cash dividend for non US resident?

Question

if a non US resident holds a Chinese ADR, if they pay a cash dividend, do you know what's the percentage of the tax withholding is? Thanks.

Answer 1

The dividends on the Chinese ADR are considered US taxable income.

Withholding for nonresident aliens is a flat 30% for dividend income.

Hence, you most likely had 30% of your dividends withheld for income tax.

Details on withholding for nonresidents are included in IRS Publication 519

http://www.irs.gov/pub/irs-pdf/p519.pdf

Answer 2

There arae two questions you need answered. The first is whether China withholds Chinese tax on the dividend distribution, you can probably get that answer from your broker.

The second question concerns U.S. tax. Normally dividends paid from the U.S. are subject to a 30% withholding tax but sometimes this can be reduced if you are resident in a country with which the U.S. has a tax treaty such as France, the UK and a long list of countries available on the IRS website www.irs.gov.

There may however be no U.S. withholding tax on this dividend. If the Chinese company does not have operations in the U.S. the dividend will not be considered U.S. source income but will be treated as forein source income. If a non U.S. citizen or resident receives foreign source income the income is not subject to U.S. tax (with the rare exception if the income is foreign source but connected with a U.S. trade or business. These are technical terms but probably do not apply in your case.)

Sorry for the technical mumbo jumbo but tax can be very complex and fact specific.

Answer 3

Dividends paid to a non-resident alien are subject to taxation at the source. The rate is 30%. The payer of the divident will withhold that from the payments. No further tax returns are required to be filed if this is your only US-source income.

Answer 4

I am not sure there would be any withholding under these circumstances.