Stock-Picking : Dividend Taxation Optimisation

Hello all!

I see a lot of post about dividend taxation on ETFs and how to optimize it.
However it seems there are few stock pickers there. And maybe even less value stock-pickers. (:heart: Warren)

@Stock Pickers : How do you avoid or minimize the dividend taxation on your stocks (its hard to remove 80% of my small caps value stocks cause they have a dividend)
I was thinking to sell before the dividend and buy after. The transaction fee with IB should be less than keeping the stock and being taxed. Any experience with that?

I’m worried this makes explode the transaction volume per year and so there is a risk being considered as a professionnal investor. (the max trading volume for not being considered professionnal is 5 times the annual salary, right?)

A another disadvantage would be to follow regularly every stock in your portfolio making investment more active.

Any experience or advise about dividend taxation optimisation for stocks (out of ETFs)?

Thanks! (and soz for my average English :stuck_out_tongue:)

This is not tax optimization, this is tax avoidance. The taxman knows this trick well.


if you sell and buy the same asset within a few days, then you also run into the risk of being classified as a professional investor and having to pay capital gains tax. Not worth it.

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As a fellow stock picker I mostly pick stocks that pay no dividends :wink:

Actually the tax office will come for me anyways because I have 300+ transactions per year. So I might as well cash in dividends but I am not really interested in value investing.

If you care for dividends you have to be careful about the funny effect that on ex dividend days the stock usually does not drop by the exact amount of the dividend payout but a bit less on average, sometimes up to half the dividend value. So I wouldn’t sell them before ex dividend regardless.

No, 5x portfolio value at the start of the year

Selling before ex dividend to avoid paying income tax on the dividend is fully legal. Buying same stock shortly thereafter though yeah gets muddy. They might argue there’s income to tax after all. Not to mention it can get you in trouble with CGT taxes, you’re supposed to hold a stock for 6+ months and most divs are paid quarterly

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It’s called Divident Stripping and is classified as “Steuerumgehung”

I’m not sure your link is about the same issue, it seems to refer to companies trying to avoid taxation by transfering the stocks in another country during dividend detachment.
It doesn’t seems to concern individuals just doing sell and re-buy (but maybe I’m wrong, it was the French translation of the page).

If the stocks get annual dividend it could be ok (cause +6 month of owning) to sell it before and refill after the detachment. However I don’t want to cheat the tax system if it’s not allowed like @glina say.

not sure if this is related, but in EU, especially Germany, there was a huge scandal involving this trick:

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Yes I heard about that, it’s not the same thing. This was a volontary cheat, for perceive some kind of reimbursement from government they shouldn’t have.

In my case the plan is to sell the stock some weeks before the dividend detachment (usually you have to own the stock some days before the detachment for receive the dividend) and then rebuy the stock after the detachment. But I can understand its risky to play this game with tax department, maybe legal but a dangerous game like you said.

On long term it does, if not, there is an easy arbitrage opportunity there.

Hi, question regarding topic.

Are dividends received in new shares taxed the same as dividends in cash? I would assume so, but maybe someone can confirm?

Stock picker picks stock for the same purpose like etf lovers.
Profit maximising while risk optimising.
Where is the profit comes from?
From 3 places:
Rising value of the underlaying stock
Valuation multiplier
From all of these above only the Dividend is taxed in Switzerland.
You have to pay tax everywhere. To focus to much on things you do not influence is not my approach, however I understand you wish to optimise.
OK, so you want to optimise, not avoid tax.
The best way to go is optimise the dividend part of your total income. Only 1 part of the abowe 3.
Pick only stock what does not pay high dividend. Bad idea but also can work if it serves your risk tolerance and you do not mind slow rising portfolio.
Stocks pay dividend 3 different ways tipically. High entry yield-low dividend inrease; Low enty yield-high dividend increase; Modest entry yield-modest dividend inrease.
In a healthy portfolio the value share of those above are about the same. Two of those groups already do not pay high dividend(already optimised). If you want, you may overdose those two on the expense of the high yielding ones making your portfolio a little imbalanced according to your risk profile. You will receive less dividend but the same total return.

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I bought Canadian domiciled company via TD Ameritrade, it is also listed on NYSE where I bought it, now this company (Entbridge) is supposed to pay dividends in September, and on their official page I found out that they will deduct 35% from dividends for Canadian tax office, alternatively I must fill out papers confirming that I am not Canadian tax resident, in such scenario they will deduct only 15%, process is similar like we have with US domiciled ETFs (US-Switzerland treaty). When I contacted TD for forms with request to help me to apply forms to Canadian tax office on my behalf, they told me that there is no need for it, and I will be taxed automatically by favorable rate - meaning that I am already qualified 15%. Which I could not believe is the case,

Does any one know how exactly this works? May be had similar case? Would appreciate your help.

Why 35%? Doesn’t Canada have a withholding tax rate of 25% - reduced to 15% according to the applying double taxation treaty?

Why not? Surely they’re obliged to determine your tax residency and withhold tax accordingly?

Hi San Francisco,

Yes, you right it is 25% not 35% made a typo, I investigate issue further yesterday with TD, they confirmed again that nothing must be reported at this stage, and dividends will be taxed at rate of 15%.