What is U.S. withholding tax?

1. What is U.S. withholding tax?

U.S. withholding tax is an amount of income tax withheld in advance by brokers from certain U.S.-sourced income, such as dividends, interest, and other investment income paid to non-U.S. tax residents, in accordance with regulations of the U.S. Internal Revenue Service (IRS). It ensures tax collection on cross-borderincome.

2. What is the withholding tax rate for non-U.S. tax residents?

Standard rate: 30% (applies by default if no valid tax residency declaration or certification, such as Form W-8BEN is provided,)

Rates for other jurisdictions: Determined by the double taxation agreement between the investor’s country of residence and the U.S. Actual rates are subject to relevant treaties and the latest announcements from the broker.

3. What types of income are subject to withholding tax?

U.S. stock dividends (cash dividends): the most common item subject to withholding

Interest from certain U.S. bonds and dividends from some American Depositary Receipts (ADRs)

Exemption: Capital gains (profits from sales of U.S. stock ) generally exempt for non-U.S. tax residents