American shares tax - some questions

[absolutezero]

I'm thinking of buying some US listed shares for the first time. NYSE listed.
I will be holding them in an ISA.

I have completed form W8-BEN which reduces dividend tax from 30% to 15% and lodged it with my broker (iWeb).

Are there any other US tax issues I need to be aware of?
I don't want to end up with a US Capital Gains Tax bill or equivalent or having to fill in a US tax return.

Any advice from any of the knowledgeable folk here?

[monabri]

I'm thinking of buying some US listed shares for the first time. NYSE listed.
I will be holding them in an ISA.

I have completed form W8-BEN which reduces dividend tax from 30% to 15% and lodged it with my broker (iWeb).

Are there any other US tax issues I need to be aware of?
I don't want to end up with a US Capital Gains Tax bill or equivalent or having to fill in a US tax return.

Any advice from any of the knowledgeable folk here?

No...you're good to go! You will not have to fill in a US tax return ( assuming you plan to stay in the UK and not move to the US or become a US citizen).

[SalvorHardin]

(Deleted duplicate post)

[SalvorHardin]

As monabri has said, no need for an American tax return as you won't have an American tax liability after withholding tax. You pay British CGT and dividend tax.

However, be aware that American domiciled funds can create American tax liability. This is because pass through taxation can apply, where investors get taxed on capital gains realised by the fund.

A similar warning applies if you are thinking of limited partnership units. Some listed "companies" are LLPs and their dividends (distributions) are treated as self-employed income. This creates an American tax liability and may require you to do an American tax return (which is painful).

A few years ago I ended up with some LLP shares when Brookfield spun off one of its businesses. I sold them ASAP to avoid getting a dividend. The IRS treated the LLP shares as a distribution and the broker deducted withholding tax. Ouch, but at least I didn't have to do a tax return.

[monabri]

Can we confirm that any CGT is not applicable for absolutezero in an ISA?

[absolutezero]

Can we confirm that any CGT is not applicable for absolutezero in an ISA?

Thanks. That's my understanding from a read around of the subject - just the 15% withholding tax - but there is no substitute for asking people who have been there and done that for their experiences!

[absolutezero]

As monabri has said, no need for an American tax return as you won't have an American tax liability after withholding tax. You pay British CGT and dividend tax.

However, be aware that American domiciled funds can create American tax liability. This is because pass through taxation can apply, where investors get taxed on capital gains realised by the fund.

A similar warning applies if you are thinking of limited partnership units. Some listed "companies" are LLPs and their dividends (distributions) are treated as self-employed income. This creates an American tax liability and may require you to do an American tax return (which is painful).

A few years ago I ended up with some LLP shares when Brookfield spun off one of its businesses. I sold them ASAP to avoid getting a dividend. The IRS treated the LLP shares as a distribution and the broker deducted withholding tax. Ouch, but at least I didn't have to do a tax return.

That's the case for funds, but bog standard single operating companies?

The company I am interested in is an "Inc"/LLC rather than an LLP.
All the SEC filings mention Inc and LLC and a CTRL+F search gives 0 records of LLP in the 10-K annual filing document.

So is the only tax liability the 30% withholding tax on dividends (reduced to 15% by W8-BEN)?

That's another question. Having filled in W8-BEN, does the broker pay the 15% dividend tax, or does the company/registrar withhold it (as the name would hint at)?
(The company does not currently pay a dividend... but maybe one day)

[mc2fool]

Are there any other US tax issues I need to be aware of?

Not while you're still alive. But if you die with over $60K of US shares you'll be liable for US estate tax.

https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns

[yorkshirelad1]

Are there any other US tax issues I need to be aware of?

Not while you're still alive. But if you die with over $60K of US shares you'll be liable for US estate tax.

https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns

The matter of inheritance tax and US assets for international holders has cropped up on TLF before: see: https://www.lemonfool.co.uk/viewtopic.php?t=31800

[SalvorHardin]

The company I am interested in is an "Inc"/LLC rather than an LLP.
All the SEC filings mention Inc and LLC and a CTRL+F search gives 0 records of LLP in the 10-K annual filing document.

