While an account holder who has submitted a Self-Certification of Tax Residencies (Substitute W-8BEN, classifying them self as a non-U.S. person) is not subject to a U.S. capital gains tax or withholding on trading profits (will be subject to the tax rules of their country of origin), they are subject to U.S. withholding taxes on U.S. source income. U.S. source income includes dividends and interest earned on securities issued by U.S. companies or U.S. registered mutual funds.
Note that withholding taxes are not limited to U.S. source income as virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders. The rate at which IBKR is obligated to withhold for a given payment depends largely upon whether there is a tax treaty in place between the country where the dividend paying country is based and the country of residence of the dividend recipient. In addition, certain taxing authorities provide their residents with a tax credit for foreign taxes paid at the point of filing in order to minimize the effect of double taxation.
For a non-US citizen, the withholding rate applied to a distribution depends on a number of different factors such as the entity through which your trade is booked, the source of the income and your tax residence (including whether you are eligible for the benefits of a double tax treaty between the United States and your country of tax residence).
We cannot provide tax advice, so in this scenario you need to refer to the prospectus of the security, contact the issuer of the security, and/or consult a tax professional regarding the tax consequences of an investment in particular securities.
For more information, see the KB article on U.S. withholding tax to non-US persons.
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