By Jeroen van der Wal, Founder and CEO, Taxology
As a general rule, all cross-border portfolio investment triggers “withholding
taxes” in the source country. The source country is where the funds are invested
and is the source the return on investment. The justification for applying
withholding taxes lies in the fact, without it, the foreign investor would benefit
from the infrastructure and productivity of the source country without contributing
to it.
The most common withholding taxes are those on dividends (from equity
investments) and interest (from debt investments). They are called withholding
taxes because although the foreign investor is the taxpayer, it is withheld from
the dividends or interest paid by the company in which the foreign investor has