W-8BEN on your own & 30% withhold

It’s more like ‘likelihood of not paying back should the company ask for outside money for itself’, and IB notably has almost zero debt - https://www.morningstar.com/stocks/xnas/ibkr/quote - much better than any bank which would have rehypothecated your deposit ten times over.

Personally I believe diversifying risk across multiple brokers/custodian banks is always a good idea - and political risk in particular. I believe the risk of audits and subsequent account freezes are very real - particularly for US tax residents. It’s also worth noting that many stocks are held in street name rather than registered in your name, and as such are vulnerable to broker bankruptcy.

I don’t know that I would recommend PostFinance as a Swiss broker though. It only makes sense if you trade enough to use the CHF 90 annual custody fees which are credited towards brokerage fees. I recommend comparing total costs in any case. Also check into what it would cost you to move existing ETF shares to a Swiss broker. It may not be worth moving your existing positions at IB. Opening new positions with a Swiss broker going forward may be a better move.

Re the W-8BEN form, this lets you avoid half (15%) of the 30% US withholding tax as per the bilateral tax treaty. The other 15% is not recoverable as far as I know (someone please correct me if you are better informed). It may be recoverable for US tax residents, but I can’t speak to that.

1 Like

They are, otherwise swiss would have refunded them too. The thing is that it involves a lot of hassle - filing non resident US tax return, physically mailing it by deadline (March-April AFAIK) and cashing a cheque from them, this is not worth it for low 2-3 figure sums.

2 Likes

It doesn’t have to be recoverable. It counts towards your swiss taxes (due to double taxation), so if you pay 15% or more income tax you’re ok.

This seems to be right!

So, I called both Postfinance and TradeDirect.

TradeDirect is a QI and will do a W-8BEN. So I’ll have 15% withheld by US and 15% withheld by CH. It seems (but not sure) I should be able to recover both with tax return.

PostFinance is NOT a QI. So I’ll get 30% deducted by US. I’ll be able to get back only 15% from Swiss authorities, and need to go to IRS to get the remaining 15%.

I think that TradeDirect may be a good option for diversification: a bit expensive with 108CHF annual custody fee, but it’s “AA” rated and Swiss based, which is very good for diversification with respect to a US broker.

Also, I think that IRS tax return (for non-QI case) would be a lot of paperwork. Any experience on this?

Good thread!
Thanks!

And did you check Swissquote?

I know I should pay attention to this but it is both complicated and extra boring… I think I would need a step by step explanation for dummies… Or get some motivation.

Let’s say I have CHF 100’000 invested with Postfinance and CHF 100’000 invested with IB…

What do I lose every year by not doing the paperwork? Any ballpark estimation?

Like 100k invested in VT? (1564 shares by the end of 2018).

In 2018 you’d have lost 15% of dividends = 382 CHF

i think 30% would be lost here, not 15%.
my understanding:

  • for us based etf (vt, etc), 3o%* of dividend taxed away
    – broker qualified -> w8-ben by broker itself -> 15% back -> da-1 by investor -> 15% back ->0% lost
    – broker not qualif: w8-ben not possible (15% lost) -> da-1 not (i am not positive here) possible (15% lost)-> edit: 30% lost
  • for irland based etf (vwrl): 15% of div lost (not more, not less), no matter which broker, no refund possible

*Edit: only the the us part of the etf is taxed at 30% (for VT that would be 55.7%; for WVRL 55.0%): so actually the taxation is:

  • tax on dividend for us part of etf: dividend% x30% x 55.7% (respectiv 55.0%)
  • tax on dividend for rest of the world (not us) part of the etf: depends on etf domicile and its tax treaty with every single country

More and more I read those posts…more and more I get confused…

I had dividends paid lately for the ETF: iShares STOXX Europe Select Dividend 30 UCITS ETF in Euros bought in IB and I got 0%, yes… 0% withheld by IB, or Europe…

Don’t understand why they are withholding the 15% to you… If we are all in Switzerland!

Regards.

Start here:

1 Like

I don’t see 30% in your examples; either 0% (Swiss qualified broker for US ETF) or 15% (Swiss not qualified broker for US ETF; or any broker for IE ETF). Can you elaborate more?

Thanks!

Didn’t call them.
But a knowledgeable guy from Postfinance told me that they used to provide W-8BEN until 2015 (when they operated through BCV, which is TradeDirect), but from 2015, Postfinance e-trading is backed by Swissquote, and Postfinance doesn’t provide W-8BEN (so I suspect also Swissquote doesn’t, i.e. they’re not QI). But we need to 2ble check

Thanks. I’ll read the complete post… is long.
Is really a bit messy all the tax treatment by the different countries/brokers … Hope one day is going to more unified!
Regards.

See my 2 edit in the post

I think that 30% withhold (not tax) applies to all the VT (not only to the US part), for the reason that VT is a US ETF.

The case in which it applies only to US stocks inside the ETF (55.7%) is for non-US ETFs. And in that case the tax is 15%, paid by the ETF, so not reclaimable.

Does it make sense?

Swissquote did , at least a while ago.

This question was raised some times and according to that Swissquote is QI.

I think you are right. Thank you.

This is correct to my knowledge as well.

By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, vous confirmez avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/