Dividend tax withholding is the act of deducting dividend withholding tax from a dividend at the point of payment, so that the shareholder receives a net amount and the tax goes directly to the authorities. The main entry explains the tax, its rates and treaty relief; this entry describes the term as used in shareholder services and securities operations.
In that setting the phrase refers to the process, not the tax. The company, its paying agent or a custodian acting as withholding agent determines the rate for each holder from residence and documentation on file, calculates the deduction on the gross dividend, pays the net amount and remits the tax. Each holder receives a tax voucher or similar statement showing gross, tax and net.
Where too much has been withheld, for example because treaty documents were not in place on the payment date, the difference is recovered through tax reclaim processing. Getting the rate right first time, known as relief at source, depends on valid evidence of beneficial ownership for tax purposes.