Financial Term Explorer
Tax Treaty
International agreements to prevent double taxation. The US-Korea treaty reduces US dividend withholding from 30% to 15%.
📝 Definition
**Tax Treaty** is an international agreement between two countries to prevent the same income from being taxed twice. Under the US-Korea tax treaty, dividend withholding on US stocks is reduced from the standard 30% to **15%**.
In Simple Terms
Paying tax in the US and then again in Korea would be unfair, right? Tax treaties prevent this double taxation. The US-Korea treaty cuts US dividend tax in half. Your broker applies this automatically.
Example
Without a tax treaty, you'd pay $30 (30% tax) on $100 US dividends. Thanks to the treaty, you pay only $15 (15%). On $10,000 annual dividends, that's $1,500 saved.
💡 Practical Tips
- 1Check if tax treaties exist with countries where you invest.
- 2Verify your broker is correctly applying treaty rates.
- 3Research treaty rates for Canada, Australia, and other countries before investing.
⚠️ Common Mistakes
Countries without tax treaties may charge high withholding rates. Always check before investing internationally.
❓ Frequently Asked Questions
What's the Canadian stock dividend tax rate?▼
Under the Korea-Canada tax treaty, 15% withholding tax applies to dividends.