Dividend tax: why less arrives in your account than was declared

A gap between the declared payout and the amount in your account almost always means one thing: personal income tax (NDFL) was withheld before the money reached you. The issuer declares the dividend per share in full, before tax, and the tax is deducted by the tax agent — the participant in the chain through which the payout travels to your account. You do not pay this tax yourself and you do not see a separate debit: what arrives is already the remainder. The current rate and the threshold at which it changes are 13%.

Who exactly withholds, and why the transaction is invisible

A dividend does not go from the issuer straight to you. It moves along a custody chain: the issuer transfers the payout into the depository infrastructure, from there it reaches your broker or depository, and that institution credits it to your account. The tax agent is the last link in the chain that pays money to an individual. It is also the party that calculates the tax, withholds it and remits it to the budget.

Two consequences follow, and they are usually what raises questions. First: your statement shows the credit already net of tax, and there may be no separate "NDFL withheld" line at all — it appears in the broker's tax report, not in the account movements. Second: the money arrives later than the date you read in the news about the shareholders' meeting decision. The record date, the date the issuer pays and the date the money is credited to you are different points, and time passes between them while the payout works its way through the chain.

The simplest way to check that a payout relates to your securities at all, and to the right date, is to look in two places: the dividend calendar — the nearest payouts are

— and the dividends section, which holds the history by issuer. The instrument card — for example SBER — shows the declared amount per share, that is, the figure before tax.

The declared amount is always "before"

The issuer does not know your tax status and cannot declare a payout "in hand". So any figure in a dividend announcement is gross. Multiply it by the number of securities you hold and you get not what will arrive but the tax base for that payout. The tax is calculated on each payout separately and rounded to whole roubles, which is why the remainder of two investors with identical holdings can differ by a few kopecks.

Why dividends cannot be "offset" with a loss

This is where people most often go wrong, and it is a matter not of arithmetic but of how the tax is built. The dividend base is calculated separately from the base for transactions in securities. A loss made on the sale of shares does not reduce the tax on dividends. Nor can losses carried forward from previous years be applied to dividends.

For comparison: with bond coupons the withholding mechanism is similar, but the base and the rules are their own — this is covered under tax on coupon income, and its effect on a bond's final yield is stronger than it seems, as examined in the article on bond yields.

Foreign issuers and depositary receipts

If the dividend is paid by a foreign company, the tax is usually withheld initially in the country where the payout originates. In that case the Russian broker does not always act as tax agent, and the duty to declare the income and pay the difference then passes to you — by filing a personal income tax return. Tax withheld abroad can be credited only if there is a double taxation agreement in force and supporting documents are available; the list of agreements changes, so it makes sense to verify a specific calculation as of the payment date rather than rely on last year's practice.

A payout in foreign currency is converted into roubles on the date the income is received. For dividends this is purely a conversion of the base, not a separate result from the exchange-rate move — the mechanics of the currency component are explained under tax on currency revaluation.

The taxpayer's status changes the rate

The rate depends not only on the size of the base but also on whether you are a tax resident. Losing residency changes the rate on dividends from Russian issuers and removes the right to most deductions. The tax agent determines your status from the data it holds, so when circumstances change, it falls to you to report it.

What to check if the amount still does not add up

Start by checking the number of securities you held on the record date: those bought after the cut-off carry no right to the payout. Then look at the broker's tax report — the withholding is shown there explicitly. Only after that is it worth suspecting an error by the agent: discrepancies are more often explained by rounding, by the record date, or by the fact that part of the holding was kept with another depository.

It is also worth keeping in mind that dividend tax is a withholding at the moment of payment, not a deferred construct such as the deferred tax in an issuer's financial statements: these are different things with similar names. How dividend policy looks from the company's own side can be seen in the cash flow statement and in the financial reports section. And why the rates and thresholds themselves change is the subject of fiscal and tax policy.

What this article does not contain: an individual calculation for a specific portfolio and a list of countries with agreements in force — the former depends on your entire base for the year, the latter changes and has to be verified as of the payment date.