Withholding Tax

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DEFINITION of 'Withholding Tax'

1. Income tax withheld from employees' wages and paid directly to the government by the employer.

2. A tax levied on income (interest and dividends) from securities owned by a non-resident.

BREAKING DOWN 'Withholding Tax'

1. The amount withheld is a credit against the income taxes the employee must pay during the year.

2. Tax is deducted not only from dividends, but from other income paid to non-residents of a country.

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