Lets say a non-resident alien files his W8-Ben (with no tax treaty provisions). According to the IRS, capital gains are tax free in the US as well as "interest-related dividends or short-term capital gain dividends". I have tested the latter by owning an ETF that made a capital gain distribution and there was no 30% withholding. Has anyone tested the former? ETFs such as IEF, TLT, SHY probably qualify as 'interest-related dividends' so in theory these distributions are tax free. I could test it myself but I don't want to wait months for the answer
Apparently the exemption to interest related dividends and capital gains has expired "Interest-related dividends and short-term capital gain dividends received from mutual funds. At the time this publication went to print, the exemption from chapter 3 withholding on certain interest-related dividends and short-term capital gain dividends paid by a mutual fund or other RIC had expired. To find out if legislation extended this exemption from withholding, go to www.irs.gov/formspubs or www.irs.gov/pub515. See Dividends paid by a RIC , later." Does anyone know if this is expected to be extended by congress anytime soon?
I don't know if it's the same for an ETF, but for mutual funds: Permanent U.S. Withholding Tax Relief for Non-U.S. Investors in U.S. Mutual Funds http://www.klgates.com/permanent-us...s--a-new-distribution-opportunity-01-12-2016/ I had a 30% withholding tax for bonds ETFs: SHY and LQD.
Also for ETF I own MINT from Pimco and dont pay witholding TAX. In this table see % of payed dividend which are exempt from NRA Witholding Tax
Apparently "ETFs are eligible, as long as they are "regulated investment companies" as defined Subchapter M of the Internal Revenue Code." Anyone has a list of all ETFs that are RICs in the US?