Charles Schwab, U.K., Limited

Charles Schwab, U.K., Limited
Type here for Search

U.S. Tax

How Do Non-US Investors Pay U.S. Tax?

Schwab UK is dedicated to serving your investment needs in a fair and honest manner. Here are some basics about certain U.S. tax and estate considerations that you may take into account as part of your investment decision-making process. You should consult your legal and tax advisor(s) to determine whether any U.S. tax withheld from any income credited to your account may qualify for a foreign tax credit in your country or jurisdiction of residence.

Download U.S. Tax and Estate Disclosure

U.S. Tax for Foreign Investors

Current American tax laws can be a powerful incentive for investing in the U.S. As a general rule, Non-U.S. citizens and residents (foreign) investors with no U.S. business operations are typically not obligated to file a U.S. tax return. Instead, when investing with Schwab as their broker-dealer (withholding agent) Schwab will withhold the required taxes on U.S. income and pay the IRS directly. Foreign investors who certify their non-U.S. citizen and resident status through filing required documentation (ex: W-8BEN form) may receive reduced tax rate from U.S. tax authorities.

Schwab foreign clients typically pay no U.S. capital gains on U.S. securities trades. And their dividends from non-U.S. (offshore) sources.

Schwab foreign investors who are non-U.S residents and are a resident of a tax treaty country with a valid Form W-8BEN on file can receive tax rates on interest and dividend income from U.S. securities investments often at lower rates than U.S. residents. Other foreign investors generally pay a flat 30% withholding tax on interest and dividend income from U.S. securities investments. Also as a withholding agent, Schwab is required to report interest and dividend income from U.S. securities to the IRS and to the client on Form 1042-S.

Please see IRS Publication 515 for more information on tax rates applicable to non-residents.

U.S. Estate Tax for Foreign Investors

Current U.S. estate tax laws also provide significant advantages to foreign investors. While foreign investors are subject to a low estate tax threshold of $60,000 on U.S. situated assets, generally certain asset classes—including non-U.S. registered mutual funds, U.S. treasury and government agency securities, and bonds and commercial paper—are exempt from U.S. estate taxes. Other assets are taxed progressively up to 55% above the $60,000 threshold.

Please see IRS Publication 515 for more information on tax rates applicable to non-residents.