Can US withholding tax be re-claimed?

Sea_Shell

Hi...anyone here knowledgeable about US tax laws??

OH has some shares in US company (old work scheme) and we've just realised that for the last few years we've been getting withholding tax deducted at 30% off dividends, when he could have been submitting W8BEN forms every 3 years and getting a reduced rate of 15% - DOH!!!!:eek:

Anyway, he's now done the form for this tax year....so my question is now....

Any chance of re-claiming any tax from IRS for the last few years....or is it a case of 'hard cheese' and put it down to (lack of) experience.

Cheers

Cook_County

The UK will only give credit for the 15% treaty rate on the UK tax return. To reclaim the rest for the past 3 years you'll need to file 1040NR tax returns and obtain an ITIN - you may want to use an acceptance agent such as American Tax Returns Ltd to assist with the ITIN application.

buglawton

I sold some similar US shares and that's the point at which I discovered the withholding tax was going to stay in the U.S. Had to do paperwork as above (didn't need to use an agent but did need to make a phone call to a nice man in the US tax dept to clarify something) and then swore never to own US shares again. Ironically after I changed employer it looks like I'll get a new bunch of them foisted on me.

EdSwippet

Before resorting to American Tax Returns Ltd you should at least see if you can handle it yourself. If the amounts involved are small the fees to ATR will negate any benefit to you.

Instructions on how to get an ITIN are here:

http://www.irs.gov/Individuals/International-Taxpayers/Obtaining-an-ITIN-from-Abroad

Broadly, fill out this form and wait (and wait, and wait, and...). Ignore the part where the IRS says that foreign offices such as London are able to help -- the never-helpful IRS is in the process of closing all non-US offices.

Once you have an ITIN, the forms you want are 1040nr and probably 8833 for each year you're claiming. Past year IRS forms are here:

http://www.irs.gov/Forms-&-Pubs/Prior-Year-Forms

All very over-bureaucratic, of course. Anything involving the US and the IRS is invariably a huge pain in the proverbial.

Sea_Shell

Thanks for all your prompt replies. Still a bit confused...are you saying it is possible to reclaim ALL the tax paid, or just the 15% overpaid as the W8BEN wasn't completed?

so far tax deducted on dividend only...do you have to pay more tax when you sell?

thanks again

buglawton

In my case the divs were reinvested in new shares and that was a tiny amount anyway. The real bill came with the sale, possibly it was capital gains or something. That's when I got motivated to do the form filling.

EdSwippet

Sea_Shell wrote: »

Thanks for all your prompt replies. Still a bit confused...are you saying it is possible to reclaim ALL the tax paid, or just the 15% overpaid as the W8BEN wasn't completed?

Just the 15% 'over withheld'. The US/UK tax treaty rate on dividends is 15%, so you can't go lower than that. The 30% rate is standard US withholding where no treaty is being claimed, so you paid 15% more than you could have. You can only go back three years with the IRS, so anything before that may not be recoverable.

Sea_Shell wrote: »

so far tax deducted on dividend only...do you have to pay more tax when you sell?

For the US, there's only tax on dividends, and no US capital gains tax for 'non-resident aliens' (that's you, me, and the other 95% of the planet's population who are not US citizens). There may of course be UK capital gains to pay.

Sea_Shell

Thanks Ed. Will sort out.

JasonPr

EdSwippet wrote: »

Just the 15% 'over withheld'.

Different question to the one asked but let's assume all your income falls within the personal allowance. Assuming the US (or another country) levied the 15% withholding tax, is there any way to get it back? IIRC won't refund the 15% when you do your SA, so does the 15% stay with the US even though you're not taxable there?

(IIRC HMRC only refunds the european savings/withholding tax but not sure how that works either.)

EdSwippet

JasonPr wrote: »

... Assuming the US (or another country) levied the 15% withholding tax, is there any way to get it back?

The US allows a 'deduction for exemptions' that is broadly the same as a UK tax free allowance. But... only for 'effectively connected income' (line 40 of the 1040nr), which share dividends are not.

Also, no way to recover this remaining 15% if the shares are held in an ISA, since the US doesn't give a hoot about the ISA wrapper.

(There is a way to recover it for shares held in a SIPP, article 10 paragraph 3(b) of the US/UK tax treaty, but only if the pension provider makes the claim on your behalf, and many do not bother.)

confusedgranny

I have an incomprehensible withholding tax form. Says things like
Part III Claim of Tax Treaty Benefits ( for chapter 3 purposes only)
No idea what chapter 3 is or if I fill it in (I have but should I have).

Is there any idiots guide for people who inherited Cadburys share that then were taken over by 3 American companies. I'm not a share owner by choice arghhhh.