Which Tax Form Should I Select?

Übersicht: 

3 simple questions can help you choose a tax certification form.   Read the questions and select the form.  For more detailed help, see Tax Information & Reporting.

Question # 1:      Are you a U.S. Person or a U.S. Entity?

• U.S. Citizen • U.S. Business or Organization
• U.S. Green Card Holder • U.S. Domestic Trust
                                       • U.S. Legal Resident

If the answer is YES, complete Form W-9

If the answer is NO, go to # 2.

Question # 2:      Do you have a U.S. Visa?

 

• H-1B Visa Holder • TN Visa Holder         
                                         • O-1 Visa Holder

If the answer is YES, find your status by the "substantial presence test." See More U.S. Legal Resident Info 

If the answer is NO, go to # 3.

Question # 3:      Are you a Legal Resident or Entity of another country?

                                      *Question does Not apply to U.S. Citizens/Entities or Green Card Holders

• Permanent Home Outside of U.S • Entity Formed Outside of U.S.
                                      •Business or Organization formed outside of U.S.

If the answer is YES, complete Form W-8  (U.S. Citizens, Green Card Holders, and Entities still complete the W-9.)

NOT SURE because you work, live, or study in the U.S. then, see More U.S. Legal Resident Info 

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.

Certify Your Tax Status

Übersicht: 

Filling out a tax certification form is required to open an IB account.  The forms confirm your tax status in relation to the United States.  Information provided by you may lower or exempt the U.S. tax withholding on your account.

Background: 

This article will help you to:

►Choose the correct certification form                            ►Find your tax treaty benefits

►Fill out and submit your form online                              ►Answer tax certification questions

 

 

 

 

Which Form Do You Pick?

Tax Treaty Benefits

Management of account activity differs for each account type.  IB is a U.S. broker and must follow U.S. guidelines.  3 simple questions help you choose the right form

Some countries have a tax treaty with the U.S.  Find out if you benefit from a lower tax-withholding rate. Tax Treaty Benefit Info

Filling Out The Form

Tax Certification – FAQ’s

The certification form is direct.  Supply basic account information on the true owner of the assets or entity.  Select  W-9 Instructions or W-8 Instructions for help. Seek professional advice for tax questions.  These common questions and answers may help you make an informed decision.  Tax Certification - Frequently Asked Questions

 

 

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.

 

 

Dividend Tax Rates

Übersicht: 

Virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders (whether those shareholders are corporate or not).  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 US and the country of residence of the dividend recipient.  .

The table below depicts certain the rates of withholding as applied by IBKR effective 6-1-2012.

 

