I am not so sure if this has been asked in the forum before or not, but I have a question regarding the withholding tax rate on dividends received from VT ETF. As far as I read in this blog post Chapter 4 — Part 2: Withholding taxes on dividends received, concrete examples investors holding US shares are normally subject to a US withholding tax rate of 30% on dividends from those shares. However, as Switzerland and the US have a double tax treaty, Swiss investors are eligible for a reduced withholding tax rate of 15%. Recently, after checking my Activity Statement on IBKR, I have observed that a 30% tax rate has been applied to the dividends I received from the VT ETF despite filling out the W8-BEN form before. I have just contacted IBKR support, but unfortunately, they couldn’t clarify my confusion. They just told me the default tax rate is 30%.
Could someone please assist me in understanding this matter better?
This is not correct. With a W8-BEN from a Swiss tax resident, IBKR should withhold only 15%. You can then get a Swiss tax credit of these 15% via DA-1 to eliminate double taxation (exact amount depends on your Swiss tax rate and further details).
@khorkhurt I don’t know why IBKR deducts 30% US WHT in your case. I assume you are a Swiss tax resident. Anything special to your situation, e.g., are you a US person?
I see around this 15% is taken as Withholding tax. Then what I am lost and didnt manage to know how, is how to get this 15% back from in my tax submission. Anyone that could help me for Basel Stadt?
Thank you so much for your response @jay. I am a Swiss tax resident, and I am not a US resident (I haven’t even been to the US in my life ). The only thing that I can think of is that I am a non-EU citizen and I don’t have a permanent residence permit in Switzerland. But I work in Switzerland, and pay taxes in Switzerland, so I am not sure how this can affect my tax rate on the dividends I receive.
I verified the information that you described in the message. I have attached a picture for your information, but it seems like I didn’t make a mistake. The IBKR support also couldn’t help me much on this topic. They started giving me some information about tax vouchers…
For whichever broker you use, you need to complete a W8 Ben form so the broker is allowed to deduct 15% tax on US sourced dividends instead of 30%
At IB you can complete W8 Ben electronically but it is not intuitive to find. Google “ibkr how to complete W8 Ben form”.
If you think you completed it already, double check since it easy to miss checking a box.
If the form looks ok to you ask their customer support what the issue is (their customer service is offshore and not always very knowledgeable, downside of IB, so a narrower question might help).
I have read that if you complete the W8 form before the broker completes year end filing the broker may be able to retrospectively adjust the withholding tax but I have no experience of this
Note in the Swiss tax return DA1 process you can claim credit in your swiss tax return for max 15%. The other 15% would have to be reclaimed from US tax authorities (forget about it and chalk it down to experience unless the amount is really significant)
@Barto Thank you very much for your response. I use IBKR. I filled out the W8-BEN form before. I have double-checked it multiple times in the last couple of days to see whether I indeed missed checking a box, but the form looks ok to me. I contacted IBKR customer service, but as you said they don’t seem very knowledgeable, and they keep diverting the topic to unrelated stuff. As you said, I don’t think that I can reclaim the 15% tax from US tax authorities. I also have no intention to do so, given the fact that I have just started investing, and it is not a significant amount, but I definitely don’t want IBKR to deduct 30% tax from the dividends that I receive because in the future this might be a significant amount. I will keep talking with customer service, and I hope that I will be able to find a solution.
My partner had a similar issue … iirc the error was an easy to miss check box at the bottom of the W8 Ben form something like “I certify I am a resident of xxx for the purposes of the tax treaty…blah, blah”
If it is filled correctly then be direct with them :"You have made a mistake, please credit my account "
Otherwise you could share a screenshot of the form here with personal details blanked out ?
Thank you very much for your help @Barto . I actually double-checked that part, and it clearly states that “I certify the beneficial owner is a resident of Switzerland …” but I still uploaded a screenshot of my W8-BEN form for your information, maybe I overlooked my mistakes (It is a long-form, so I am not sure if the quality of the screenshot will be good after upload).
Strictly speaking, the withholding is still 15% and the US will always keep these 15%. Switzerland will give you a tax credit to the extent it would otherwise be double taxation. If your tax rate in Switzerland is lower than 15%, you will not get a full credit.
The total net tax you’re paying for US dividends is MAX(15%, Swiss tax rate), assuming we ignore the more complicated details of the refund calculation.
There are no (L2) withholding taxes for dividends from (UCITS) ETFs with an Irish domicile.
Funds may internally be subject to withholding taxes, that’s called L1 withholding. This generally applies to all ETFs, including US and IE ETFs. However, the rate of L1 withholding taxes depends on the combination of ETF domicile and stock domicile.
US stocks held by US ETFs are not subject to any L1 withholding taxes while US stocks held by IE ETFs are subject to 15% L1 withholding.
Swiss investors don’t get any tax credit for L1 withholding taxes, unfortunately, which is why US-domiciled ETFs are a much better choice than IE-domiciled ETFs for ETFs that hold US stocks. For ETFs that hold non-US stock, IE-domiciled ETFs are a much more sensible choice. For ETFs that hold both US and non-US stocks, it’s a bit less clear.
It depends on the domicile of the stock, of course. I also assume that on average the difference is small for non-US stocks.
My comment was more about not wanting to let the US take 15% of my dividends for no reason if I have an ETF that exclusively holds non-US stocks. And I might not even always get the full 15% as tax credit in Switzerland, especially after retirement when my taxable income is much smaller.