30% tax on dividends with US stocks ?

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  1. #1

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    30% tax on dividends with US stocks ?

    Hi

    I'm opening an account with etrade for a HK company, and whereas the agent said there won't be any tax on capital gains, she also said there will be a 30% tax on all dividends - from the US authorities I gather. Is that what non americans in HK pay on their US stocks ?

    Thnka for your input
    Luis


  2. #2

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    Besides the agent it would be only 10% for mainland china residents, so I'm a bit confused.


  3. #3

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    That is certainly what I heard from a (HK resident) friend who got caught out by this - he was investing in US stocks through Citibank and was rather surprised to be hit with a 30% tax on the dividends.


  4. #4

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    that is interesting - what exactly would you be paying the tax for?


  5. #5

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    It is called withholding tax, and generally arises when paying interest or dividends outside the company's home territory. This is done to mitigate tax evasion. Countries with tax treaties often enjoy a lower rate, but as HK has very few significant ones, people living here get hit with the full rate.

    Even Hong Kong has an indirect withholding tax (through not allowing a deduction for profits tax) on interest payments when being paid offshore to non financial institutions.

    Withholding tax - Wikipedia, the free encyclopedia


  6. #6

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    Quote Originally Posted by LuisHK:
    Besides the agent it would be only 10% for mainland china residents, so I'm a bit confused.
    Because China's tax treaty with the USA specifically excludes Hong Kong.

  7. #7

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    i think you have been misled. there is tax withholding on short term cap gains, which is securities sold under 1 year.

    US tax withholding only applies to US sources income. if you invests in US company that has 80% of its income from foreign sources like philip morris, there won't be tax withholding.

    do watch out for MLP which will be 35% tax withholding even for all tax treaty countries.


  8. #8

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    Quote Originally Posted by kale:
    i think you have been misled.
    No - you simply haven't understood the question. The question relates to dividends, NOT capital gains.

  9. #9

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    Quote Originally Posted by PDLM:
    No - you simply haven't understood the question. The question relates to dividends, NOT capital gains.
    he made a statement saying no tax withholding on cap gain which was told by the etrade agent. it is a false statement. I was correcting him on that part.

    also, like i said on the post above, not all dividends get withhold at 30%. check the 80/20 rule. there are a bunch of ADRs listed on US stock market which are treated different.

  10. #10

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    Thanks all for your replies and the extra info ! I definetely had no idea on the points Kale raised. As MLP I guess I'm not too concerned as looking for index funds rather than individual stocks, but can someone else confirm there would be witholding tax on those ETFs if resold before 1 year ?


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