How to track foreign-currency dividends and the tax withheld from them

The short way

A dividend from a company in another country is not one number. It is four, and a tracker that keeps fewer than four will eventually disagree with your statement:

• Gross — what the company declared per share, times your shares, in its own currency.
• Withholding — tax deducted at source by the payer's side before anything reaches you.
• Net — what arrived, which is the only figure your cash balance knows about.
• Exchange rate — the rate your broker converted at, if it converted at all, with any margin inside it.

The broker's statement is the record of all four. A tracker's withholding setting is a forecast; the statement's withholding row is the history. What the two kinds of figure mean, and why yields computed from them differ, is under withholding.

So:

1. Set the rate per holding, not per portfolio, in whatever tracker you use, because the rate depends on the issuer's country as well as yours, and one portfolio-wide percentage is wrong for every holding outside the country it was chosen for.
2. Check one payment per country against the statement each year. If the tracker's withholding differs from the statement's, the statement wins, and the setting needs changing.
3. Record the amount received in your currency, so the exchange rate in the tracker is the one your broker dealt at rather than a reference rate.

The general job of keeping one dividend ledger across brokers is tracking dividends across several brokers; this page is the foreign half of it.

What the options are

Withholding as a per-holding rate, applied to each payment. Sharesight applies a withholding rate per holding, overridable under the holding's settings, and recalculates the tax withheld on its generated dividends when the rate changes. Its help notes that in an Australian portfolio the default for US holdings is 15% on the assumption that a W-8BEN has been completed, and 30% if not. It also warns that the dividend it shows for a foreign holding may be the gross declared amount, higher than what reached your account; entering the exact home-currency amount received makes it back-calculate the exchange rate. Dividend Watch sets withholding per holding or per portfolio, so a forward income figure can be net, and computes currency return per transaction across 11 currencies.

Withholding as a field on each payment. Portfolio Performance stores gross, tax, fees and the exchange rate on the dividend transaction itself, and its PDF importer fills them from the statements of the banks it supports. Nothing is assumed; each payment holds what the statement said. It is free, desktop only, and the import list is weighted to German-speaking banks.

Withholding as one assumption for the forecast. Snowball Analytics uses withholding rates to produce an after-tax yield and income projection. DivvyDiary computes net dividends from one personal tax rate plus an annual allowance — the German shape — on its paid plan, and passes reclaims of foreign withholding to a partner service rather than handling them in the app. Both are honest about being estimates. Neither is a record of tax you paid.

Reinvested dividends. Digrin marks a dividend as reinvested, one at a time or as a rule for all future payments, and adds the shares. Dividend Watch has the same marking on its Pro plan only.

Where this breaks

The rate is a property of you, not of the stock. For a non-US investor holding US shares, the IRS starting point is that most US-source income paid to a foreign person is taxed at 30%, with a reduced rate where a treaty between your country and the US provides one. The reduced rate is claimed on Form W-8BEN, held by your broker. Two holders of the same stock can therefore have different net dividends, and no shared database can store the right net figure for you.

A W-8BEN expires on a calendar, not on an event. The IRS instructions say the form generally stays in effect until the last day of the third calendar year after the one in which it was signed, unless something on it becomes incorrect first. When it lapses, the withholding agent may have to withhold at 30% until a new one is filed. Your tracker, still set to the treaty rate, keeps reporting the lower figure. The first symptom is a statement that disagrees with the tracker on every US payment from the same date — which is why step 2 is a yearly check rather than a one-off.

Withheld is not the same as owed. In the other direction — a US filer holding shares of companies abroad — IRS Publication 514 notes that some treaty countries withhold at their full rate and expect you to claim the treaty reduction back as a refund. For the US foreign tax credit, the qualifying amount is the tax at the lower treaty rate, not what was taken, because the excess is refundable. A tracker that books the whole deduction as tax paid is recording the deduction correctly and the creditable amount wrongly. Reclaiming the excess is a filing in the other country, which is why DivvyDiary hands it to a partner.

A reinvested foreign dividend buys with the net. In a dividend reinvestment plan the shares are bought with what is left after withholding, at the share price in the stock's currency on the reinvestment date. A tracker that sizes the reinvestment from the gross buys too many shares, and every later dividend generated from that share count is too large by the same fraction. And if the reinvested shares are not recorded at all, Sharesight's own help points out, the share count is understated and every later dividend looks wrong. The reinvestment is also a purchase, at its own price and exchange rate, so it adds a lot with a cost of its own.

Exchange rates disagree by small amounts, every time. A dividend converted by your broker was converted at the broker's rate, margin included. A tracker valuing it at a reference rate for the day — Portfolio Performance loads the European Central Bank's, for instance — will be a little off on every payment, which totals to a visible gap over a year. Record the rate the statement shows on the income, and let the reference rate value the holdings.

Withholding often arrives as its own row. Some brokers' statements put withholding in a separate section with its own date. An importer that reads only the dividend lines records the gross as cash received; one that reads the tax rows as fees puts them in the wrong total. Check one imported payment against the statement before trusting the year.

If you outgrow this

When the figure goes on a return, the broker's year-end tax documents are the record the tax authority compares against, not the tracker's income total. Among the cards here only Sharesight produces filing-shaped reports, and only for Australia, New Zealand and Canada.

When the question is forward income rather than past income, the per-holding rate is a fine assumption; that is what Dividend Watch and Snowball Analytics are built around.

This page describes how withholding is recorded, not what rate applies to you. That is a question for the tax authority's own material, or for somebody paid to answer it.

The rest of the category is dividend trackers.