When a client holds a position that pays a dividend, the dividend may be subject to withholding tax. The applicable withholding tax depends on several factors, including the country of the issuer, the client’s tax residence, the type of instrument, the applicable tax treaty and the tax documentation available on the account. For example, dividends paid by U.S. companies to non-U.S. persons are generally subject to U.S. withholding tax. A valid tax form may allow a reduced treaty rate where a tax treaty applies and the client is eligible. In some cases, withholding tax is applied at source by the issuer, paying agent, custodian or other withholding agent before the dividend is credited to the account. Where tax is withheld at source, it may not always be possible to apply a reduced treaty rate directly through the account. Clients who believe too much tax has been withheld, or who wish to claim a refund, should consult a qualified tax adviser or the relevant tax authority in the applicable jurisdiction.
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