With the exception of Estonia and Latvia, all European countries covered in today’s map levy a dividend taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. . Top dividend tax rates vary significantly across European countries. While Slovakia levies a tax of only 7 percent on dividend income, Ireland taxes dividends at 51 percent.
Over the last two years, four European countries have made changes to their dividend tax rates. Iceland and Norway increased their rates, each by approximately two percentage-points. France and Latvia each cut their rates by ten percentage-points.
In 2018, France implemented a flat 30 percent tax on capital income. Adding the four percent exceptional contribution on income above €500,000 ($590,000), the current top dividend tax rate is 34 percent. Prior to the reform, dividends earned by individuals were included as taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income. at the shareholder level, with a top rate of 44 percent.
In 2018, Iceland increased its tax rate on dividends from 20 percent to 22 percent.
Latvia adopted a cash-flow tax model in 2018, replacing its business income tax. Under the new model, a 20 percent corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. is levied when profits are distributed to shareholders. There is no additional dividend tax on individuals. Prior to the reform, Latvia levied a 10 percent dividend tax.
Norway levies its ordinary income tax on dividends, multiplied by an adjustment factor. In 2019, a 22 percent ordinary income tax and an adjustment factor of 1.44 applies to dividend income, resulting in an effective dividend tax rate of 31.7 percent. In 2017 and 2018, the tax rate and adjustment factor were different, translating to tax rates of 29.8 percent and 30.6 percent, respectively.
Source: OECD, “Tax Policy Reforms 2019,” Sept. 5, 2019, https://www.oecd.org/tax/tax-policy-reforms-26173433.htm; OECD.Stat, “Table II.4. Overall statutory tax rates on dividend income,” 2019, https://stats.oecd.org/index.aspx?DataSetCode=TABLE_II4.
|Country||2017 Tax Rates||2018 Tax Rates||2019 Tax Rates|
|France||44.0 percent||34.0 percent||34.0 percent|
|Iceland||20.0 percent||22.0 percent||22.0 percent|
|Latvia||10.0 percent||0.0 percent||0.0 percent|
|Norway||29.8 percent||30.6 percent||31.7 percent|
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