W-8BEN AND LOWERED US DIVIDEND TAX FOR EU RESIDENTS (INQUIRY)

[lylytran09]

Lets see it step-by-step:
1. I use a US platform to invest in US ETFs
2. I present the W-8BEN prooving that my country has a tax treaty with the US on the 15% withholidng dividend tax (instead of 30%).
3. I indicate to my broker I want to use dividend re-invested plan (DRIP) to accumulate dividends.
4. I would only get the 15% US withholidng tax on those dividends before they get re-invested through DRIP right? Beacuse as I'm not recieving them here in my country, I don't need to pay tax because they are being re-invested in the US. So I pay the US tax. Right?

 

[shir]

@lylytran09 Note that if your country has a divy tax rate above 15%, you still gotta pay that difference as a DRIP is a taxable event. Otherwise correct.

 

[lylytran09]

@shir Spain has an starting 19% on dividend tax. That would mean that I have to credit that against the 15% to pay an extra 4% here in Spain? (In total 19%). What do you prefer, paying 4% more on dividend taxes, or half the expense ratio?

 

[shir]

@lylytran09 What expense ratio, exactly?
As to the credit against extra 4%, correct.

 

[lylytran09]

@shir I'm interested on Sp500 and Nasdaq ETFs. In the US you can find sp500 with 0.03% fee vs. 0.07$ here in EU. Same with Nasdaq, 15% vs 33%. I would need to pay the 4% extra on dividends. Im student at 18 and I don't declare taxes yet. I would pay only 15% until I declare them? I would have just to declare for lnly the dividends?

 

[theonly1theymake]

@lylytran09 Here's a blog post with some additional guidance for completing the W-8BEN for investment accounts: https://blog.taxid.pro/tax-form-w-8ben-for-investment-accounts-2f76d2489c5c

 

[lylytran09]

@theonly1theymake Thanks!!!

 

[didomach]

@lylytran09 I am from Romania. With my US broker I have a reduced withholding tax because of the treaty. That tax is retained at the source for dividends (i.e. US retains the 15% at every dividends distribution). In my country I say (I have broker provided data, annually) I already paid 15(or whatever)% dividend tax in US and according to local low I would only need to pay to the higher potential tax level a difference. Because taxation of dividends is lower in my country I don't pay any additional tax here.

 

[lylytran09]

@didomach So you just pay the 15% of the US? But if your country would have Lets say... 21% tax ln dividends. You would have to pay the extra 6% right?

 

[didomach]

@lylytran09 Yes.

 

[lylytran09]

@didomach And, would you pay capital gains tax to your country if you move (to reside) abroad? Let's say the US for example. That' would be nonsense because you haven't sold the securites.