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 — 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 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 | |
|---|---|---|
| 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 — 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- It is a saved setting, so editing it makes existing runs out of date until they run again.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 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?.
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Fincanva provides no financial advice. Backtests show what would have happened — not what will.
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