Last time I wrote about Nestle, many readers reached out to me asking about the consequences of owning the Switzerland-based stock in an IRA. The straightforward answer: You have to pay taxes to the Swiss government which cannot be avoided by investing in a retirement. The rules of tax treaties only offer protection to those invested in taxable accounts—your taxable rate gets lowered from the foreign country’s sticker rate to your domestic rate.
To use as an example the company on my mind today, French oil giant Total SA, the tax implications work like this: The French government has a sticker tax of 25% on dividends to American investors. If you are an American investor contemplating a stock in Total SA (or any French company paying dividends), the cost-benefit analysis works out like this: Buy Total SA in a regular, taxable brokerage account and your rate gets reduced to 0%, … Read the rest of this article!