US brokers: Taxation of dividends & interest for foreign corporations

Discussion in 'Retail Brokers' started by makloda, Oct 7, 2006.

  1. I understand _ALL_ foreign natural persons as well as foreign corporations are affected by US withholding taxes on dividends and interest. The question is: Can we get the taxes "back" somehow?

    Let's say I have an account with a US broker and use my Bahamas corporation which owns a bunch of US dividend stocks. These pay dividends every quarter, the broker keeps x% withholding tax and remits it to the US IRS.

    Is there any way to ever recover these (lost) funds? Is there any legal way around this type of taxation?

    I used the search here on the forum and couldn't find any answers to this issue. Thanks in advance.
  2. lescor


    Fill out a W8-BEN form and submit it to your broker. This says you are not a US citzen and are exempt from the dividend and interest income withholding tax. Available from the IRS or your broker.
  3. I almost gave up on this. Thanks for the information!
  4. Actually nor true for most brokers.

    IB Canada withholds 15% on ALL US dividend income for ALL accounts...
    (I have several very different accounts)...
    IF one fills out one of 3 different W8 forms...
    And withholds 30% if you DO NOT.

    You cannot ever, ever get the withheld funds back...
    But Revenue Canada will give you a dollar for dollar tax credit for money withheld by the US government...
    So ** if you pay taxes ** it's a complete wash.

    This is possible ONLY because Canada has a tax treaty with the US.

    If you country does not...
    You will get the full US withholding treatment in the 30% range.

    Why does the IRS do this?

    This is the only way to prevent US citizens...
    From opening foreign brokerge accounts as a ** tax evasion strategy **.
  5. HoundDogOne thanks for the post. And let me guess, it doesn't make a different if the account is held by a non-US natural person or a non US-corporation!?

    Sucks to lose out so much on the dividend income!