IRS taxing my US shares in ISA

simonfitba

Hello,

I have shares in a company listed on the US stock exchange as part of my ISA and I got a letter the other day explaining that my dividend was being taxed 30 per cent by the IRS.

Is this correct even though I am a British citizen?

Cook_County

The treaty rate is 15%. Have you filed a form W8-BEN?

simonfitba

Nope. I don't even know what a W8-BEN form is.

The letter I got from Halifax mentioned a Form 1042-S Foreign Persons US Source Income Subject to Withholding Tax 2007.

Cook_County

The Form can be found here and should be given to the Halifax.

www.irs.gov/pub/irs-pdf/fw8ben.pdf

You will need to file a 2007 US tax return (form 1040NR) to reclaim the amount over 15% as you are only liable at 15% not 30%. Halifax should have given you a W8-BEN at the beginning.

simonfitba

Yeah, thanks. I have been reading up on this form online. Since the W8BEN only lasts three years, would it be worth ditching my US shares and buying FTSE companies instead?

tradetime

simonfitba wrote: »

Yeah, thanks. I have been reading up on this form online. Since the W8BEN only lasts three years, would it be worth ditching my US shares and buying FTSE companies instead?

You simply fill out another form every 3 years, if that's inconveniant then yes ditch them for UK listed stocks and save the tax on the dividend as well.

simonfitba

Will the shares be taxed by the US if I sell them? Can I keep the money from the sale in the ISA wrapper and buy UK stocks?

I feel I have a lot of learning to do...