Section 881 of the US tax code imposes a 30% tax on the gross amount of US source fixed or determinable, annual or periodical (FDAP) income derived by a foreign corporation that is not effectively connected with the US business. Sections 1441 and 1442 require any person making a payment of FDAP to a nonresident alien (or foreign corporation) to withhold tax equal to 30% (unless the withholding rate is reduced pursuant to a provision of the tax code, the tax treaty or if the income is effectively connected with a US trade or business).
However, depending on the tax laws of the issuer country, taxes can also be withheld at the source. Typically, when a foreign country has withheld dividend taxes for an investor, the IRS will offer a tax credit so the dividend is not double taxed. In the US, investors would have to fill out form 1116 to claim the foreign tax credit paid to the foreign country from which the dividends originated. This will offset the portion that was already withheld.
The taxation on ADR dividends are complex so it is important to examine the tax treaties and possible source withholding - the process can sometimes result in double taxation so there may be reclamation opportunities.
It is recommended to contact a tax professional in this matter.