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- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 13
I just learned something today.
Historically it didn't really matter what sort of thing I bought if it was listed in the US. Corporations, partnerships, ADR, non-US company, whatever. The domicile of the company generally determined the withholding tax rate on the dividends if any, but that wasn't a very big deal. Where I live there isn't any additional year-end paperwork for withholding tax, since I get nothing back anyway.
But I just thought I would share my new knowledge: since last year, if you aren't a "US Person" and you own a piece of a US listed partnership, there is a withholding tax when you sell. Not 10% of the dividend, not 10% of the profit, but 10% of the entire sale proceeds. And, as mentioned, if like me you live in a place that doesn't have a double taxation treaty with the US covering this specific situation, that withheld tax is a dead loss.
Nice little example summary at Interactive Brokers:
Buy 200 shares @ 50.
Transaction value = $10,000
Sell 200 shares @ 51.
Transaction value = $10,200
Profit = $200.
Withholding = $1020 USD
Assuming no tax reclaim requests, the loss in value to the investor would be $820
So...I have to screen all my picks to make sure they are not listed partnerships. I don't know how to do that other than manually from the VL database, and I don't know any way to check my backtests with that as a filter as VL tests are no longer possible in GTR1 which has a security type field. Dang! For example, 3 of 6 picks on one of my screens today were in that category. Some are not so obvious, for example Sunoco.
Jim
No. of Recommendations: 1
Nice catch, was digging into EPD LP and was thinking to buy some
No. of Recommendations: 0
Nice catch, was digging into EPD LP and was thinking to buy some
The Interactive Brokers application gave me the warning, thank goodness. If you live outside the US, you now have to go to the account management page and click a link to opt in to the ability to buy them. I haven't tried lately, so only today did I see the pop-up. I used to own quite a few, off and on.
I imagine that for most people it isn't THAT big a deal...unlike me, I presume most of the non-US people on this forum probably live in countries with tax treaties that let you get a tax credit for the tax withheld. But I don't know what other things in your tax return it can be used to offset, so I don't know if it would be a full refund, and then there is the hassle and bookkeeping.
Jim
No. of Recommendations: 0
But I just thought I would share my new knowledge: since last year, if you aren't a "US Person" and you own a piece of a US listed partnership, there is a withholding tax when you sell. Not 10% of the dividend, not 10% of the profit, but 10% of the entire sale proceeds. And, as mentioned, if like me you live in a place that doesn't have a double taxation treaty with the US covering this specific situation, that withheld tax is a dead loss.
Nice little example summary at Interactive Brokers:
Buy 200 shares @ 50.
Transaction value = $10,000
Sell 200 shares @ 51.
Transaction value = $10,200
Profit = $200.
Withholding = $1020 USD
Assuming no tax reclaim requests, the loss in value to the investor would be $820
I would assume that you still have the choice of filing a tax return in the U.S. and recovering the excess withholding. N'est ce pas? Maybe it's not worth the hassle to you.
Elan
No. of Recommendations: 4
I would assume that you still have the choice of filing a tax return in the U.S. and recovering the excess withholding. N'est ce pas? Maybe it's not worth the hassle to you.
Nope.
First, what a horrible hassle that would be. I'm neither a US citizen nor "US Person" for tax rules.
And second, there would be no benefit, as far as I could see. To get a credit on the tax paid, I would presumably have to declare the related income (or class of income) as taxable in the US, something I'm understandably not keen on doing.
Heck, if I were filing US tax returns most of my banks and brokers would never talk to me again.
Jim
No. of Recommendations: 0
For what it's worth, all we US-ians get is a credit for foreign tax paid under certain circumstances and only (of course) in taxable brokerage accounts - such as, an international mutual fund share sale generating a capital gain, dividends paid by an international mutual fund. I've never heard of getting fleeced for 10% of the total sale! Wow!
