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Public companies distribute part of their profits to their shareholders in the form of dividends. The amount of the dividend is determined at the annual general meeting. Usually the amount of the dividend depends on the economic situation, profitability and dividend policy of the company. A dividend is that part of the net profit that is also distributed to the shareholders. The amount of the dividend can be very different. That depends on each company. However, the right to a dividend cannot be invoked. Public companies do not necessarily have to pay a dividend. If, for example, business reasons speak against it, the dividend cannot be paid out. The same is true if the company has made a profit. Dividends are usually paid out after the general meeting. However, there are also companies that pay dividends more often. in Germany, dividends are typically paid only once a year, while in the United States, monthly or quarterly payments are the rule. Of course, dividends also influence the development of share prices. We're talking about what is known as the dividend discount. Many investors are less willing to buy a stock when the dividend has already been paid. You would now have to wait another year for another dividend to be paid. Since the price is based on supply and demand, the value of the stock often drops after a dividend is paid out. This phenomenon is known as the dividend discount.

If you earn investment income in the form of dividends, you are usually obliged to pay a withholding tax on the investment income. You can and should give your broker or bank a so-called exemption order. If you are a customer of several banks, you can divide your allowance among them. As a single, the amount of your exemption is 801 euros, if you are married, then it is 1602 euros per calendar year. If this exemption has been exhausted, the withholding tax is due for the investment income (beyond the exemption). The amount of the withholding tax is currently 25% plus the solidarity surcharge of 5.5%, so you pay a total of 26.375% (as of 2020). The final withholding tax is then paid directly from your bank or broker to the tax office.

A small sample calculation for a single with an allowance of 801 euros


You will receive a dividend of 1000 euros


1000 euros minus the tax exemption (801 euros) = 199 euros

25% capital gains tax of 199 euros = 49.75 euros

+ 5.5% solidarity surcharge of 49.75 euros = 2.74 euros

Accordingly, 52.49 euros are to be paid in taxes

Of the € 1,000 dividend, € 947.50 remains

Have you invested in foreign stocks, funds or ETFs and received a dividend? Then a so-called withholding tax is due, which is determined by each country itself. In the US it is currently 30%. Fortunately, the US and Germany have a double taxation treaty, so only 15% is due. This 15 percent will be retained by your bank and paid accordingly.

You shouldn't run after the money, but go towards it. (Aristotle Onassis)

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