ordinary portfolio investor. The 5% rate and the exemption in the same article are for companies with large holdings, not for individuals.

For the broker to apply the treaty rate you need Form W-8BEN. According to the IRS instructions it establishes that you are not a US person and, where applicable, claims a reduced rate as a resident of a treaty country. It generally stays in effect until the last day of the third calendar year after signing — one signed on 30 September 2015 is valid through 31 December 2018 — unless something on it changes.

At Interactive Brokers you update tax forms in the Client Portal under Settings → Account Profile, then Profile, the pencil next to the account holder and Tax Forms (IBKR Guides: Update Tax Forms). That page does not say when or how IB asks you to renew the form.

How much tax Finland charges

Under sections 2.1 and 2.3 of Vero’s detailed guidance Osinkotulojen verotus (Taxation of dividend income, Finnish only), a dividend from a listed company resident in a treaty country is taxed like a Finnish one: 85% is taxable capital income, 15% is tax-exempt. The short version is on the page Foreign dividends.

Capital income is taxed at 30% up to 30,000 € a year and 34% above that (vero.fi). On a dividend that comes to 25.5% of the gross, or 28.9% in the upper bracket.

No Finnish prepayment is withheld from a foreign dividend — the Foreign dividends page says so plainly. The 10.50 $ from the example arrives with your tax decision, unless you pay it in advance as an additional prepayment.

For the bigger picture — rates, ETFs, common mistakes on the return — see dividend taxation in Finland.

How the credit works and where it stops

You are not taxed twice: the US tax is deducted from the Finnish tax on the same income. Section 3.2.1 of Vero’s guidance Relief for international double taxation limits the credit three ways:

• the treaty ceiling — 15% for the US (Vero’s treaty table);
• the tax actually paid — never more than what the US really withheld;
• the Finnish tax on that income — the credit cannot exceed what Finland charges on the same income.

With 25.5% Finnish tax against 15% withheld, the third limit rarely bites. But if you owe almost no capital income tax for the year, there is nothing to credit against. The uncredited part then carries forward for five years against income of the same type and source (section 3.2.6 of the same guidance).

If 30% was withheld

That happens when the broker has no valid W-8BEN. Finland still credits only 15%: under section 3.2.1 nothing above the treaty ceiling is credited, and on form 16B the “tax paid abroad” line may not exceed the treaty amount (16B instructions, section 2).

On 100 $ that means 30 $ withheld, the same 10.50 $ to pay in Finland, and 59.50 $ in your pocket instead of 74.50 $. The extra 15 $ is still yours, but only the US can give it back. Vero notes that this is usually fixed in the source country by asking the payer for the right form and instructions.

On the US side, a refund of tax withheld at source is claimed by filing Form 1040-NR with Form 1042-S attached as proof of the withholding (IRS instructions for Form 1040-NR). Whether Interactive Brokers can adjust past withholding itself once a new W-8BEN is in place is not covered by the IB documentation we found — ask the broker. Above all, renew the form so that the next dividends are withheld at 15%.

Which year and which exchange rate

Year. Under section 2.5 of the dividend guidance, a dividend is income of the year in which it became available for withdrawal; for a listed company that is the payment date set in the dividend decision. A dividend declared in December and paid in January belongs to the new year.

Rate. The 16B instructions: convert income and tax paid in a foreign currency into euros at the rate for the transaction date; you may also use the ECB’s average rate for the year. PnlTrack converts the dividend and the withholding at the ECB rate of the payment date — the transaction-date rate under that same rule. How the exchange rate moves a result in euros is shown in the guide up in dollars, down in euros.

How to report it in MyTax

The steps follow the instructions for form 16B (section 2, foreign dividend income). MyTax has the same fields, so you do not need the paper form.

1. Check the pre-completed return. If the dividends are already on your pre-completed return, check the amounts; add anything missing and correct anything wrong.
2. Enter the gross dividend in euros. Country (United States), company, the “listed” tick box and the dividend before withholding — in euros at the payment-date rate or the ECB average rate for the year.
3. Enter the tax paid abroad. The US withholding in euros, but no more than 15% of the gross — even if more was withheld.
4. Reclaim any excess from the US. If 30% was withheld, the difference is reclaimed from the US (Form 1040-NR with Form 1042-S), and the W-8BEN at the broker is renewed.

Calculator

Enter the dividend, pick the withholding rate and your capital income tax rate — the calculator shows the Finnish tax, the credit and what you keep.