Tax withholding on US stocks inside ISA/pension
Discussion
Even with a W8-BEN, the IRS still collect a 15% WHT (withholding tax) on tax dividends. Obviously this is confusing when many S&S providers advertise the benefits of these accounts as not being subject to tax, and require W8-BEN to trade.
According to the below link, the WHT is collected at source and then needs to be claimed back - and only a few do this on behalf of their clients automatically.
Just wondered if anyone is aware whether this also applies when investing into funds as part of ISA or pension? I suspect the following will apply:
According to the below link, the WHT is collected at source and then needs to be claimed back - and only a few do this on behalf of their clients automatically.
Just wondered if anyone is aware whether this also applies when investing into funds as part of ISA or pension? I suspect the following will apply:
The International Investor said:
The second is that when you hold foreign stocks through a domestic stock broker, they are usually held in a nominee account. This means that the account is in the name of the stock broker (or another intermediary) who is holding them on behalf of you, the beneficiary.
https://the-international-investor.com/investment-faq/reclaim-withholding-tax-foreign-dividends-isa-sippIn terms of WHT an ISA doesn't give you any more protection than a regular taxable account (i.e. fill out a W8-BEN and end up paying 15% WHT rather than 30%). In fact thanks to foreign tax relief, if you have other dividend tax to pay from non-US stuff, it can actually end up being advantageous not to have the US stuff inside an ISA.
Holding it in a SIPP (with a provider that's an IRS-registered intermediary) is best, as you can reclaim all of the WHT.
ETA: wrote all that with stocks in mind, then noticed your OP refers to both stocks and funds. With funds it comes down to where they're domiciled - so if you're investing in the US via a US-domiciled fund, the above applies. But if (as is more likely) you're doing so through an Irish/Luxembourg/UK-domiciled fund, you can't reclaim anything as the WHT has already been paid by the fund.
Holding it in a SIPP (with a provider that's an IRS-registered intermediary) is best, as you can reclaim all of the WHT.
ETA: wrote all that with stocks in mind, then noticed your OP refers to both stocks and funds. With funds it comes down to where they're domiciled - so if you're investing in the US via a US-domiciled fund, the above applies. But if (as is more likely) you're doing so through an Irish/Luxembourg/UK-domiciled fund, you can't reclaim anything as the WHT has already been paid by the fund.
Edited by NowWatchThisDrive on Friday 27th December 09:02
NowWatchThisDrive said:
In terms of WHT an ISA doesn't give you any more protection than a regular taxable account (i.e. fill out a W8-BEN and end up paying 15% WHT rather than 30%). In fact thanks to foreign tax relief, if you have other dividend tax to pay from non-US stuff, it can actually end up being advantageous not to have the US stuff inside an ISA.
Holding it in a SIPP (with a provider that's an IRS-registered intermediary) is best, as you can reclaim all of the WHT.
ETA: wrote all that with stocks in mind, then noticed your OP refers to both stocks and funds. With funds it comes down to where they're domiciled - so if you're investing in the US via a US-domiciled fund, the above applies. But if (as is more likely) you're doing so through an Irish/Luxembourg/UK-domiciled fund, you can't reclaim anything as the WHT has already been paid by the fund.
Thank you - very clear & also for the edited info. I notice pensions refers only to SIPP in the link I shared but would the taxes be treated the same as workplace pension?Holding it in a SIPP (with a provider that's an IRS-registered intermediary) is best, as you can reclaim all of the WHT.
ETA: wrote all that with stocks in mind, then noticed your OP refers to both stocks and funds. With funds it comes down to where they're domiciled - so if you're investing in the US via a US-domiciled fund, the above applies. But if (as is more likely) you're doing so through an Irish/Luxembourg/UK-domiciled fund, you can't reclaim anything as the WHT has already been paid by the fund.
Edited by NowWatchThisDrive on Friday 27th December 09:02
I'd have thought the funds available in your workplace pension will almost certainly be Irish/Lux/UK-domiciled (you can verify by referring to the pension provider's documentation for the particular funds, and checking the first two letters in their ISIN codes).
That being the case, the final sentence of my previous reply would apply - i.e. the fund will have paid WHT on any dividends distributed by its US holdings, but whatever dividends you receive are distributed by the fund itself so you can't reclaim anything.
That being the case, the final sentence of my previous reply would apply - i.e. the fund will have paid WHT on any dividends distributed by its US holdings, but whatever dividends you receive are distributed by the fund itself so you can't reclaim anything.
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