Responsible specialist on tax payments
5 the most popular questions about the W-8BEN
Russian broker is not a tax agent for dividends, acquired from sources, which are outside the borders of Russia. It means, that the broker, in order to form a taxable base of individuals, does not take into account this income and does not tax it. Foreign income from securities is taxed at the rates of that state, in which the issuer is formally registered.
If the issuer is registered in the United States and you receive income from securities in accordance with its shares, you can provide your own broker (tax agent) completed Form W-8BEN. This form allows you to certify the right to implement a reduced tax rate of ten percent, instead of the usual thirty percent. You can find out more about this form from the article "W-8BEN for individuals".
The popularity of shares of US organizations among Russian financiers is growing, therefore there are more and more questions about benefits, given by Form W-8BEN. We will answer the most common of them.
Form W-8BEN is valid for all foreign dividends?
Not. This form gives the right to lower the tax rate only on dividends, which are received from issuers, formally registered in the USA. If the company is registered in another foreign country, then W-8BEN does not qualify for the reduced rate. In this case, the general tax rate will apply., which was adopted in a foreign country. For instance, for securities ISIN DE0007236101 (Siemens) taxation state is Germany, tax rate on income from securities in general, without submitting tax exemptions, is 26,375%.
Simplified Form W-8BEN qualifies for a reduced tax rate?
Not. Only a signed full Form W-8BEN is eligible for a reduced rate of ten percent.. The simplified form makes it possible to carry out transactions with securities, but income from securities on shares of organizations from the United States will be taxed at a rate of - thirty percent.
Have a signed Form W-8BEN, but the tax on income from securities on shares of organizations from the United States was thirty percent. Why?
May be, Form W-8BEN was not yet signed at the time of the dividend cut. To implement the reduced tax rate, the signed form must be valid already on the cut-off date, but not on the date of dividend payment.
There is a decrease in the tax rate on the body of the stock?
Not. Form W-8BEN entitles you to reduce the tax rate from thirty percent to ten percent on dividends only. If you are selling an American security, then within the framework of this operation, the broker is the tax agent, profits from its sale will be taxed NDFL. The tax rate depends on the status of a tax resident in Russia: if an individual is a tax resident of Russia, the rate will be thirteen percent (fifteen percent if exceeded 5 RUB million), if an individual is a tax non-resident of Russia, then the rate is generally thirty percent.
Form W-8BEN applies to income from securities on shares of companies, which are REIT?
Real Estate Investment Trust (REITs) - real estate exchange-traded funds. Securities income from these sources will be taxed at the rate of thirty percent even if there is a signed W-8BEN.
Let's emphasize, upon receipt of foreign dividends, individuals must, without the help of others, submit reports to the tax office by submitting a 3-NDFL declaration. How to do it, read in the articles "3-NDFL 2020: report foreign dividends to the taxpayer's LC" or "3-NDFL 2020: report on foreign dividends through the "Declaration" program.
