Asset Classes

Free investment financial education

Language

Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts

Tax Treaties

Lesson 3 of 6
Duration 2:39
Level Beginner
Close Navigation

The US has tax treaties with approximately 70 countries.

They are listed on IRS.gov and can be accessed for free. Do not assume that your country is not
included, as some countries with treaties may surprise you given overall US relations with those
countries.

Tax Withholding Rate

• Most, but not all, tax treaties lower withholding on investment income (primarily dividend
income) from 30%, which is what is required by the US income tax code (statutory withholding).
• The most common treaty rate is 15% or a 50% reduction from the statutory amount.
• Some treaties lower the rate further to 10%, while others only reduce it slightly to 25%.
• Many countries allow for a credit to be taken against tax due in your home country. This is
country specific, so it is best to consult a local tax advisor on this issue.
W-8BEN – Keep it Current
• Do not forget that your W-8 on file with the account holder must be current.
• Remember that they expire every three years and must be updated if you move.
• If your W-8 lapses, then withholding at 28% on income kicks in. Theoretically, this might be
better if you live in a country without a tax treaty as 28% withholding is better than the 30%
withholding you are subject to;
• But 28% withholding includes withholding on gross proceeds from securities sales, whereas
having a valid W-8 exempts proceeds from withholding.

FATCA

• The Foreign Account Tax Compliance Act – commonly referred to as FATCA – imposes reporting
requirements on US entities to foreign government. Aimed at getting US persons to report and
pay US taxes on accounts and other income held outside the US, the law has had sweeping
impact which has resulted in worldwide information sharing between governments.
• Because of this information sharing it is essential to keep your W-8BEN up to date with all
custodians.

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Leave a Reply

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.

Disclosure: Tax-Related Items (Circular 230 Notice)

The information in this material is provided for informational purposes only and does not constitute tax advice and cannot be used by the recipient or any other taxpayer to avoid penalties under any federal, state, local or other tax statutes or regulations, or to resolve any tax issue.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.