What's the tax percentage if you invest via US brokers?

[iloveyouguys]

I was given two conflicting pieces of information from US brokers.

1. There is a 20% dividend and interest tax withheld for my country.
2. Withholding rate depends on my income tax level.

If the dividends paid out by the stocks I hold is $10K/yr, what would be the withholding rate on that? About 10% (marginal tax rate) or 20%? Any ideas?

(PS. This tax is automatically taken by the broker AFAIK)
If it's like 20%, I'm thinking of investing in stocks that don't pay dividends. When you sell after 1 year, you don't pay any tax on your gains to the US AFAIK.

Pinging @Martin Everson @rowena 🙂

 

[fshore]

Withholding tax for dividends are 30% for US stocks/etfs, it doesn't matter where the broker is.
If your country has a tax treaty with the US that reduced withholding taxes to 20%, then it would be 20% provided that you fill out w9-ben with tax treaty declaration.
All US efts are required to pay out dividends, so to find stocks that don't pay dividends you need to look at individual stocks.

 

[iloveyouguys]

fshore said:
Withholding tax for dividends are 30% for US stocks/etfs, it doesn't matter where the broker is.
If your country has a tax treaty with the US that reduced withholding taxes to 20%, then it would be 20% provided that you fill out w9-ben with tax treaty declaration.
All US efts are required to pay out dividends, so to find stocks that don't pay dividends you need to look at individual stocks.
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Wrong. Its not W9. Its W8.

Again, wrong. TRBCX pays no dividends.

I do not like that you are giving false information to people here.

 

[Martin Everson]

iloveyouguys said:
If the dividends paid out by the stocks I hold is $10K/yr, what would be the withholding rate on that? About 10% (marginal tax rate) or 20%? Any ideas?
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Whats your country?

iloveyouguys said:
If it's like 20%, I'm thinking of investing in stocks that don't pay dividends. When you sell after 1 year, you don't pay any tax on your gains to the US AFAIK.
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Your country may charge you capital gains tax depending on which country it is. I can't answer without knowing your specific country.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[KJK]

iloveyouguys said:
Again, wrong. TRBCX pays no dividends.
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Where exactly does that come from?

https://www.dividendinvestor.com/dividend-history-detail/trbcx/

Dec. 12, 2019	Dec. 13, 2019	Dec. 12, 2019	Dec. 16, 2019	0.340
Dec. 12, 2019	Dec. 13, 2019	Dec. 12, 2019	Dec. 16, 2019	0.110

Dec. 12, 2018	Dec. 13, 2018	Dec. 12, 2018	Dec. 14, 2018	0.090
Dec. 12, 2018	Dec. 13, 2018	Dec. 12, 2018	Dec. 14, 2018	2.250

US equities are really specific - not just ETFs but also REITs (which have to distribute earnings) as well as MLPs (which also distribute - only it is not called a "dividend" but a "cash distribution" and that one is taxed even worse for non-US guys).

Withholding tax is 30 % if you do not declare your domicile, as was correctly stated above.

If you want to buy something that just accumulates earnings, find a single company that does stock buybacks or the owner dislikes dividends (e.g. Berkshire).

 

[iloveyouguys]

Martin Everson said:
Whats your country?



Your country may charge you capital gains tax depending on which country it is. I can't answer without knowing your specific country.
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I don't like Google mate if you know what I'm talking about 🙂 I don't think I can PM here.

I think you pay the capital gains tax to the country you are resident of, for pretty much all countries. This is from my tax treaty:

The taxation of capital gains under the Agreement is essentially the same as under most recent U.S. tax treaties. In general, except for real property and business property, the country of the seller's residence is given the exclusive right to tax capital gains. A limited exception to this general rule relates to the alienation of corporate shares. Under the exemption, one Contracting State may, in accordance with its law, tax a resident of the other State on the gain from the alienation of shares issued by a corporation that is a resident of the first Contracting State if (i) the shares are not quoted on a stock exchange in the first Contracting State; (ii) the shares are alienated to a resident of that State; and (iii) the seller held the securities for one year or less. (Current U.S. law does not impose tax on a foreign person on the disposal of shares in a U.S. corporation.)

As you can guess, the main goal is to maximize growth. I'm looking into if I can use tax advantaged accounts like Roth IRA or not. A reputable broker who knows my situation told me I can create a Roth IRA with them but someone on the internet told me that's not legal. Roth IRA helps you avoid federal tax and I don't know if that corresponds to the ALL of the tax withholding. (I'm aware of estate tax 40% and age 59 limitation but don't know the specifics.)

Do you happen to know anything about Roth IRA or other tax advantaged accounts?

Btw I consulted with a few people and I think the tax withholding rate is a set rate, and it doesn't depend on income level.

 

[fshore]

iloveyouguys said:
Wrong. Its not W9. Its W8.

Again, wrong. TRBCX pays no dividends.

I do not like that you are giving false information to people here.
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Sorry the form is called w8ben not w9ben.
All US etf that receives dividends are required to pay them out. If the etf doesn't receive any dividends then there will not be any to pay out.

Great that you don't like that people write incorrect information on this forum. You should check all the other posts on the forum. Thanks!

 

[daxbr]

This guy is an expert. Too bad he stopped posting. Old posts here: International Tax Blog | Expatriation | Real Estate Transactions

 

[speedster]

Here's a link from IB showing the various withholding tax rates for US dividends.

https://ibkr.info/article/861

 

[JustAnotherNomad]

Wait a minute - so if I live in a country that doesn't tax capital gains (or taxes them at a lower rates than the US) and that has a DTA with the US, I will *still* have to pay the US taxes? I was hoping I would only pay the taxes in my home country.

 

[speedster]

JustAnotherNomad said:
Wait a minute - so if I live in a country that doesn't tax capital gains (or taxes them at a lower rates than the US) and that has a DTA with the US, I will *still* have to pay the US taxes? I was hoping I would only pay the taxes in my home country.
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No