W-8, tax benefits at IBKR

[pastorphil]

I used the search enginge and have not found anyone talking about it. On the website they talk about filling out an W-8 and i dont understand what i need to do as a swiss resident, do i need to fill that form every 3 years out? What tax benefeits are there?

 

[virtualhope]

@pastorphil You only need to fill out the form if you plan to buy US ETFs (maybe also for US stocks?) to get back the last 15% withholding tax of the dividends from the IRS.

If you don't care or don't plan to buy US ETFs (e.g. because you buy IE ETFs) you can ignore it.

 

[pastorphil]

@virtualhope Im guessing if it want to buy $VT or $VTI ill have to do the form right?

 

[virtualhope]

@pastorphil Correct, if you want to get the taxes back. You can always donate them to the IRS

 

[prayer75]

@pastorphil Everyone files w8/9 with IB and you will be asked to update it every year. With this form you can claim de CH-US tax treaty rate of 15% instead of default 30%. There is no way around it.

 

[christhomas2]

@pastorphil Check your withholding tax for Dividends on U.S. Stocks or ETF, if 15% IB did that for you, if 30% open a ticket. You get a message if you have to fill out W-8 BEN, but I think since a few years they do it for you if you have Swiss tax residence.

 

[johnstalling]

@christhomas2 Where do you check?

 

[christhomas2]

@johnstalling Statement.

 

[kapp]

@christhomas2 Which one?

 

[christhomas2]

@kapp activity then dividends and withholding tax.

 

[johnsr]

@pastorphil Dividends (stocks & ETFs) are taxed at source by the broker (IBKR). 15% for US based dividends and other %% for Ireland/others. This withholding tax goes to US IRS, provided that IBKR knows you are a Swiss resident (via US W-8 BEN form).

In CH the withholding tax on dividends is 35%. In the Swiss tax declaration you can show that you have paid 15% at source, and in this case, with the correctly filled the tax decl, the tax office can recognize this and reduce their claim to 35-15 = 20%. Something like that. It is unclear how IRS "refunds" Helvetia 15%.

Please correct me in above.

Normally the dividends are rather small. I ask myself each year: do I need to spend hours(!) fighting back 15% in my tax declaration (it is a lot of monkey work and it takes hours to file all that in the tax decl)?

 

[smta276603]

@johnsr The ch tax office will not charge 35-15, because 35 is the withholding rate, not the tax rate. They will refund you 15 and tax the dividends together with the rest of your income.

 

[johnsr]

@smta276603 Thanks for clarification!

When the 15% refund takes place? In the same tax return calculation, i.e. same year as it was declared for?

E.g.: IBKR took 15% which is XX chf during 2023. In my tax declaration for 2023 I provide this info (for each investment position I report the dividend amount--this is all I did; I never bothered with DA-1, R-US forms). The dividends are added to my income (marginal tax rate on those can be higher or lower than 35%), then, CH tax office recognizes the already-paid XX chf, and reduces the income tax by this amount in their 2023 final decision. Correct?

 

[smta276603]

@johnsr The marginal rate is not going to be higher than 35%, for many people. It's around 27% with a half-a-million yearly income.

The CH offices only know what has been withheld under the Swiss law, so they would discount the 35% if it has been withheld.

The 15% is refunded only if you file the DA-1, and usually immediately after you file it (way before the tax declaration is processed).