Tag Archives: optionsxpress

Claiming back US dividend withholding tax on non-US equity ETF

As I am not a US citizen, the dividend that I receive from US-listed ETF are subject to 30% withholding tax. It is OK for US equity ETF, such as Vanguard Total Stock Market ETF (VTI) that I own, because the dividend originated from US companies. However, for non-US equity ETF, such as Vanguard Emerging Markets Stock ETF (VWO), the dividend is also subject to the withholding tax. Is there a way to claim back this withheld tax on non-US equity ETF from Uncle Sam?

How to claim?

Well, a Taiwanese investor/blogger by the name of greenhorn has successfully claimed back withheld tax for non-US equity ETF dividend. He detailed the steps in Filing for Tax Refund with Form 1040NR (sorry, it is written in Mandarin). To be able to do this, you need Form 1042-S that you broker (hopefully) send you every year, and the form must show that you have overpaid the tax, as shown in the figure below (from the above article by greenhorn).

Source: greenhornfinancefootnote.blogspot.com

Source: greenhornfinancefootnote.blogspot.com

To be specific, in item “Income Code 06”, Gross Inome (Box 2) should only include US-sourced dividend (e.g. VTI), such that Gross Income (Box 2) times 30% should be less than U.S. Federal tax withheld (Box 7), i.e.

B*30% < C

The difference (C – B*30%) is the overpaid tax that you can claim back. This is good news to me as I can now claim back the withheld tax of my VWO.

But …

However, my 2007 Form 1042-S from optionsXpress shows that A*30% = B, as shown below.

Form 1042-S from optionsXpress

Form 1042-S from optionsXpress

This means optionsXpress does not differentiate between US- and non-US-sourced dividend. My VWO dividend was included in the Gross Income (Box 2) and therefore, I could not claim back my withheld tax from Form 1042-S. The form does not show that I have overpaid the tax, as A*30% equals B.

This is not unique to me, as others have reported that their brokers also include both US and non-US sourced dividend as Gross Income in their Form 1042-S. In Filing for Refund of Overpaid NRA Withheld Tax with Form 1040NR, readers of the article reported that Zecco and MBTrading are two of the brokers that do this, making the Form 1042-S not suitable to claim back withheld tax. Other readers and the blogger greenhorn himself reported that Form 1042-S from eTrade and FirstTrade do differentiate between US- and non-US-sourced dividend, hence effective for claiming back withheld tax.

So, for me, I gave up this avenue to claim back withholding tax on my VWO dividends.

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Cash withdrawal and deposit with two brokers

Just to record my experience in cash withdrawal from optionsXpress (OX) and cash deposit to Saxo Capital Markets (Saxo).

Cash Withdrawal from OX

Prologue

Before I requested for withdrawal, I have noticed my name in OX was spelled in the reverse order, so my name on the cheque issued by OX would be different from my UOB bank account name. I am not sure if the bank will accept such cheque.

I wrote to OX to find out how I can change my account name. The reply was to write them request in a letter to change the account name; and to speed up things, I could scan and email the letter. So I wrote the letter, print, sign, scan and finally email to OX. Within a week, the account name was changed according to my request. I was ready to request for a withdrawal by cheque.

Withdrawal

I login to make the request but forgot the 4-digit PIN required on the withdrawal page. I went to the helpedesk chat room to reset my PIN and finally made the withdrawal. Here is the time line:

  • Sep 3: Submitted withdrawal request.
  • A week after Sep 3: Received the USD cheque.
  • Sep 11: Deposited the cheque into the deposit box at UOB bank. Wrote my name, account number and contact number at the back of the cheuqe.
  • Sep 15: Received a receipt by post for the deposit of the USD cheque. 
  • Oct 10: The money is deposited into my SGD savings account. 
  • Few days after Oct 10: I received a credit advice (below) that gave the details of the commission and conversion rate. 
Credit Advice
Cheque amount  USD 74.12
Less: Correspondent bank agent commission USD 15.00
Less: Correspondent bank charges  USD   0.00
Converted @ 1.4760000 SGD 87.26
Less: Handling commission SGD 10.00
Less: Telex charge SGD   0.00
Less: Postage SGD   5.00
Amount credited SGD 72.26

I am OK with the time taken to withdraw and cash in the cheque, but the commissions are just too high.

Cash Deposit to Saxo Capital Markets

  • Day 1: Issued a SGD personal cheque that bears my name on the front surface. Wrote my Saxo account number and login ID on the back of the cheque. Sent the cheque to Saxo by post; attn to my broker.
  • Day 2: My broker SMS me that the cheque was received and would be deposited in two days.
  • Day 4: The money was deposited into my cash account and ready for trading.
Done!