The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate.[1] According to International Labour Organization report, more than 200 million people globally or 6% of the world's workforce were without a job in 2012.

Gross domestic product (at purchasing power parity) per capita , i.e., the purchasing power parity (PPP) value of all final goods and services produced within a country in a given year, divided by the average (or mid-year) population for the same year.

Those values are taken directly from the corresponding MISC index.

The price/earnings ratio (often shortened to the P/E ratio or the PER) is the ratio of a company's stock price to the company's earnings per share. The ratio is used in valuing companies.

Those values are taken directly from the corresponding MISC index.

Dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share.[1] It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant. It is often expressed as a percentage.

Stock Dividends Tax

Taxes can eat from 0%, when properly managed up to ~60% of your profit when missmanaged. For an individual investor there are three applicable taxes which we will discuss in detail later on:

Witholding tax: in most jurisdictions the country in which the company is domiciled in, witholds a tax upon distribution of dividends of said company to it's shareholders. It's shareholders may be you as an individual investor or in a more complicated case: a managment company (In the case of ETF's and Index Funds. More on that later)

is domiciled in, witholds a tax upon of said company to it's shareholders. It's shareholders may be you as an individual investor or in a more complicated case: a managment company (In the case of ETF's and Index Funds. More on that later) Payroll tax: In edge cases dividends and capital gains may be taxed as normal income

Capital gains tax: this is the tax imposed upon the amount won when selling an equity with a profit

Investor Tax Residence

In order to understand who and how taxes work, we will look at who and how owns an ETF in a complicated scenario.

Meet Max: Max used to live in slovakia his whole life and be a tax resident there:

But he started working in Germany and spends 7 months of the year there. According to German Tax Residence Law Max is considered a Tax Resident of Germany now:

Germany defines the breakpoint at 6 months and because Max reaches it, he pays taxes (Income, Dividend and Capital gains) to the German Govornment:

Because he is resident in Slovakia for less then 183 calendar days, he is not layable to pay any taxes there, according to the Slovak tax law .

In theory he could fall in two Govornment jurisdictions, although for that to be possible both govornments should have a small enough breakpoint for Max to be defined as a tax resident in both

Brokers

Max doesn't like German and Slovak brokers. He uses a Belgian one:

Every time he recieves a dividend payment he has to pay the dividend tax rate of the country of his residence (25%) to the govornment of said country: . His brocker being in Belgium has no effect on his rate. It does have an effect on who is responsible for that collection. If he had used a German broker, the broker would automatically collect the tax and send it to the German authorities. Now he has to do that himself, by submiting country speficif formulars.

Corporate Tax Residence:

Meet Royal Dutch Shell , incorproated in the Netherlands (it's tax Residence is there):

Whetever a company decides to pay out dividends, it collects a percentage of the dividends as a dividend tax. in accordance to the tax rate of the company's tax residence country and the beneficiary tax residence in behalf of the govornment the company is a tax resident in.

Let's take an example. Let's say Shell decides to pay 1€ worth of dividends to Max. Because Max has registered as a German citizen when opening his Belgian account, his broker knows his tax residence and transmits that information to the dutch govornment. The Dutch govornment now witholds 15% tax. As an example, Shell pays 1€ in dividend to Max, through his broker which let's the dutch Govornment know Max is a resident of Germany: Because the Belgium brokerage has no authority to withold any taxes of non-Belgian tax residents(neither should it), it just passes the sum to Max:

Double taxation treaties

Now Max has to pay the govornment his 25% share. But Germany has a signed treaty with the netherlands in order to avoid double taxation. Because of that the German govornment recognizes the 15% that Max paid, and demands only the 10% left to add to it's own tax rate of 25%. In fact Germany always recognizes 15%, and in theory has a treaty with many nations, where an agreement is riched that the foreign nation should tax dividends up to 15%, so that the rest of the tax is owed to the German govornment (25 - 15)%. So we end up with the following chain:

Examples from across Europe

Max invests in Nestle (incorporated in Switzerland): And while in theory it should work that way, the Swiss govornment automatically witholds its normal 35%. You can submit a form in a lenghty process to get the 0.20€ (35 - 15)% the Swiss owe you in a lenghty process.

Max invests in a Bulgarian company. Bulgaria has 0% witholding tax for EU citizens:

A Bulgarian investor invests in Germany. The Bulgarian dividend tax rate is 5% (different from the witholding tax rate for non-residents). Bulgaria has a tax treaty with Germany(and most countries) allowing German authorities to withold 15% tax. Bulgaria also recognizes all foreign witholded tax, which lowers the tax due to the govornment to 0%.

A Luxembourgian (15% dividend) invests in Bulgaria (0% witholding for EU)

Bulgarian (5% dividend tax, substractable) invests in Luxembourg (15% witholding)

Investor from Switzerland (35% dividend tax) invests in Slovenia (15% witholding tax)

ETF Dividends Tax

By buying an ETF an investor buys a share of a legal entity (different then a share of a company in most cases) which itself owns shares in companies and recieves dividends by them. The ETF then distributes(or not. some on that later) the dividends to the investors.

