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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2970
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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you answered 3 years ago to someone: "This means that what

This answer was rated:

you answered 3 years ago to someone:
"This means that what you will really be doing is a Lump Sum distribution from the US IRA. The US-UK tax treaty does cover this subject. Article 17 of the treaty deals with pensions. Since the IRA was generated with money from a 401K it would fall under pensions for tax treaty determination.

Under the previous treaty, a lump-sum payment from a pension scheme was taxable only in the country of residence. So if an individual moved from the US to the UK before receiving a lump sum from a US pension scheme, they would be taxable on the lump sum neither in the US (because of the treaty) nor in the UK (which does not tax lump sums anyway).

The treaty was changed and now the individual will only be taxed in the country where they are resident at time of distribution.

The withholding of the taxes in the US would be the real problem. Could the W8 form cover this with the understanding that you are requesting no withholding based on Tax Treaty provisions under Article 17? Here is a link to the W8 Form:
"
I have the same problem, but mine is the US-Belgian tax treaty. I think I also can do the distribution without withholding and bring it here to Belgium, right?
Two questions: 1. what is a lump-sum distribution? I have two IRAs with two different investment companies, do I have to join them first?
2. When i get the money in Belgium, where do I need to put it?

Welcome and thank you for giving me the opportunity to assist you with your tax question.

 

The W8-BEN would be utilized in your situation, and you would cite Article 17 of the Tax Treaty between the US and Belgium.

 

Yes. You are correct that you can take the distribution and bring it to Belgium.

 

A lump sum distribution is the distribution or payment, within a single tax year, of the entire balance. You do not have to combine the funds from the two IRAs. You would simply have two lump sum distributions.

 

As to where you need to put the money when you get it in Belgium, that is up to you. I cannot advise you what to do with your money. However, my advice would be to research different accounts/plans that are available to you.

 

Please let me know if you require further information or clarification.

 

Thank you and best regards.

Customer: replied 3 years ago.


thank you very much.


About "As to where you need to put the money when you get it in Belgium, that is up to you.", what I meant is if I have to transfer the money directly into some specific type of belgian retirement account in order to qualify for the tax treaty provisions.


 


 

Hi, Paul.

 

If you have the money transferred into some specific type of Belgian retirement account from your US account, that would not be a lump sum distribution, but rather a rollover. From the information in your original question, I was under the impression that you would be taking lump sum distributions from your US accounts to do with as you wish. In any event, neither is a taxable event to you.

 

Thank you and best regards.

Barbara and other Tax Specialists are ready to help you

Hi, Paul.

 

Just a short note to thank you for the "excellent" rating. It is most appreciated.

 

Barb

Customer: replied 3 years ago.

sorry to bother you again, but it is a little hard to believe that indeed we can just not pay any tax.


From the irs website, http://www.irs.gov/Individuals/International-Taxpayers/Pensions-and-Annuity-Withholding


 


we read;


"A nonresident alien can elect exemption from withholding only if he or she certifies to the payer that he or she is not (1) a U.S. citizen or resident alien or (2) an individual to whom Internal Revenue Code section 877 applies (concerning expatriation to avoid tax). The certification must be made in a statement to the payer under penalties of perjury. However, nonresident aliens who choose such exemption will be subject to withholding under Internal Revenue Code section 1441."


:


It seems to say at the same time you can , however you cannot. Would you please explain their statement?


thank you,


Paul

Hi, Paul.

 

Thanks for coming back to me with your follow-up question. As I stated previously and based on the information you provided to me, the W8-BEN would be utilized in your situation, and you would cite Article 17 of the Tax Treaty between the US and Belgium. The following are the instructions for W8-BEN for your review. Please let me know if you require further information or clarification on this.

 

Thank you and best regards,

Barb