With the exception of Estonia and Latvia, all European countries covered in today’s map levy a dividend tax. Top dividend tax rates vary significantly across European countries. While Slovakia levies a tax of only 7 percent on dividend income, Ireland taxes dividends at 51 percent.
Over the last two years, four European countries have made changes to their dividend tax rates. Iceland and Norway increased their rates, each by approximately two percentage-points. France and Latvia each cut their rates by ten percentage-points.
In 2018, France implemented a flat 30 percent tax on capital income. Adding the four percent exceptional contribution on income above €500,000 ($590,000), the current top dividend tax rate is 34 percent. Prior to the reform, dividends earned by individuals were included as taxable income at the shareholder level, with a top rate of 44 percent.
In 2018, Iceland increased its tax rate on dividends from 20 percent to 22 percent.
Latvia adopted a cash-flow tax model in 2018, replacing its business income tax. Under the new model, a 20 percent corporate income tax is levied when profits are distributed to shareholders. There is no additional dividend tax on individuals. Prior to the reform, Latvia levied a 10 percent dividend tax.
Norway levies its ordinary income tax on dividends, multiplied by an adjustment factor. In 2019, a 22 percent ordinary income tax and an adjustment factor of 1.44 applies to dividend income, resulting in an effective dividend tax rate of 31.7 percent. In 2017 and 2018, the tax rate and adjustment factor were different, translating to tax rates of 29.8 percent and 30.6 percent, respectively.
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