U.S. withholding tax refund denied because IB is UK-based?

Good morning everyone,

I’m writing about a topic that I understand little about, and unfortunately, even though it seems to have already been discussed on the forum, it still isn’t clear to me, so I hope someone can provide some information. I reside in the canton of Graubünden, have a C permit, and have been investing with Interactive Brokers for three years. From the beginning, I have filed my tax return requesting a refund of the U.S. withholding tax applied to my Vanguard Total World (VT) ETF, and I have always received the refund without issues.

Surprisingly, this year my refund was denied, with the explanation that my holdings are in the United Kingdom, which disqualifies me from the refund. I replied that I had received the refund in previous years, and they responded that I shouldn’t have received it in those years either and that it was their mistake. Fortunately, they also mentioned that they wouldn’t ask me to repay the amounts due to the elapsed time (thank goodness!).

In any case, I don’t think I am the only one in this situation, and I’m asking if anyone can confirm whether this decision is justified. Also, how do you handle it? For example, do you buy Vanguard VT through another broker (if a Swiss one exists from which you can buy this asset) or purchase a similar asset through a Switzerland-based broker?

Thank you all for your kind responses.

Have you specify on the DA-1 form or software that the shares are from the US?

Staat column in this exemple.

You should do a formal request, because you are in your right

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In 99.9% of those cases, people who got rejected claimed the supplemental US withholding (so they’re asking for a 30% refund instead of 15%).

You probably need to amend your declaration and only ask for DA-1, not R-US.

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I just spoke with the person in charge of my declaration. She is reaffirming that I asked correctly for the foreign witholded taxes. I will receive a refund of a 15% for those assets that are eligible of a refund BUT no refund at all for VT because it is an US-Asset and IB is based in the UK… this does make no sense at all to me because all my assets are deposited together in IB and therefore in the UK and I don’t see why it shold be differen for US-Assets but she explicitly confirmed this are the rules…

If this does not make sense to you either, what would you do in my position? Thanks

So just to be sure.

You received dividends of lets say 800 USD from VT. IB deducted 15% 120 USD because you had W8BEN filled in already

Now when you asked for 120 USD refund via DA1 form, the tax office rejected the claim because IB is in UK? The tax is not about brokerage, the tax is about security. Your security is in USA , so it shouldn’t matter if your broker is in UK or Uk or wherever outside CH.

This is very strange.
Sometime back someone else also mentioned the case for canton Schwyz. I am starting to think there is someone going on.

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Where your broker is located doesn’t matter at all. VT is an US-Based ETF so with the Double Tax Treaty CH-US you can claim all the WHT.

Your tax officer is just incompetent and this is usual. To have study their training formation they don’t have any clue of what they are doing, they just do it mechanically and don’t ask their legal division about “tiny” problem like yours.

Ask her to have your tax declaration analysed by their legal division.

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I willhave to send a formal request to revise the case, I guess.

To clarify, are those other assets at IB as well? Are they US domiciled assets?

(and you double checked your declaration? it doesn’t say depot schweiz or zusätzliche Steuerrückbehalt USA anywhere?

Not trying to be pedantic, but it simply may help when discussing this topic (with anybody, this forum, colleagues, tax officer), this US WHT withheld by IB (or a part thereof) is credited (aka Gutschrift) to you on your tax bill, and not refunded.
The “Zusätzlicher Steuerrückbehalt US Aktien” (withheld by Swiss brokers) is refunded.
This is why some people may think you are speaking of the latter, when you speak of a refund.

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Thanks everybody for your answers and informations. As I said, I know very little about fiscality issues like these and I may be confusing some terms. Therefore I just had a deeper look. In Graubünden, besides of the bill regarding my income tax, I receive every year three different documents from regarding my assets declaration:

  1. “Verfügung über die Verrechnungsteuer” (35%)
  2. “Verfügung über den zusätzlichern Steuerrückbehalt USA”, and
  3. “Verfügung - Anrechnung ausländischer Quellensteuern”

Every year I received a small refund (credit?) in every one of the documents. This year the situation is as follows:

  1. Refunded/Credited
  2. Denied because the assets are in a UK deposit
  3. Still on its way - the Tax Officer told me this refund (credit?) had been approved.

I double checked on my tax declaration. No mention about “depot Schweiz” or anything similar. :slight_smile:

Then it seems to me like everything is in order. As 2. is not being withheld by IB due to W8-BEN. So nothing to be able to be refunded.

  1. is the leftover 15% with DA-1 and it seems you’ll get that credit.
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Okay
So you were trying to get 30% back instead of 15%

Tax office declined
All good

Next time, please fill the form correctly.

Wow, I must say this sounds like arabic to me :slight_smile: I am happy to know I can trust my tax officers :slight_smile:

@Abs_max would you be so kind to explain to me what I did wrong? I still dont’ get it… thanks for your patience!

Tax office in switzerland is in general the most friendly office i know of in the world.

It it tough to say for your canton. But for Zurich, when I enter the security in tax software, I get this question.

  • Answer to this question needs to be NO if broker is IBKR UK or anyone else outside CH
  • Answer to this question needs to be YES if broker is Swissquote or other Swiss broker.

This assumes you filled in WE8BN at your brokers in time.

Reason is that foreign brokers with correct W8BEN forms only deduct 15% from dividends. Swiss brokers are obliged to deduct additional 15% (+15% of withholding in US)

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Thanks so much for this explanation. I think I get it now! :slight_smile:

In Graubünden they are all very kind but the software gives a little less informations, as far as I can see… :wink:

btw they’re much nicer than Zurich, in Zurich I think if you misfile it they just deny it fully (they don’t correct it to only do the 15%)

I thought maybe a WIKI for this topic might be good. This keeps coming back.
Mods -: If this is irrelevant, please feel free to delete.

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