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Charles Schwab wishes to serve your investment needs in a fair and honest manner, and believes that you should be aware of the basics as to certain U.S. tax and estate considerations that you should take into account as part of your investment decision-making process.
You should consult with your own legal and tax advisor to determine whether any U.S. tax withheld from any income credited to your account may qualify for a foreign tax credit in your jurisdiction of residence.
Overview
As a general rule, non-U.S. citizens or residents who receive U.S. source income are subject to U.S. tax. As a brokerage firm located in the United States, Charles Schwab is required to withhold U.S. income tax for its non-U.S. customers on their U.S. source income.
In order to satisfy U.S. Internal Revenue Service (IRS) tax reporting requirements, non-U.S. persons must declare their country of residence and to verify their status as a non-U.S. citizen or resident to the IRS and Schwab on IRS Form W-8BEN. Schwab will then withhold U.S. taxes from non-U.S. customers based on customer's country of residence as declared on the IRS Form W-8BEN.
In the absence of a valid IRS Form W-8BEN along with required supporting documents (see Required Document Checklist) on file for each account holder appearing on the account, Schwab is required to withhold 28% of all sales proceeds and of certain other corporate actions that result in a cash payment to your account. Without a valid IRS Form W-8BEN, Schwab is also required to withhold tax on non-U.S. customers' accounts at the maximum tax rate of 30%, which is generally higher than rates available to residents of countries that have a tax treaty with the United States. Information included in the IRS Form W-8BEN will be reported annually by Schwab to the IRS and to the account on IRS Form 1042-S.
Please see IRS Publication 515 for more information on tax rates applicable to non-residents.
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