---
title: "Dividend tax"
description: "Dividend tax is the rate applied to dividend income in a backtest. The dividend is credited as received; the tax is charged with the strategy's other taxes."
canonical_url: "https://fincanva.com/glossary/dividend-tax"
last_updated: "2026-09-24"
md_url: "https://fincanva.com/glossary/dividend-tax.md"
---

# Dividend tax

Dividend tax is the rate applied to dividend income in a [backtest](/glossary/backtest). A dividend a holding pays is credited to the [strategy](/glossary/strategy) as received — after any [withholding tax](/glossary/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](/glossary/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](/glossary/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](/glossary/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](/glossary/capital-gains-tax#what-happens-to-a-realized-loss) 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](/glossary/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](/glossary/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](/glossary/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.

## 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?](/docs/investing-theory/is-this-financial-advice#is-this-financial-advice).*

Fincanva is for education and illustration only. It is not personalised financial advice, and past or simulated results do not predict future ones. [Read the Terms Addendum](https://fincanva.com/terms/addendum#section-3)