IMPORTANT NOTIFICATION: For all non-US persons and entities holding a Charles Schwab Hong Kong U.S. Dollar Account: Effective 1st January 2023 Schwab will withhold an additional 10% of gross proceeds, including sales proceeds, of publicly traded partnerships securities (PTP) and certain distributions by PTPs. Please note this new PTP withholding tax is separate from the existing maximum 37% withholding for individuals and 30% withholding for entity accounts.
What you need to know about U.S. taxes
Schwab is dedicated to serving your investment needs in a fair and honest manner. Here you can learn some basics about certain U.S. tax and estate considerations that you should take into account as part of your investment decision-making process and how they can affect your investments in the American market.
Importantly, you should consult your own legal and tax advisor(s) to determine the U.S. tax consequences to foreign investors of investing in the U.S.
U.S. Tax for Foreign Investors
As a general rule, foreign investors (i.e. non-U.S. citizens and residents) with no U.S. business are typically not obligated to file a U.S. tax return, including on income generated from U.S. capital gains on U.S. securities trades. Instead, when investing with Schwab as their broker-dealer, Schwab will withhold the required U.S. taxes on U.S. income and gross proceeds, as applicable, and pay the withheld tax and report to the IRS directly.
Foreign investors must continue to certify their non-U.S. citizen and resident status through submitting required documentation (ex: the applicable W-8 form) and may be able to receive reduced U.S. tax withholding by identifying the country where they claim to be a resident for income treaty purposes.
Schwab foreign investors who are non-U.S. residents and residents of a tax treaty country with a valid Form W-8 on file may be able to claim a reduced rate of withholding under an income tax treaty. Other foreign investors generally pay a flat 30% withholding tax on certain interest and dividend income from U.S. securities investments. As a withholding agent, Schwab is required to report interest and dividend income from U.S. securities to the IRS and to the client through Form 1042-S, or other applicable form.
Please see IRS Publication 515 for more information on tax rates applicable to non-residents.
U.S. Estate Tax for Foreign Investors
Foreign investors are generally subject to a low estate tax threshold of US$60,000 before being subject to U.S. estate tax at a rate up to maximum of 40% above this threshold on U.S. situated assets, such as securities of U.S. companies. However, assets that are exempt for U.S. estate tax generally include securities that generate portfolio interest (e.g., U.S. treasury and U.S. government agency securities and certain U.S. corporate bonds and U.S. commercial paper), and dividend income from certain foreign corporations or offshore mutual funds are generally not subject to U.S. estate taxes. Executors for non-residents must file an estate tax return or Form 706-NA. Please note that the U.S. estate tax rules for foreign investors may be modified by applicable estate and gift tax treaties.
Please see IRS Publication 515 for more information on tax rates applicable to non-residents.
Additional Tax Related Document
Additional Tax Related Document
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