U.S. Tax Withholding on Payments to non citizens of the United States, we provide a full service to help you claim back any tax that may have been withheld incorrectly. Make contact with us for further advice.
When an organisation, such as a Share registrar, or in the terms of the US and Canadian stock market a Transfer Agent, pays income to an individual the law of that country states that the organisation must withheld a percentage of that income for tax. This is known as Withholding Tax, the organisation withheld tax. This is because it is then that individuals responsibility to claim back the tax. Often the individuals are unaware and the Transfer agent will not voluntarily release that money to you.
Most types of U.S. source income paid to a foreign person are subject to a withholding tax of 30%, although a reduced rate or exemption may apply if stipulated in the applicable tax treaty between the USA and the relevant country.
Here in the UK as long as the correct form, W8 BEN, is completed and registered on the account with the Transfer agent then only 15% would be withheld on any share dividends that they pay out.
More information with regards to tax Treaty can be found on the US/UK tax treaty information page.
If the W8 BEN is completed incorrectly or the incorrect W8BEN is filed, or a W8 BEN is not registered at all with the transfer agent over a long period of time the amount of tax incorrectly withheld can accumulate to a large sum. This money can eventually be claimed back from the IRS (Inland Revenue Service in the US) but the procedure can take several months or even years and can become a very expensive process to correspond back and forth with the IRS.
If you need assistance with claiming back the Federal Withholding tax, as part of our full medallion guarantee transfer and sale service we would be pleased to assist.