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Ed Johnson, Tax Preparer
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hi my name is Allan I am Australian citizen living in ...

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hi my name is Allan I am Australian citizen living in Australia , I am thinking of setting up an account with an American based broker with the aim of buying stock shares that may be either OTC -BB -Nazdaqu ? - or NYSE I have provided a completed W-8BEN FORM but do not really understand what it means . my main concern is the capital gains rules that may apply to any short term profits that I may make thank you for any advice that you may provide
Submitted: 6 years ago.
Category: Tax
Expert:  Ed Johnson replied 6 years ago.

Dear Jay,

Thanks for using Just Answers for this question.

The form W-8BEN is for you to claim treaty benefits with regard to the earnings you receive from your investing. The tax treaty between the U.S. and Australia has a beneficial treatement of this income. Without a determination by the IRS, if you do not have a W-8BEN on file claiming the tax benefits, withholding tax from your investment earnings could be as high as 35%. However when you file this form, the agent who does withholding has to withhold at the treaty rate.

The following publication has a chart that lists the treatry tax rates for various categories of income. Your concern is: interest, dividents, and capital gains.

capital gains, by treaty are 30% and Dividents are at at 5 or 15 percent depending on source; and interest is at 10%.

Short term capital gains are taxed as regular income, except that the treaty rates will apply.

http://www.irs.gov/pub/irs-pdf/p901.pdf

 

 

Ed Johnson, Tax Preparer
Category: Tax
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Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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Ed Johnson
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GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee