Glossary
Withholding tax
Tax deducted at source on cross-border payments such as dividends, interest or royalties, usually when they leave a country to a non-resident.
When a company pays dividends, interest or royalties to someone abroad, the paying country often requires it to withhold a percentage and remit it to the tax authority. Rates vary widely and are frequently reduced or eliminated by a double tax treaty between the two countries.
Why it matters
Withholding tax can quietly erode the return on an offshore structure. A jurisdiction with a wide treaty network — or no withholding on outbound dividends — is often worth more than a slightly lower headline corporate rate.
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