It's The Pennies What You Gotta Pay Attention To

Aug 2026

I recently filed my German taxes and realized that I had lost 15% of my US dividends due to double taxation. Not ideal.

I live in Germany and I hold some dividend-generating stocks in the US and in the Netherlands. When I first bought those stocks, I knew they would generate some dividends, but I bought them because I believe those companies will do well in the future, not because I wanted passive income today. So I didn’t really bother to calculate exactly how much in dividends they would pay (I knew it wouldn’t be much) or to check if I had to do anything specific tax-wise other than a regular filing.

I had vaguely heard about the W-8BEN form, which I could fill out to lower the tax withheld from 30% to 15%, and thus avoid double taxation. But, since my dividends were so small, I figured that 15% of them would barely be enough to buy a chair at IKEA —and I’m very lazy— so I never bothered to fill it out. I felt that it wasn’t worth the overhead.

However, a hypothetical lost chair hurts less than an actual lost chair. Seeing those €19.23 lost to the IRS reminded me of my grandfather, who used to say “The big amounts of money protect themselves, it’s the pennies what you gotta pay attention to”, and that was enough for me to finally dedicate time to understand what this form is about and how to file it.

The main idea is that each country taxes the dividend income of its residents at whatever rate it finds suitable (typically between 10 and 40%). Additionally, each country has the right to tax income that arose there, regardless of where the owner of the asset resides. If you own dividend-generating stocks in country A and reside in country B, then country A will tax your dividend (i.e. withhold a % of it) and country B will tax what’s left again. But… being taxed twice isn’t nice, and countries want to encourage foreign investment. So bilateral agreements arose to avoid the double squeeze.

The W-8BEN is how you claim the benefit of one such agreement. It is you telling the US: “I live in a country you have a deal with, so please apply the reduced rate agreed on so I’m not taxed more than I should be”. [1]

The ability to ask a foreign government to drop your tax (e.g. via the W-8BEN form) is convenient. However, it is not always needed because your own government can also acknowledge that you already paid taxes elsewhere and credit that paid amount against your domestic tax bill. So, instead of saying “US, please tax me less” you can say “Germany, I already paid some tax on this income, so I owe you less”.

Interestingly, when a country credits the foreign tax withheld against your tax bill, it is essentially forfeiting that revenue. Germany could say “I don’t care how much you paid elsewhere, I’ll tax you the same”. But the point of a bilateral agreement is that by following it, Germany knows that US residents investing in German companies will have the same benefit (i.e. the US will credit the tax withheld by Germany against their tax bill), thus encouraging Americans to buy German stocks.

There is a detail though. How much foreign tax each country is willing to credit is capped. This means that you can get taxed by a foreign government more than what your government is willing to credit. If you are taxed more than the “creditable cap”, then that uncredited amount is lost money. That gap between what the foreign government taxed you and what your country will credit is the double tax we want to avoid. Those are the pennies we want to pay attention to. And this is the precise scenario where the W-8BEN form comes in handy. It allows you to lower your foreign tax rate and bring it within the threshold of what your country will credit fully. Double tax avoided, voila!

Let’s go over actual numbers and my specific example to make this concrete. Germany sets dividend tax at 25% and credits the dividend tax you paid elsewhere —but only up to 15% of the dividend. The Netherlands and the US set the dividend tax for non-residents at 15% and 30% respectively. Note how what the US taxes non-residents is higher than what Germany is willing to credit. US taxes 30%; Germany credits only up to 15%. There is a 15% difference. That difference —that uncredited 15%— went to the IRS, but it could have gone to your nice new chair. In other words, you were taxed 15% more than you could have been. [2]

My foreign dividends for 2025:

The Netherlands withheld 15%. The US 30%.

Germany credits foreign withholding tax only up to 15% of the dividend. Which means it credited…

As you see, Germany credited the full €4.92 withheld on my Dutch dividends, but it credited only €19.23 of the €38.46 withheld on the US ones. Meaning I lost the other half: €19.23. My grandfather would not be particularly proud. [3]

To keep future pennies from being lost —and make grandpa proud!— you can fill out the W-8BEN form through your broker and lower your US withholding tax rate. If you live in Germany, filling it out will lower the US dividend tax withheld from 30% to 15%. In my case meaning an extra €19.23 in my pocket. It might not seem like much, but over the long run this compounds.

So, go file your W-8BEN form and start thinking about what piece of nice furniture to buy with that extra money you’ll be getting. [4]

[1] Technically it's your broker talking to the US. I added a direct link to the form provided by the IRS for reference, but you normally file this through your broker.

[2] I didn't know how often these rates change and wanted to provide snapshots of the law as sources here in case they change by the time you read this post. But it turns out that international dividend tax rates are incredibly stable: they have not changed in over a decade. These can change anyway, so here are the Dutch, US and German sources.

[3] I said I "lost" the other €19.23 but you can actually reclaim over-withheld tax by filling out a 1040-NR form.

[4] I'm not a financial advisor —this is just what I worked out for my own case. Treaties, rates and forms differ by country, so check yours.