Dividend tax is the rate applied to dividend income in a backtest. A dividend a holding pays is credited to the strategy as received — after any withholding tax taken at source — and the dividend tax on it is charged afterwards, together with the strategy's other taxes. It is one of the two taxable events Fincanva models — the other is a realized gain, covered by 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?
All of it, at first — less any withholding at source — and then the dividend tax is charged on that amount. Over the run the strategy keeps the dividend minus both: at a dividend-tax rate of 26% on a dividend with no withholding, 74% of it stays in the strategy. The taxed portion leaves the simulation as tax and shows up in the "Taxes" band of the P&L breakdown alongside tax on realized gains.
Three rules decide how the charge works:
- Withholding comes first. Dividend tax is applied to the dividend as it reached the account, after any withholding at source — never to the gross amount.
- The charge follows the tax regime. Dividend tax is charged with the capital-gains tax: once a year, on the dividends of the whole year, under United States, Other and the Italian Declarative regime; as dividends arrive under the Italian Administered regime. Until then the full dividend is in the account as cash, but the value the run reports already sets aside the pending dividend tax from the day the dividend arrives.
- Losses do not reduce it. Dividend tax is charged on dividend income on its own; realized capital losses are set only against capital gains.
A dividend-heavy strategy meets this charge on every dividend 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 | |
|---|---|---|
| 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 |
How does Fincanva handle it?
- The rate is a percentage of dividend income, seeded from your 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 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.
What does it look like in practice?
A holding pays a 100 gross dividend with no withholding at source, and the dividend-tax rate is the Italian default of 26%. The strategy is credited 100; the tax on it, 100 × 26% = 26, is charged later — at the start of the next year under the Declarative regime, on the same day under Administered — so over the run 74 stays in the strategy and 26 leaves as tax. Under a United States residency, where the field is seeded at 20%, the same dividend would cost 20 of tax, charged once the year is over.
Now suppose the dividend was paid from a market that withholds tax at source — take an illustrative 15%, a round number and not the rate Fincanva applies to any particular holding. The strategy is credited 85, and the 26% dividend tax is charged on that 85: 22.10. Flip the Taxes assumption off and the full 100 is credited with neither deduction — 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?.