NEW YORK - U.S. shareholders of the new DaimlerChrysler AG will face a foreign exchange risk and a German tax bite on their dividends.
That is because the new company, which will be incorporated in Germany, will withhold German taxes on dividend payouts to foreign investors. Although U.S. shareholders can claim a partial refund of any German taxes withheld when they file their U.S. tax returns, they can expect to net only $90 for every $100 worth of dividends declared by the new company.
That is before any U.S. taxes that must be paid.
The computation of the net payout is outlined in a Securities and Exchange Commission filing by Daimler-Benz AG, whose shares are traded on the New York Stock Exchange in the form of American Depository Receipts.
David Fischer, controller for Glickenhaus & Co., an institutional investor that represents about 8 million shares of Chrysler Corp., said U.S. taxpayers can elect to take a credit or a deduction for foreign dividends.
DC shareholders also will face a foreign-exchange risk. That is because dividends will be declared in German marks - and soon in euros - but paid in dollars.