Dividend Withholding Rates
  Jurisdiction #1         
Jurisdiction #2          Withholding Rate
  United States Australia 15.0%
  United States Austria 15.0%
  United States Bangladesh 15.0%
  United States Barbados 15.0%
  United States Belgium 15.0%
  United States Bulgaria 10.0%
  United States Canada 15.0%
  United States China 10.0%
  United States Cyprus 15.0%
  United States Czech Republic 15.0%
  United States Denmark 15.0%
  United States Egypt 15.0%
  United States Estonia 15.0%
  United States Finland 15.0%
  United States France 15.0%
  United States Germany 15.0%
  United States Hungary 15.0%
  United States Iceland 15.0%
  United States India 25.0%
  United States Indonesia 15.0%
  United States Ireland 15.0%
  United States Israel 25.0%
  United States Italy 15.0%
  United States Jamaica 15.0%
  United States Japan 10.0%
  United States Kazakhstan 15.0%
  United States Korea 15.0%
  United States Latvia 15.0%
  United States Lithuania 15.0%
  United States Luxembourg 15.0%
  United States Malta 15.0%
  United States Mexico 10.0%
  United States Morocco 15.0%
  United States Netherlands 15.0%
  United States New Zealand 15.0%
  United States Norway 15.0%
  United States Pakistan 30.0%
  United States Philippines 25.0%
  United States Poland 15.0%
  United States Portugal 15.0%
  United States Romania 10.0%
  United States Russia 10.0%
  United States Slovakia 15.0%
  United States Slovenia 15.0%
  United States South Africa 15.0%
  United States Spain 15.0%
  United States Sri Lanka 15.0%
  United States Sweden 15.0%
  United States Switzerland 15.0%
  United States Thailand 15.0%
  United States Trinidad and Tobago 25.0%
  United States Tunisia 20.0%
  United States Turkey 20.0%
  United States Ukraine 15.0%
  United States United Kingdom 15.0%
  United States Venezuela 15.0%
  Canada Algeria 15.0%
  Canada Argentina 15.0%
  Canada Armenia 15.0%
  Canada Australia 15.0%
  Canada Austria 15.0%
  Canada Azerbaijan 15.0%
  Canada Bangladesh 15.0%
  Canada Barbados 15.0%
  Canada Belgium 15.0%
  Canada Brazil 15.0%
  Canada Bulgaria 15.0%
  Canada Cameroon 15.0%
  Canada Chile 15.0%
  Canada China 15.0%
  Canada Croatia 15.0%
  Canada Cyprus 15.0%
  Canada Czech Republic 15.0%
  Canada Denmark 15.0%
  Canada Dominican Republic 18.0%
  Canada Dubai 15.0%
  Canada Ecuador 15.0%
  Canada Egypt 15.0%
  Canada Estonia 15.0%
  Canada Finland 15.0%
  Canada France 15.0%
  Canada Gabon 15.0%
  Canada Germany 15.0%
  Canada Guyana 15.0%
  Canada Hungary 15.0%
  Canada Iceland 15.0%
  Canada India 25.0%
  Canada Indonesia 15.0%
  Canada Ireland 15.0%
  Canada Israel 15.0%
  Canada Italy 15.0%
  Canada Ivory Coast 15.0%
  Canada Jamaica 15.0%
  Canada Japan 15.0%
  Canada Jordan 15.0%
  Canada Kazakhstan 15.0%
  Canada Kenya 25.0%
  Canada Korea 15.0%
  Canada Kuwait 15.0%
  Canada Kyrgyzstan 15.0%
  Canada Latvia 15.0%
  Canada Lithuania 15.0%
  Canada Luxembourg 15.0%
  Canada Malaysia 15.0%
  Canada Malta 15.0%
  Canada Mexico 15.0%
  Canada Moldova 15.0%
  Canada Mongolia 15.0%
  Canada Morocco 15.0%
  Canada Netherlands 15.0%
  Canada New Zealand 15.0%
  Canada Nigeria 15.0%
  Canada Norway 15.0%
  Canada Oman 15.0%
  Canada Pakistan 20.0%
  Canada Papua New Guinea 15.0%
  Canada Peru 15.0%
  Canada Philippines 15.0%
  Canada Poland 15.0%
  Canada Portugal 15.0%
  Canada Romania 15.0%
  Canada Russia 15.0%
  Canada Senegal 15.0%
  Canada Singapore 15.0%
  Canada Slovakia 15.0%
  Canada Slovenia 15.0%
  Canada South Africa 15.0%
  Canada Spain 15.0%
  Canada Sri Lanka 15.0%
  Canada Sweden 15.0%
  Canada Switzerland 15.0%
  Canada Tanzania 25.0%
  Canada Thailand 15.0%
  Canada Trinidad and Tobago 15.0%
  Canada Tunisia 15.0%
  Canada Turkey 20.0%
  Canada Ukraine 15.0%
  Canada United Kingdom 15.0%
  Canada United States 15.0%
  Canada Uzbekistan 15.0%
  Canada Venezuela 15.0%
  Canada Vietnam 15.0%
  Canada Zambia 15.0%
  Canada Zimbabwe 15.0%


Dividend Considerations - US Extended Trading Session

An account holder who purchases a US stock outside of normal or regular trading hours (i.e., 9:30 a.m. to 4:00 p.m. Eastern time) but during the extended trading hours session (i.e., 4:00 p.m. to 8:00 p.m. Eastern time) on the day prior to that stock going ex-dividend is entitled to receive that dividend.  The reasoning behind this is that trades executed during the extended trading hours session on Day 'T' settle at the same time ('T+2') as trades which are executed during regular trading hours on Day 'T'.  All such trades will therefore settle within a timeframe sufficient for the purchaser to be recognized as an owner of the shares prior to the close of the Record Date. 