So is the only tax liability the 30% withholding tax on dividends (reduced to 15% by W8-BEN)?

That's another question. Having filled in W8-BEN, does the broker pay the 15% dividend tax, or does the company/registrar withhold it (as the name would hint at)?
(The company does not currently pay a dividend... but maybe one day)

Yes, America levies a 30% withholding tax on dividends, which is reduced to 15% if you have completed the W8-BEN form.

The brokers deduct the withholding tax, so your account is only credited with the net dividend. Remember that the withholding tax, if the shares are held outside an ISA, can be offset against your UK tax liability. In particular dividend tax.

I suspect that if an American registrar was sending a dividend to a certificated shareholder who was not an American taxpayer then they would deduct the withholding tax. Otherwise how would the IRS get the withholding tax without chasing the shareholder themselves, or relying on them to pay the tax? But I can only speak for online accounts and shares held with a full service broker as I have never received dividends from a certificated American shareholding.

[mrodent]

I have completed form W8-BEN which reduces dividend tax from 30% to 15% and lodged it with my broker (iWeb).
... Any advice from any of the knowledgeable folk here?

Some of them have already spoken. As a certified non-knowledgeable eejit, I can now speak. Just to point out the bleedin' obvious.

I have no idea what shares you're contemplating buying, but BRK.B (Berkshire Hathaway) is great from a UK taxpayer's PoV: under the tenure of Buffett and Mingus they (I believe) never issued a dividend: all is capital growth.

Ultimately I have no idea whatsoever whether (the anointed successor) Abel, who has probably been taking a highish percentage of the decisions for quite a few years now, ever will. It really simplifies things though. The orange beast's attempt to drive down the USD (an avowed aim, no doubt contradicted by many other worthless utterances over the years), combined with the depressed state of US markets, combined with the laughable negative reaction to Buffett's "revelation" that he was stepping down somewhat more at the venerable age of 94, might make it quite a nice proposition currently. Just an idea, as you've crossed the threshold of the W8-BEN and are now An Initiate. One Of Us. A Person Of Substance. I just bought £40k's worth today to add to my stash.

[1nvest]

I believe, not sure, that if you own more than $60,000 of US assets then US estate tax (similar to our inheritance tax) rules can kick in. Under US/UK tax treaty we get the same (very generous) allowances as Americans, something like $12 million exempted - BUT you (or rather your heirs) have to fill in the correct forms within the correct timescale or otherwise be treated as others - end up having to maybe pay US estate tax on total global assets i.e. potentially a complete headache for heirs. Shares bought in the way of a US stock fund in a Irish domiciled ETF within a ISA ... and no headaches.

[absolutezero]

Are there any other US tax issues I need to be aware of?

Not while you're still alive. But if you die with over $60K of US shares you'll be liable for US estate tax.

https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns

Oh joy!

[absolutezero]

Thanks for all the replies.
I posted (yes posted - as in an envelope) to my broker on Tuesday morning
Hopefully they will process it quickly and I can buy.

[Sorcery]

Thanks for all the replies.
I posted (yes posted - as in an envelope) to my broker on Tuesday morning
Hopefully they will process it quickly and I can buy.

I am going to leave a permanent message for my broker, to sell everything US when I die, or preferably a minute before.

[1nvest]

Thanks for all the replies.
I posted (yes posted - as in an envelope) to my broker on Tuesday morning
Hopefully they will process it quickly and I can buy.

I am going to leave a permanent message for my broker, to sell everything US when I die, or preferably a minute before.

They'll chase you (heirs), and unlike the UK trying to get Americans extradited there's near zero protection in the other direction.

[Sorcery]

I am going to leave a permanent message for my broker, to sell everything US when I die, or preferably a minute before.

They'll chase you (heirs), and unlike the UK trying to get Americans extradited there's near zero protection in the other direction.

Serious question, so how long do you need to wait after selling US share holdings before death, to avoid getting tangled up with US estate taxes?

[Sorcery]

They'll chase you (heirs), and unlike the UK trying to get Americans extradited there's near zero protection in the other direction.

