---
title: "Dividend tax"
description: "Dividend tax is the rate applied to dividend income in a backtest, so a dividend a holding pays is credited to the strategy net of the tax on it."
canonical_url: "https://fincanva.com/docs/backtesting/dividend-tax"
last_updated: "2026-08-27"
md_url: "https://fincanva.com/docs/backtesting/dividend-tax.md"
---

# Dividend tax

Dividend tax is the rate applied to dividend income in a backtest, so a dividend a holding pays is credited to the strategy net of the tax on it rather than in full. It is one of the two taxable events Fincanva models — the other is a realized gain, covered by [capital-gains tax](/docs/backtesting/capital-gains-tax) — and it is a single rate, with no holding-period distinction: a dividend is taxed the same whether the position is a week old or five years old. In the app it is the "Dividend tax" field, described as "Rate applied to dividend income."

**Also seen as:** tax on dividends, dividend income tax.

## How much of a dividend reaches the strategy?

The strategy is credited the gross dividend minus the tax on it: at a rate of 26%, a dividend arrives with 74% of its value intact. The taxed portion is not reinvested and does not compound — it leaves the simulation as tax, and shows up in the "Taxes" band of the [P&L breakdown](/docs/analysis/p-l-breakdown) alongside tax on realized gains.

Because dividends are taxed as they are paid, a dividend-heavy strategy meets this deduction repeatedly over a run, while a strategy holding non-distributing instruments may never meet it at all.

## How is dividend tax different from withholding tax?

They are two different deductions on the same kind of income, and they are set up differently in Fincanva:

| | Dividend tax | [Withholding tax](/docs/backtesting/withholding-tax) |
|---|---|---|
| Who sets the rate | You, in the tax settings (unless it is locked for your residency) | Nobody — Fincanva applies it automatically |
| Where it is taken | In the simulation's tax accounting | At source, before the cash reaches the account |
| Visible as | The "Taxes" band in results | The "Withholding tax rate" beside each dividend event |

## Defaults in Fincanva

- The rate is a percentage of dividend income, seeded from your [tax residency](/docs/backtesting/tax-residency) — which residency seeds which value, and where the field is read-only rather than yours to set, is on that page.
- It applies only when the [Taxes assumption](/docs/backtesting/taxes-toggle) is on; with Taxes off, dividends are credited gross.
- It is a saved setting, so editing it flips existing runs to **Needs re-run** until they run again.

## Worked example

A holding pays a **100 gross dividend** and the dividend-tax rate is the Italian default of 26%. The tax on the event is 100 × 26% = 26, so 74 is credited to the strategy and 26 leaves as tax. Under a United States residency, where the field is seeded at 20%, the same 100 dividend would be credited as 80.

Only the net amount goes on to work inside the strategy: if [reinvest profits](/docs/backtesting/reinvest-profits) is on it is the 74, not the 100, that gets put back to work. Flip the Taxes assumption off and the full 100 is credited instead — the same run, viewed gross of tax.

*The figures on this page describe what Fincanva models, not what you should do with your money — see [Is this financial advice?](/docs/investing-theory/is-this-financial-advice#is-this-financial-advice).*