Hi, currently I'm holding an ADR stock who pays dividends quarterly. Part of these dividends is called “Foreign tax withheld” is paid to the foreign government. My tax advisors says that we I pay the tax to U.S. government for my dividends, I can use “Foreign tax withheld” for some tax credits.
Let's say that your Qualified Dividend amount = X
foreign tax withheld =（X * 0.35）
currently received dividend = (X * 0.65)
U.S. tax without credits = 【X * （0.2+0.038）】
tax credit = (foreign qualified dividend/X )* foreign tax
My tax advisor asks to find out the amount of foreign qualified dividend. This confuses a lots. By definition of qualified dividends, I need to hold the stock 60 days before and after the ex-dividend day. (All my shares are qualified shares).
But what does it mean by “foreign qualified dividend” ? My tax advisor seems not able to explain it well to me. Anyone has any ideas?
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