First, we need to know that dividend trading works mainly for US stocks. The European market is not generous in dividends (it does not pay dividends or pays very little).
What are dividends?
Before we know the regulations on dividend payment on eToro, we need to understand what a dividend concept is?
A dividend is an amount that a company periodically pays to shareholders, as well as dividends or reserves.
Dividends are distributed according to the capital contributed by each shareholder of the company, giving them a certain amount of money per share they own.
For example, if Apple announced a dividend of $0.80 per share, the shareholder with 50 shares would receive $40.
There are four important dates in the dividend process:
- Announcement date: The company’s management announces its intention to pay dividends. The Board of Directors also announces the value of the dividend, the ex-dividend date and the dividend payment date.
- Ex-dividend date: If traded on or after this day or after this date, the buyer will not be entitled to the dividend. Only holders of shares prior to the ex-dividend date will receive dividends.
- Date of registration: When the company checks the records to see who is eligible to receive the dividend. The record display date is one business day after the ex-dividend date.
- Dividend Date: When dividends are paid to the company’s shareholders.
Therefore, it is necessary to monitor the ex-dividend date to avoid the case of not receiving dividends.
Also, for stocks listed on any exchange, we look for the dividend program on that plan. Note that you need to search for the information correctly to make sure you receive dividends
Does eToro pay dividends?
Dividends can be added to or deducted from your account if the account is trading stocks, ETFs or indices that pay dividends.
- If you hold a BUY position, you will receive the dividend paid directly on your available balance. For leveraged trades, eToro PAYS dividends.
- If you hold a SELL position, the dividend payment will be deducted from the available balance.
- For leveraged trades, eToro CALCULATES dividends.
The dividend date is added (minus) on eToro.
It would be better if you held the position before the market opened on the ex-dividend date for the dividend payment.
- If you hold a CFD position, the dividend will be added (subtracted) to the available balance on the ex-dividend date.
- If you hold a position backed by real assets (currently US stocks, without leverage), you will receive a dividend payment on your available balance on the settlement date.
How much tax is withheld from my dividends?
Receiving dividends is a mandatory event in some cases and in some jurisdictions. The tax withheld by eToro depends on various factors and can vary from possibility to point.
Dividends paid on US stocks and ETFs.
In general, the withholding tax for cash dividends paid by a U.S. company is 30%. In cases where an adequate affiliate income (ECI) is produced, the tax rate will be 37%.
Dividends paid on non-US stocks and ETFs.
The percentage of withholding tax depends on the laws of the country of origin.
Defining the country of origin of a stock for tax purposes is complicated, as it varies from country to country. It can be the country of incorporation of the company issuing the dividend or actually managed and controlled. In cases where a company is considered a taxpayer of more than one country, the applicable tax treaties will determine which country is entitled to collect the tax. eToro will retrieve this information from a trusted database and align each dividend payment item with the appropriate withholding tax each day.