sharetrader
Results 1 to 5 of 5
  1. #1
    Member
    Join Date
    Dec 2017
    Posts
    82

    Default Tax obligations on US shares purchased via US brokerage.

    I am about to open an account with Tradestation to access the US markets at far better rates than going thru ASB. Part of the process is filling out a US IRS W8-BEN form, and now i'm wondering how much tax the US govt is going to want to take from my profits if any. Anybody have a quick rundown of the tax situation?

    I'm not a trader, more a buy and hold investor, but will be purchasing a few put options and the like to hedge against general market downturns. No company or trust structure in use, just doing everything in my own name at this stage.

    Thanks in Advance.

  2. #2
    Permanent Newbie
    Join Date
    Mar 2010
    Posts
    750

    Default

    Quote Originally Posted by Vagabond47 View Post
    I am about to open an account with Tradestation to access the US markets at far better rates than going thru ASB. Part of the process is filling out a US IRS W8-BEN form, and now i'm wondering how much tax the US govt is going to want to take from my profits if any. Anybody have a quick rundown of the tax situation?

    I'm not a trader, more a buy and hold investor, but will be purchasing a few put options and the like to hedge against general market downturns. No company or trust structure in use, just doing everything in my own name at this stage.

    Thanks in Advance.
    Without going into our own FIF regime etc etc I came across these W8-Bens recently in relation to business income from a US company that wanted to deduct a 30% withholding tax. Reading the W8-BEN and the double tax agreement, business income should be 0% but I have yet to hear back if they agree with me or not. In your case dividend income per Article 10 should not exceed 15% so I guess 15% is what you put on the W8-BEN assuming you are a NZ resident.

    Not confident that this is right so best to check elsewhere and would appreciate it if you get back with what you find out.

  3. #3
    Member
    Join Date
    Dec 2017
    Posts
    82

    Default

    Quote Originally Posted by Aaron View Post
    Without going into our own FIF regime etc etc I came across these W8-Bens recently in relation to business income from a US company that wanted to deduct a 30% withholding tax. Reading the W8-BEN and the double tax agreement, business income should be 0% but I have yet to hear back if they agree with me or not. In your case dividend income per Article 10 should not exceed 15% so I guess 15% is what you put on the W8-BEN assuming you are a NZ resident.

    Not confident that this is right so best to check elsewhere and would appreciate it if you get back with what you find out.
    Still checking this out, but on another fora this is what somebody had to say.
    Our double tax agreement with America allows them to charge up to 15% withholding tax on dividends received by company domiciled in America. On your US IRS W8-BEN form you will put "Article 10 paragraph 2" in reference to the our double tax agreement with America which limits the withholding tax deducted form your dividends to 15%. This 15% withholding tax deducted can then by used to offset against your tax on taxable income at the end of the year when you go to do your tax return.If you're looking into trading options, you will need to look into the "financial arrangement rules" which govern the taxation of financial arrangements.
    Might be talking to my accountant mate tonight at the pub, so i'll see what he has to say about it.

  4. #4
    Legend
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    5,763

    Default

    Quote Originally Posted by Vagabond47 View Post
    I am about to open an account with Tradestation to access the US markets at far better rates than going thru ASB. Part of the process is filling out a US IRS W8-BEN form, and now i'm wondering how much tax the US govt is going to want to take from my profits if any. Anybody have a quick rundown of the tax situation?
    I have held some US listed shares in my own name for some time as a 'buy and hold' investor. IIRC they used to take 15% off the dividend payment each time. But I could credit that deduction against my tax liability in NZ. More recently the holding company for these shares changed. Now the tax deduction seems to have increased to 30%. I am not sure if this was because there was a change of provider, or whether it is part of the Trump tax reforms. I still intend to claim the increased tax deducted as 'tax paid' on my NZ return. All it will mean is that I will have no residual tax liability in NZ any more. Yes I have filled in my US IRS W8-BEN form. I think the withholding tax rate changes, depending on whether you have done this or not

    I'm not a trader, more a buy and hold investor, but will be purchasing a few put options and the like to hedge against general market downturns. No company or trust structure in use, just doing everything in my own name at this stage.

    Thanks in Advance.
    Be careful you don't die holding these. You will be done for US death duties which kick in at a much lower bar than if you were a US resident. Holding the shares in a company structure in the future should avoid this!

    SNOOPY
    Last edited by Snoopy; 10-07-2018 at 01:13 PM.
    Management top tip: Share the responsibility. Change your name by deed-poll to "Someone Else"

  5. #5
    Permanent Newbie
    Join Date
    Mar 2010
    Posts
    750

    Default

    Hey Snoopy

    Sounds like you are short changing the NZ taxpayer for the benefit of the US of A. Sounds like you need to send the new holding company an updated W8-BEN so they stop deducting tax at the non-declaration rate and return to 15%.
    I assume you are on at least the 30% tax rate because if you were on the 17.5% rate to $48,000 you wouldn't get the benefit in NZ for any foreign tax paid over 17.5%. Actually I take that back as I haven't considered the FIF regime calculations and rules.
    Last edited by Aaron; 10-07-2018 at 03:00 PM.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •