International Income

The table lists the US-listed shares and depositary receipts in our universe whose issuer is domiciled outside the United States, ordered by forward yield, highest first. Country is the jurisdiction whose withholding rule applies to the dividend, not necessarily where the company trades or earns; price comes from the daily quote pipeline; the yield and annual rate are forward figures built from the last regular dividend and the payment frequency. The remaining columns come from our country withholding reference rather than from the market: the headline rate that country applies to a departing dividend and, in the expert view, both the same forward yield with that headline rate subtracted as an illustration and the note that says what tends to happen in practice, which for several of these countries is not the headline rate. The caveat: ordering by yield puts the highest number on top, and on a foreign payer a high forward yield is often a single large annual dividend annualised, a falling share price, or both.

A depositary bank buys or takes delivery of ordinary shares in the company's home market and holds them with a local custodian. Against that block it issues receipts in the United States, each one representing a fixed number of the underlying shares — a ratio that can be one to one, one receipt to several shares, or several receipts to one share, chosen so the receipt trades at a price a US market is comfortable with.

Those receipts are what you buy. They clear and settle like any US security, which is why an ADR sits in an ordinary brokerage account beside domestic stocks. The company may have sponsored the programme and filed with the SEC, or a bank may have created an unsponsored programme without the company's involvement, in which case the disclosure you get is thinner and more than one competing programme can exist for the same company.

The table sets the two holdings side by side one dimension at a time: the middle column is the US-listed receipt, the right-hand column the ordinary share as it trades in its home market. Each row is a structural difference — what you actually own, where it settles, what fees attach, how the dividend reaches you — rather than a view on which is preferable. The caveat: the two lines can quote very different prices for economically similar exposure, because the ratio, the currency and the fee sit between them.

One row per country in our own withholding reference, which is editorial data maintained on this site rather than a feed from a data provider. The middle column is the headline rate a dividend leaving that country is withheld at — statutory or treaty, whichever the note names — and the right-hand column says what tends to happen in practice, because the headline rate and the rate a US holder ends up bearing are frequently different numbers. The caveat: these are indicative rates that change without notice, they are not confirmed for your account, and the rate operated for you depends on your treaty position and on what your broker files.

A company can hold its dividend perfectly steady in its home currency for a decade and still pay you less every year in dollars, because the translation is done fresh each time. A stronger dollar shrinks the dollar value of an unchanged foreign payment; a weaker dollar raises it. Neither move says anything about the business.

The same translation applies to the share price, so a foreign holding carries two exposures that can move together or against each other. The conversion itself is not free either: the rate used by a depositary or a broker includes a spread, and that spread applies to every payment, not once at purchase.

Hedged funds exist and remove some of the currency movement at the cost of a hedging expense that is itself driven by the interest-rate difference between the two currencies. That is a trade-off with real costs on both sides, not a way of getting the income without the currency.

Each row takes one convention a US income investor treats as normal — how often a dividend arrives, whether the amount is fixed, whether a streak means anything — and puts the usual US practice beside the practice common elsewhere. Nothing in it is a rate or a number that changes; it is a description of habits and, in a few cases, of company law. The caveat worth carrying into the table above: where a payer follows the right-hand column, any annualised yield built from its last payment is a weaker guide than the same arithmetic on a US quarterly payer.

A pooled investment vehicle domiciled outside the United States is generally a passive foreign investment company in the hands of a US holder. The default treatment of a PFIC is deliberately punitive: gains and certain distributions are spread back over your holding period and taxed at the highest rate for each year with an interest charge on the deferral, and the holding brings an annual Form 8621 with it.

Two elections can replace that default — a qualified electing fund election, or a mark-to-market election for shares that meet the marketability test. The QEF election needs an annual information statement that most foreign funds simply do not produce for US holders, which is what makes the default so hard to escape in practice.

Coming the other way, European rules require a key information document in a prescribed format before a fund can be sold to retail buyers there, and US funds do not produce one. The result is a wall in both directions, and the ordinary US answer to foreign income is a US-domiciled fund that holds foreign securities — which is not a PFIC, whatever it owns.

Owning shares in a foreign operating company is a different matter and is not normally a PFIC problem. The test looks at the company's own income and assets, so an ordinary foreign manufacturer or bank sits outside it, while some foreign holding companies and investment vehicles fall inside it.

These are the US-domiciled, US-listed funds in our catalog whose stated business is holding foreign dividend payers, ordered by distribution rate, highest first. Price is from the daily quote pipeline; the distribution rate and annual rate are forward figures — the last regular distribution multiplied by the payment frequency — and the income score is our own research screen rather than a rating. The caveat: a fund's distribution rate is already net of the foreign tax withheld inside the fund, so it is not comparable with the pre-withholding yields in the table further up this page.

A US citizen or domiciliary is subject to US estate tax on a gross estate that includes property wherever it is situated, so moving money abroad does not move it out of the US estate. What moving it abroad can do is add a second claimant, because many countries levy their own inheritance, succession or estate tax on assets situated inside their borders — real property in particular, and in some countries local shares and local bank accounts as well.

The US has a small number of estate and gift tax treaties, separate from the income tax treaties, that decide which country taxes what and provide relief against double taxation. Where no such treaty exists, a foreign death tax credit may be available, and where neither applies the same asset can be taxed twice.

Situs rules are technical and they do not always follow intuition. Local law can also override your will for property held there through forced-heirship rules, and probate for a foreign asset is generally handled under that country's own procedure. This is planning that needs an adviser qualified in both jurisdictions, not a checklist.