Following the same logic, an account holder who sells and closes out a long US stock position during the extended trading hours session on the day prior to that stock going ex-dividend will not be entitled to receive that dividend.  However, if the stock was sold stock (i.e. an opening trade), the account holder would be obligated to pay the dividend to the lender of the shares.

Glossary terms: 

What are the key dates relating to stock Dividends?

Übersicht: 

Key dates relating to stock dividends are as follows:

1. Declaration Date - date at which company's board of directors approves dividend payment and designates the Payment Date and Record Date.

2. Record Date - the date which determines which stockholders are entitled to receive the dividend payment. You need to own the shares as of the close of the Record Date in order to receive the dividend.

3. Ex-Dividend Date - the date on or after which the stock will be traded without the right to receive the dividend. Because most stock trades in the US settle regular way; that is, two business days after the trade, an individual must purchase the stock two business days before the Record Date to qualify for the dividend. The Ex-Dividend Date is therefore one business day before the Record Date.

4. Payment Date - the date on which the declared dividend is paid to all stockholders owning shares on the record date.

 

* Please note these key dates may be different for special dividends. Please reference KB 3043 for information regarding special dividends.

Are non-US residents subject to withholding for tax purposes?

Übersicht: 

 

Information relating to tax obligations is reported as required to the tax authorities within your country of residence as well as other countries if trading products subject to any local withholding requirements.  Unless specifically directed by a taxing authority, IBKR does not withhold taxes on proceeds from security sales. We are required by US tax law, for example, to withhold US taxes on dividends paid by US corporations to foreign persons at a rate of 30%. This rate may be lower if the US has entered into a tax treaty with your country. In addition, investment interest income is not subject to US withholding. All withholdings for non-US persons and most entities will be reported on Form 1042-S at the close of each year. For further information refer to IRS publication 901 and/or your tax advisor.

My account was debited for a dividend payment (Payment in Lieu) for a short stock position which I don’t recognize. How did this occur?

Übersicht: 

 

A short stock position may originate from an option position which you held in your account.  For example, if you hold a long put position in your account, that position may be subject to automatic exercise by the clearinghouse if it is in-the-money by a defined threshold at expiration.  This put exercise will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date. 

 

Similarly, a short call position in your account is subject to assignment should a call purchaser elect to exercise their right to purchase the stock and your account be allocated through the random clearinghouse and broker assignment process.  This call assignment will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date. 

 

These payments will be reflected on your Activity Statement as a 'Payment In Lieu Of Dividend'.

What does Payment in Lieu refer to?

Übersicht: 

A Payment in Lieu, or Pil, typically refers to a cash debit or credit made to an account in recognition of a stock dividend.  A Pil in the form of a debit will be made when an account is holding a short position in a stock on its ex-dividend date. This debit occurs as the lender of the shares which facilitated the short sale remains entitled to all dividends paid throughout the duration of the loan period.   

Conversely, a Pil in the form of a credit is made when a long stock position in an account has been loaned out on its ex-dividend date.  Account holders should note that shares which are held long and which are the subject of a margin lien may be eligible to be loaned by the broker.  In this situation the credit originates from payment by the borrower of the shares rather than from a dividend by the share issuer.   U.S. taxpayers who are recipients of Pil credits should discuss the tax implications of Pils and non-qualified dividends with their tax adviser.

Syndicate content