Serious question, so how long do you need to wait after selling US share holdings before death, to avoid getting tangled up with US estate taxes?

Microsoft's copilot answered :

Once you sell your US shares, they are no longer considered US situs assets, meaning they are generally not subject to US estate tax if you pass away afterward. However, the key factor is when the proceeds are transferred out of US jurisdiction.
- Immediate Relief Upon Sale: As soon as the shares are sold, they are no longer classified as US assets for estate tax purposes.
- Cash Holdings in US Accounts: If the proceeds remain in a US brokerage or bank account, they could still be considered part of your taxable estate. US cash deposits are typically exempt from estate tax, but other financial instruments may not be.
- Transferring Funds Internationally: Moving the proceeds to a non-US account ensures they are outside the scope of US estate tax.

Good enough for now imho.

[1nvest]

They'll chase you (heirs), and unlike the UK trying to get Americans extradited there's near zero protection in the other direction.

Serious question, so how long do you need to wait after selling US share holdings before death, to avoid getting tangled up with US estate taxes?

I'd guess a day given the US is now running to T+1. Increasingly countries are sharing data, for instance a W8BEN is pretty much just a cross reference of your UK NI number to a allocated US tax number. As part of probate your death (NI number) will be posted and other countries can check that against their records and in some cases your heirs could be liable for 'death duties' in both the UK and elsewhere. Under UK/US tax treaty that agrees that you only pay once, the UK will discount any duties paid in the US and vice versa. It also provides us with the same allowances as Americans ... BUT you have to fill in the correct forms, correctly completed and submitted in the correct timescale, it can then take months and if a older version of the form was used or there was a mistake ... you'll be outside of the correct timescale to re-submit. So you need a good UK solicitor whose expert at such submissions (as they might be liable if incorrectly filled in/submitted). In which case you might also use them for probate/your will, and make sure your executor knows to contact them asap after your death to get things rolling. In which case buying US stocks in the US (NYSE/whatever) is likely fine. If not then your heirs would be better placed if you held something like a Irish domiciled US stock ETF as then its not you who is registered as the US stocks shareholder, the ETF provider is.

The progression path is towards things becoming even worse, everyone having all their movements/actions/thoughts recorded, visually (cameras), tracking (phone), thoughts (internet searches etc.), transactions etc. In effect a open prison system. The majority have simply accepted that imprisonment - many even see publicity as being a form of celebrity status. In the past the state couldn't even impose income tax as the common response back then when asked how much they earned or had saved was 'none of your business'. As-is now and they're shifting down to where near every penny you have, earn, spend will be noted/tracked. Which is inclined to lead on to the likes of penalties being automatically taken from you for even casual infringements of 'not having been a good citizen' - potentially even with your activities being blocked due to not having a high enough good-citizen point score.

Nowadays people don't own their own home even though they might believe they do, they now just have their name on the title. Money you deposit into banks becomes the banks money, when you ask for some back/out that's considered more as a loan by the bank to you - you may be interrogated as to why/where you intend to spend that money. Stocks aren't registered in your name, they're registered in the brokers name. AI and big data even tracks all bitcoins and if you receive any 'dirty' bitcoin could have that confiscated and potentially other assets as well.

The tax rule book is so extensive and obscure that practically anyone could be found to be guilty one way or another, a total flip from innocent until proven guilty. Yes that still stands but is a case of you and your limited finances/representation going up against a entity with mighty resources/funding - judgement is more inclined to be awarded to HMRC than you.

But people don't care what is being imposed upon them or the future that they are leaving for their children. You don't see many police around as they just don't care about protecting you, rather they can solve things after events from a office desk, see for instance where a attacker came from and subsequently went to and make a arrest. Presently that takes many man hours (cost) to run through, however as AI/big data expands so it might become more automated/quicker.

[SeagoonN]

Not while you're still alive. But if you die with over $60K of US shares you'll be liable for US estate tax.

https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns

Oh joy!

What happens if the US shares are held in a joint account eg a married couple?
Would it be fair to assume that each partner has a $60,000 allowance for US Estate tax, ie a total of $120,000?