By ETF's a new very important variable enters the game: The ETF domicile. This domicile has 2 effects on our examples. Fortunately almost all of the European ETFs are domiciled in either France, Luxembourg or Ireland which makes the picture somewhat easier.

ETF Domicile: company witholding tax

For the purpouses of the witholding tax, the Govornment of the company the ETF holds witholds tax as if it was witholding tax from a resident of the country the ETF is domiciled in.

Meet SPDR, domiciled in Ireland: SPDR owns Nestle with a weight of 2,78%: and Royal Dutch Shell with 1,51%: . Examples of these companies distributing 1€ of dividends is discribed below:

By distribution of dividends, the Swiss govornment trheats the Irish ETF as an Irish citizen so the Irish-Swiss treaty for dividend witholding tax applies. (which put's the maximum witholding tax at 15% instead of the 35% without a treaty).

The same thing happens in the Netherlands, but the treaty there doesn't help the ETF case since, the non-treaty tax-rate is still 15%:

ETF Domicile: ETF witholding tax

Remember when we said that the ETF is a misterious "Legal Entity"? Well that misterious entity has a special status in Ireland and Luxembourg, making the respective countries withold 0% tax rate. The only other popular option for Europe: France makes no such distinctions and treats it like a normal company. A few examples:

Note that to the point of view of the French govornment, the fund is a normal company distributing dividends and therefore 25% is taxed on top of those dividends (0.85€) and not the original value.

ETF Domicile: investor dividend tax

The chain now continues as if the fund is a normal company as seen from the point of view of the govornment of the investors tax residence.

The caveat is that the govornment doesn't see the taxes paid from the companies to the fund, and swaps a full tax to the fund, as it would to a company:

Here Max pays the full 25% dividend tax to the german govornment on his 0.85 dividend income. He can't reimburse the dutch tax:

An example of the french govornment treating funds as if they are normal companies, but taxing only 15 % because the investor is a tax resident in switzerland Switzerland and France have a treaty. Switzerland then takes the rest (35 - 15) = 20% of the 0.85 euro left. (Because Switzerland has a 35% dividend tax rate)

Note that the situation isn't realy any better for the investor with Luxembourgish / Irish domiciled ETF's. The only different is who the tax goes to.

An unfortunate investor from Slovakia didn't notice that Luxembourg doesn't have a tax treaty with Australia (to reduce the tax to the widely used 15%), so Australia taxes the fund at the full amount of 30%. He decided to buy Lyxor Australia (S&P/ASX 200) Luckily for him Slovakia has no dividend tax.

An even unluckier australian decided to buy an australian ETF but used the Lyxor one domiciled in Luxembourg. Because the fund is treated from the outside as a normal luxembourgian company, and Australia has no treaty the Australian govornment, it taxes him the full 30% (on the 0.70 euro profit).

If he had used an australian broker, that would kindly be done for him automatically, so he wouldn't even notice where half of his profit went:

Distributing versus Capitalizing / Accumulating dividends

So far all of the examples shown were those with distributing dividends. So how are accumulating dividends different? Funds accumulating dividends just don't distribute the dividends to the investor but reinvest it in the company:

Meanwhile the investor doesn't get any dividends. He just sees his fund growing in value (by all of the dividends):

In theory he avoids the 25% German tax. In practice many govornments still make him pay the tax on the redistributed dividends, out of his pocket: So the investor is left with + = worth of profit.

But there is a caveat. Let's assume the ETF has no natural growth for this example. All the growth comes from reinvesting of dividends. The ETF grew by . At some point max will want to sell the ETF (since the ETF is not distributing the dividends, that's his only way of making a profit). A capital gains tax of 25% will be witheld from Max because he made a profit. So when he sells Max is left with: But remember he paid 0.21 already in dividend tax from his pocket: + =

When capitalizing dividends makes sense

Capitalizing the dividends would make sense if:

The tax payer country has no dividend tax on capitalized dividends (so Max wouldn't have to pay out of his pocket) The capital gains tax is smaller then the dividend tax (of the taxpayer country) The tax payer is in a no dividend tax on capitalized dividends country and plans to move to a country with lower capital gains tax.

An example: Max, a Bulgarian investor has an accumulating fund. In Bulgaria, you pay tax only on dividends passed down to you, so he pays 0% dividend tax for the time being: Were max to sell his shares, he would have to pay the 5% capital gains tax on his accumulation: But if first Max decided to move to Slovakia, wait the time needed to be a tax residend there, and not be a tax resident in Bulgaria anymore (usually around ~6 months), he would have to pay capital gains taxses to the Slovak govornment, which is 0%: