or a dutch one!
Hi Hedgehog, I have question to your comment “if your broker withholds 30%, you should just change broker, any respectable broker withholds only 15% from US equities.” I know from my ex-bank CS, and my neo-bank Migrosbank & I have seen that another big other Swiss broker withholds 30% (2x15%) from US equity. I thought this was standard. I get these amounts credited via my Steuererklärung, so it’s not really an issue. But still interested to know - are u speaking of “respectable” Swiss brokers or foreign-based brokers like IB, when u say only 15% should be withheld?
There’s enough swiss brokers who don’t respect their customers enough to file paperwork with IRS and have to withhold 1x30%, in this case you will only get 15% via CH Steuererklärung and will have to get the other 15% from the IRS (non resident US tax return), with difficulties. Or you could simply refuse to respect them back in return and switch to IB, yes, only 15% w/h/ then.
I’ve started on IB end 2017 (thanks in no small part to your hints & pushes) and am moving my respect and some wealth step by step, but I’ll probably keep eggs spread to a few baskets & thus keep a Swiss broker for some Swiss/European investments.
To the topic of 2x15%… I have had some US stocks at a Swiss broker & feel the first 15% which the US takes is “nicht rückforderbare Steuer” & gets angerechnet via the Steuererklärung (due to Doppelsteuerabkommen).
The second 15% “zusätzlicher Steuerrückbehalt USA” is taken by the Swiss Government (i.e. all Swiss brokers without exception) & refunded (like the Swiss Verechnungssteuer) via the Steuererklärung.
My understanding wud mean I do get my 15% back & 15% angerechnet without filing at IRS & that all Swiss-based brokers are “respectable”… at least in this point!! (Don’t get me started on fees though.)
“Beim Bezug von Dividenden amerikanischer Wertschriften via eine schweizerische Inkassostelle
(beispielsweise eine Bank) wird nebst der bereits in den USA belasteten, nicht rückforderbaren Quel-
lensteuer von 15 % ein zusätzlicher Steuerrückbehalt von 15 % des Bruttoertrags abgezogen. Damit
erfolgt eine um insgesamt 30 % reduzierte Nettoauszahlung.
Der in der Schweiz erhobene zusätzliche Steuerrückbehalt von 15 % kann mit dem zum Wertschriftenverzeichnis gehörenden Ergänzungsblatt vollumfänglich zurückgefordert werden (Rückforderung
in der Schweiz vergleichbar mit der eidgenössischen Verrechnungssteuer).”
"Für die im ausländischen Staat verbleibende, nicht rückforderbare Steuer kann in der Schweiz mit dem entsprechenden Ergänzungsblatt zum Wertschriftenverzeichnis die pauschale
Steueranrechnung geltend gemacht werden.
and that’s the part where double taxation relief provisions of income tax treaties come into effect. What you cannot reclaim from foreign government you get from the swiss on account of having to pay swiss taxes on that income. Both items (US 15% and swiss 15%) are claimed on DA 1.
But if you got the default 1x30% withheld by US because your broker didn’t bother to file necessary paperwork with IRS, then 15% of them is actually reimbursable by US. Swiss will only refund you the non-US-refundable 15% and then tell you to fuck off and get the rest from IRS
Either way as you see your total withholding with a swiss broker is 30%, but depending on how much it respects you as a client, you may have to deal with IRS or get double taxed
Help me understand: So the 30% is not actually 30%, but 15% by US and 15% by the second country (e.g. Switzerland)? And if your broker files the paperwork to IRS then US part is waived and the 15% that remains actually goes to Switzerland?
That would explain why you can reclaim it from Switzerland with DA-1, the part I didn’t really understand. I always thought the 15% stays in USA. So how is it?
no, not correct, 30% US without paperwork (then 15% reclaimable from IRS), 15% US + 15% CH for CH broker with paperwork (“Qualified Intermediary”), 15% US for non CH broker with paperwork. 15% always stay in the US.
And then why does Switzerland reimburse the part that US kept? I have VTI at IB, get 1000 dividend, 150 stays with the IRS, i presume. Then by the end of the year, I file DA-1 to the Swiss tax office, and tell them: “look, my average tax rate was 25%, and I paid 15% WTAX to USA on this dividend income”. Pleaz give it back to me! Why do they do it?
Because they signed a treaty saying they’ll do so.
Wait, does it? Didn’t we just say that I can reclaim it from Switzerland? Unless you mean that 15% does stay in the US, but you can get reimbursed by the Swiss, it’s just not the same money and Switzerland is kind of at a loss here.
Swistzerland reimburses it on account of your swiss taxes that you have to pay on this income and takes a hit in its own tax revenue. This is called double taxation relief, the idea is to prevent people from getting taxed twice by both countries. And they will only reimburse the part up to swiss tax rate, if you owe 10% tax, you get only about 10% back not 15%, no free lunch. And then you pay those 10% them back with the final tax bill
Yes, this part I understood. So Switzerland just does not charge you with income tax on these 1000 of dividend, because the US already did (they charged 15%, so if your Swiss taxes are 25%, you still have to pay 10%).
