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Withholding Tax

Withholding tax is an amount withheld by the party making a payment to another (payee) and paid to the taxation authorities, depending on the nature of the product or service being paid for. Local WHT is often used to counteract tax evasion and tax avoidance whereas overseas WHT is often used to collect tax from payers within the boundries rather than payees who may be outside the boundries.

WHT tax is often applied to

In India, tax is not withheld at source from dividends since tax is paid by company on the profits (excluding dividends) and hence dividend income is tax free in hands of payee.

UK has imposed a 20% withholding tax on distributions from Real Estate Investment

Sometimes WHT is applied to cross country payment, based on country-to-country relations. At other times, it is applied on Invoices from all Foreign Suppliers, to boost local business or to make them subjected to local VAT, which otherwise would be applicable for local suppliers. In few
countries, WHT is applied also on certain types of local vendors as well (eg. consultants).