W-8 changes 15.05.06 - important

Discussion in 'Retail Brokers' started by local_crusher, May 4, 2006.

  1. Users received E-Mails from IB regarding changes in tax withholding / W-8 Forms effective 15.05.06.

    I (and possibly others) would be very grateful, if someone, maybe the IB reps, could clarify what (legal) changes will apply that date.

    Unfortunately, I could not gather any information from other sources, so I start this thread.

    Thanks. local
     
  2. Why can't you just call IB and ask them this question?
     
  3. winter, we do not talk about a stuck order here. I expect neither IB's nor any other CS to address legal/tax issues.

    But maybe we can get some information from IB mgmt or compliance, so it is done here and everybody else can read along.

    I noticed somebody else started already a topic at IB's own discussion board, but it seems alot more ppl/including IB will look around here.
     
  4. zdreg

    zdreg

    what did the e-mail say?
     
  5. "... you still have not completed a revised W-8 form for the US IRS. Not completing this form by May 15th will subject you to withholdings on dividends at 30% instead of the lower treaty rate of your country. In addition, if we do not have an old W-8 on file that was completed within the last three years, you will also be subject to withholdings on interest paid at 30% and on Net Trade Proceeds at 28%. "

    As I said, I tried Google heavily but was unable to find out, what changes actually were made or how "tax treaties" are now applied differently.
     
  6. def

    def Interactive Brokers

    i don't recall the specifics but I understand we were required to update the W8's. No big deal, just update the form and it's business as usual.
     
  7. IBj

    IBj Interactive Brokers

    Winter is correct. We cannot get into tax issues because, frankly, we aren't fluent in this complex topic. Our staff focus on the business, not government regulatory issues we cannot change.

    I will down what I know (which comes only from having lived overseas so you should not take it as anything more than indication). You should contact your accountant or banker for exact details regarding the withholding rules.

    The US govt, in an effort to ensure proper reporting and collection from overseas accounts, put in a rule that says: "If you don't have a valid reporting form for your reporting type (US persons=W9, non-US persons=W8) with the financial institution (bank, broker, etc), then the institution must withhold 30% of the proceeds from securities transactions on USD denominated instruments."
    This means stock sales, bond sales, etc. All you have to do is fill in the proper form and you won't be withheld.

    Note that this is essentially a bully tactic. The US, as the world's number 1 economy, can't really force some small local estonian bank to comply, but it can enforce their rule with multinationals like HSBC, Deutsche, UBS, etc because they will be enjoined from US access if they don't toe the line. It was implemented for non-US institutions a few years ago. It looks like they are now applying it to US institutions as well.

    Case:
    buy 100 IBM @ 90 at 12:00 in USD
    sell 100 IBM @ 90 at 12:00 in USD
    The sell trade will be withheld on $3000 (30%*90*100shares) even though there is no profit, and no tax liability. But since nobody can live with 30% on proceeds (as opposed to profits) everyone will file their W8/W9.

    The solution to avoid this mess is simple. Fill out the new W8 correctly and well before May 15. we may try to warn people again on May 13 or something but you should just get the tax report done if you don't want to have to deal with the issue.

    CAVEAT: THE ABOVE IS NOT EXPERT ADVICE. IT COULD BE WRONG. THE ONLY THING THAT I CAN ASSERT WITH CONFIDENCE IS WE BELIEVE THERE IS SUCH A RULE (EVEN IF MY DETAILS MAY BE OFF) AND WE ARE REQUIRED TO ENFORCE IT AS OF 15 MAY 2006.
     
  8. This is exactly the kind of runaround that I have been getting from IB...
    For 2 months now...
    As I try to get information from IB Canada about the W-8 form they are forcing on me.

    My auditor and tax specialist wants me to fill out a W-8BEN form as the last 10 years...
    IB is giving me only option to fill out W-8IMY form.

    Any tax matter is a very, very serious matter for a man running a business...
    And IB has just stonewalled me on this...
    Exactly like your post.

    Filling out the correct W-8 form is MY responsibility... not yours.

    rm+

    :cool: :cool: :cool:
     
  9. As a specific example...
    IB will not tell which version of the W-8 form is ** presently on file ** for my account.

    That would be a great place to start.

    rm+

    :cool: :cool: :cool:
     
  10. IBj

    IBj Interactive Brokers

    You are not correct. US government regulations have made it the responsibility of most financial institutions who do business in the US, or want to, to enforce their policy. IB does not set the policy.

    IB is not giving you the runaround. We aren't in the tax advice business, period. We can only tell you we are enforcing a regulatory law. We are not specialists in international tax law to explain how that law may or may not affect you. Everyone's tax situation will be different.

    See a tax specialist if you want advice. The only advice IB can give you is what is legally demanded of us when you don't fill out the appropriate form(s).
     
    #10     May 4, 2006