Dividend Tax Rates in Europe

April 23, 2020

Many countries’ individual income tax systems tax various sources of individual income—including investment income such as dividends and capital gains. Today’s map shows how dividend income is taxed across European OECD countries.

A dividend is a payment made to a corporation’s shareholders from corporate after-tax profits. In most countries, such dividend payments are subject to dividend tax. The dividend tax rates shown in the map below are expressed as the top personal dividend tax rate, taking account of all imputations, credits, or offsets.

2020 dividend tax rates in Europe, Ireland Denmark United Kingdom France Norway Belgium Sweden Finland Portugal Austria Slovenia Germany Italy Netherlands Spain Switzerland Iceland Luxembourg Turkey Poland Czech Republic Hungary Lithuania Slovak Republic Greece Estonia Latvia

Ireland has the highest dividend tax rate among European OECD countries, at 51 percent. Denmark and the United Kingdom follow, at 42 percent and 38.1 percent, respectively.

Estonia and Latvia are the only two European countries covered that currently do not levy a tax on dividend income. This is due to their cash-flow-based corporate tax system. Instead of levying a dividend tax, Estonia and Latvia impose a corporate income tax of 20 percent when a business distributes its profits to shareholders.

Of the countries that do levy a dividend tax, Greece has the lowest tax rate, at 5 percent, followed by Slovakia, at 7 percent.

European OECD countries levy an average dividend tax rate of 23.3 percent.

In many countries, corporate profits are subject to two layers of taxation: the corporate income tax at the entity level when the corporation earns income and the dividend tax or capital gains tax at the individual level when that income is passed to its shareholders as either dividends or capital gains. Some countries, however, have integrated their taxation of corporate and dividend/capital gains income to eliminate such double taxation.

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An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. Individual income taxes are the largest source of tax revenue in the U.S.

Double taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income.

A 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.

A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment.