Tax expert answers
5 most popular questions about the W-8BEN form
Russian broker is not a tax agent for dividends, received from sources, located outside the Russian Federation. This 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 dividends are taxed at that country's rates, in which the issuer is legally registered.
If the issuer is registered in the USA and you receive dividends on its shares, then you can provide your broker (tax agent) completed Form W-8BEN. This form allows you to confirm the right to use a reduced tax rate in the amount of 10%, instead of standard 30%. You can learn more about this form from the article "W-8BEN for individuals".
The popularity of American stocks among Russian investors is growing, therefore, more and more questions about benefits arise, given by Form W-8BEN. We will answer the most frequent ones.
Form W-8BEN is valid for all foreign dividends?
Not. This form gives the right to reduce the tax rate only on dividends, which are received from issuers, legally 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 total tax rate will apply., adopted in a foreign state. For example, for securities ISIN DE0007236101 (Siemens) taxation country is Germany, tax rate on dividends in general, without submitting tax exemptions, is 26,375%.
Simplified Form W-8BEN qualifies for a reduced tax rate?
Not. Eligibility for a reduced rate 10% only gives a signed complete form W-8BEN. The simplified form makes it possible to carry out transactions with securities, but dividends on shares of American companies will be taxed at the rate - 30%.
Have a signed Form W-8BEN, but the tax on dividends on shares of American companies amounted to 30%. Why?
Maybe, Form W-8BEN was not yet signed at the time of the dividend cut. To apply the reduced tax rate, the signed form must be valid as of the cut-off date, and not on the date of dividend payment.
There is a tax rate reduction on the body of the stock?
Not. Form W-8BEN qualifies for a tax rate cut from 30% to 10% only on dividends. 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 of the Russian Federation: if the individual is a tax resident of the Russian Federation, the rate will be 13% (15% in case of exceeding 5 RUB million), if the individual is a tax non-resident of the Russian Federation, then the rate in the general case is 30%.
Form W-8BEN applies to dividends on company shares, REIT related?
Real Estate Investment Trust (REITs) - real estate exchange funds. Dividends from these sources will be taxed at the rate 30% even with a signed W-8BEN.
Recall, upon receipt of foreign dividends, individuals must independently report 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.
