Taxpayers receive the benefit of the capital gains rates on qualified dividends from U.S. corporations. This also applies to dividends from foreign corporations in foreign countries with which the United States has a treaty and exchange of information agreement in place. Recently, modifications were made to the list of countries covered impacting capital gains. Changes for the 2023 tax year are as follows:
| Country | Change | Effective Date |
|
Chile |
Treaty signed, so qualified dividends in effect. | Dividend paid on or after Dec. 19, 2023 |
|
Hungary |
Treaty terminated, so no qualified dividends. | Dividend paid on or after Jan. 8, 2023 |
|
Russia |
No longer meets exchange of information requirements. | Dividend paid on or after Jan. 1, 2023 |
Note, although the qualified dividend provision ended on Jan. 8, 2023, for Hungary, the withholding rate in the treaty was still effective until Jan. 1, 2024.
Passive Foreign Investment Company (PFIC)
Dividends from PFICs are not eligible for this special rate and have other U.S. tax issues. This might include dividends from foreign mutual funds or other foreign corporations that hold or generate mainly passive investment income assets. If the foreign corporation is considered a controlled foreign corporation (CFC), then it cannot be considered a PFIC.
Have Questions?
If you have questions about how this impacts your unique tax situation, please contact Moore Doeren Mayhew's advisors today.