Here’s a nice quote I found on Wikipedia:
Generally, the U.S. payor must verify the Tax Identification Number of its payees and withhold 30% of this payment if a TIN is not presented. Qualified Intermediary (QI) is generally a foreign bank or other foreign financial institution that signs an agreement with the Internal Revenue Service. Under the agreement, the QI maintains its own records of the U.S. or foreign status of the beneficial owners of the payments and may undertake responsibility for income reporting and tax withholding.
So to recap and better understand the possible scenarios:
- I live in a country without US tax treaty, my broker is not QI: US takes 30%, non reclaimable
- I live in a country without US tax treaty, my broker is QI: US takes 15%, broker takes 15% and sends it to US
- I live in a country with US tax treaty, my broker is not QI: US takes 30%, I can reclaim 15% from IRS
- I live in a country with US tax treaty, my broker is QI: US takes 15%, it can be deducted from my local taxes
So scenario (3) looks like the shittiest one, because not only you have to reclaim the 15% at IRS, but the other 15% gets lost? Did I get it right?
no you get those 15% in (3) from your local government as a tax credit or straight up refund to your bank account like in Switzerland
the other 15% are lost indeed if you won’t bother to mail a US non resident tax return and cash in their cheque
@hedgehog, so it depends how it is defined deduction of 1×30% is not equal to 2×15% so to speak…
So which CH broker(s) is not “respectable” and deducts 1×30%? In this regards CS, Migrosbank & SQ are “respectable”, acc. to my knowledge.
@Bojack, yes, your explanation is correct, that’s why you get one part “angerechnet” (it’s “nicht rückforderbar” and stays in US and u don’t have to pay again due to double tax treaty) and other part “rückerstattet” (taken by CH and given back by CH).
Now I’m confused. Let’s put names
SQ is (3): 30% taken. 15% reimboursed from swiss government and 15% you can ask IRS
IB is (4): 15% taken and then reimboursed from swiss government.
SQ is a bit cumbersome but the result is identical.
Post updated with corrections from the following posts.
Brokers with Qualified Intermediary status:
- Interactive Brokers
- Charles Schwab
Brokers without Qualified Intermediary status:
- CornerTrader (?)
- Degiro (?)
Withholding tax for US-based securities:
- Domicile without US treaty, broker without QI: US takes 30%, non reclaimable
- Domicile without US treaty, broker with QI: US takes 15%, broker takes 15% and sends it to US
- Domicile with US treaty, broker without QI: US takes 30%, reclaim 15% locally and 15% from US
- Domicile with US treaty, broker with QI: US takes 15%, reclaim 15% locally
- Domicile with US treaty, Swiss broker with QI: US takes 15%, broker takes 15%, reclaim 30% locally
All Swiss brokers I know of (that is CS, Migrosbank and SQ) are Qualified Intermediaries.
So for most us (domicile CH (i.e. with treaty) and QI)
- US takes 15%, this is “nicht rückforderbar” but at least it gets “angerechnet” by Switzerland (due to treaty)
- Switzerland takes another 15% (“zusätzlicher Steuerrückbehalt USA”) which gets refunded in the same way as Verrechnungssteuer, if u declare correctly.
I would like to know which Swiss Broker is not “respectable” / a QI, cos I don’t know of any.
From SQ small print:
“Die Bank hat eine so genannte „Qualified Intermediary“
(oder „QI“)-Vereinbarung abgeschlossen. Zudem hat sie
mit der US-Steuerbehörde („IRS“) eine „Foreign Financial Institution“ („FFI“)-Vereinbarung gemäß dem zwischen der Schweiz und den Vereinigten Staaten von Amerika („USA“) getroffenen Abkommen über die Zusammenarbeit für eine erleichterte Umsetzung des „Foreign Account Tax Compliance Act“ (FATCA, zusammen mit dem FFI Abkommen die „FATCA-Vorschriften“) getroffen.
6.2 Falls der Kunde eine natürliche Person ist, hat er der
Bank gegenüber bestätigt:
a) dass er eine „non-US person“ ist, d.h. dass er kein US-Staatsbürger ist (einfache, doppelte oder mehrfache
Staatsbürgerschaft) und dass er nicht den Status eines
ausländischen Ansässigen („resident alien“) hat (zum
Beispiel durch Besitz einer „Green Card“ oder durch
längeren Aufenthalt in den USA im laufenden Jahr und
den vorangegangenen zwei Jahren). Zudem bestätigt der Kunde, dass er im Sinne des US-Steuerrechts wirtschaftlich Berechtigter („Beneficial Owner“) der von ihm gehaltenen Vermögenswerte und der daraus resultierenden Einkünfte ist. Sofern zwischen den USA und dem Wohnsitzstaat des Kunden ein Doppelbesteuerungsabkommen besteht, bittet
der Kunde um eine Reduktion der US-Quellensteuer auf
den Einkünften aus US-Quellen und gewährt die Bank
dem Kunden grundsätzlich eine solche Reduktion.”
For example Strateo and CornerTrader aren’t.
I edited my post to reflect your corrections. However, I don’t get it. If you’re by SwissQuote, and USA withholds 15% and then your broker withholds another 15%, which makes 30%, then how are you supposed to reclaim all of it back? I guess almost nobody has an average tax rate of over 30%, so how is it calculated?
30% AFAIK they are not QI
you’re entitled to a refund of last 15% either from swiss or us side regardless of your tax rate. Only for whether the swiss will refund you the 15% that stay in us does your swiss tax rate matter