NRA with 30% withholding on dividends wants a refund

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DERREN JOSEPH:

US charges 30% percent withholding on its dividends. Yes. Is there any situation where I can get some or all of this back? I already have a W8BEN form. Okay. So two separate questions there. So yes, the US does charge 30% FDAP withholdings. So that's fixed annual and periodic, I think. I don't remember what the D stands for, but there's 30% of that withholdings. Yes, it can be lowered. And here's the catch, if you are a resident in a country with a double tax agreement. So, that's why we say, you know, you need to come up with a strategy. I think gone are the days when it could just be random. You know, I feel like going here, I feel like doing this and that, because the implications are so vast right now, given the health situation and whatever else we're dealing with. So the answer is normally, no, you can't get that 30% back. Yes, you can get it back if you can claim on a tax treaty. You can file a US return and claim tax treaty benefit, and you may be able to get a refund. But just because let's say, for example, you have a UK passport, right? Or you have an Italian passport just calling around, Australian passport. I'm calling countries with a DTA, with a double tax agreement with the US right? Listed on the US website, the US IRS website. So let's say you are a citizen. That doesn't mean that you can claim. That doesn't necessarily mean that you can claim the treaty. Why? Because the treaty has a limitation of benefits clause. All treaties have a LOB, and a limitation of benefits clause to prevent treaty abuse. So if it is that you are not resident in that jurisdiction, in which you're going to claim the treaty benefit, you may not be able to claim that treaty benefit and get any portion of that 30% returned to you.

So the answer is yes, but you need to be resident in a treaty jurisdiction. As to the follow-up question that you asked about the W8 form. Okay. So the W series of forms - the W8BEN, W8BEN-E, the W9s, and a whole bunch of WECIs, they're all meant to... they're not going to any tax authority. Well, they're requirements from the financial institution that you're dealing with. So that's to indemnify them, should IRS come knocking on the DOJ? The US department of justice, comes knocking on their door and accusing them of encouraging tax evasion or facilitating tax invasion as what happened with Switzerland, right?

So, that's to indemnify them. That is not a tax document. That's a document to, as part of the record-keeping or the KYC, or the know your customer procedures of the financial institution you're dealing with. So that doesn't help your situation. What helps your situation? If you want to reduce that withholding is you need to be resident in a treaty jurisdiction. Hope that helps.

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