Withholding tax in practice for VT on IBKR

Dear community,

today I was celebrating my first dividend from VT on IBKR.

From the expected $900 roughly 2/3 were deposited to my account. I understand that the remainder are taxes that are withheld.

If I understood correctly, I can claim half of those with the DA1-Form in my next tax return.

The other half should be covered by my W8-Ben in IBKR.

Now my question would be, how/when do I receive the part pertaining to the W8-Ben?

If someone could help me how this works in practice that would be amazing. :slight_smile:

I think you have to fill out the W8-BEN form proactively, this reduces the withheld taxes from 30% to 15%.

There are instructions on how to do this in the poor swiss IBKR blogpost: How To Open An Interactive Brokers Account In 2021? - The Poor Swiss

I have no idea but I presume that the 30% will be used to deduct your tax liability when you file your taxes, so in the long run you’ll get the money back.

(But I’m not sure about the points I raised here so feel free to jump in and correct me if anyone knows better)

30% on a foreign broker sounds like you didn’t fill a w8ben.

If you care about you can file with the IRS to get the extra 15% back. (Other 15% is usually reclaimed through da-1)

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Should not be deducted by broker/intermediary

Mhhh what kind of deductions are you seeing for your dividends?

I.e. the dividend for today was $0.785 per share. How much of this did you receive?

I am assuming that I might have not submitted it correctly. :thinking:. How could I check this? Because I remember filling it out.

If your W8BEN is properly registered with IBKR you should have received 85% of your dividends, 15% being tax at source.

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Thanks for your answers.

Then I will check today if everything is registered as intended and update you. :slight_smile:

So after some digging I think I know what happened.

As Guillaume has stated, exactly 15% have been deducted from the dividends.

What has thrown of my calculation was that I bough some VT on the 20.12. For those shares I did not receive any dividend as they have been probably bought too close to the dividend date.

Is it correct to assume that I then have paid the (share price - dividend amount)? Otherwise it would feel a bit weird to pay full price and then not receive the dividend. :thinking:

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The share price should theoretically drop by the dividend amount on the ex-dividend date to account for the fact that the buyer will not receive the dividends. So no, it shouldn’t matter (in fact it should be slightly better for you to buy after the dividend date, since you get taxed on the dividend, but IMO it’s too small an advantage to worry about)

In practice you probably won’t notice this price change since it is not unusual for the price to vary more than a typical dividend for VT

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Share price dropped from 105.10$ to 103.36$ on 20th December (ex dividend day). Dividend was 0.78$/share. So you were better off by 0.96$/share pre taxes and ~1.16$/share after taxes.

I’d just add that IB has very good reporting tools. In web client: Reports → Statements → Activity → Year To Date
You can see a ton of stuff there, including Trades, Dividends (with all dates), Withholding Tax, Change in Dividend Accruals (showing pending dividends yet to be paid to you)…

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Yep I found the report. The interface is just quite intimidating as a beginner and some things are rather hard to find. :wink:

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