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Withholding tax on US equity derivatives - 871(m)
Following regulations issued by the US Internal Revenue Service ('IRS') under Section 871(m) of the US tax code, non-US holders of US equity derivatives are taxed on dividend adjustments in the same way as non-US holders of the real US dividends.
Plus500 has an obligation under this US tax regulation to obtain documentation from customers that trade instruments that reference US equities. If you are trading or wish to trade instruments that reference US equities, please fill in the required form.
If you are trading or want to trade instruments that reference US equities, you must fill in the form in your trading account as soon as possible. Failing to provide the form, can result in trading restrictions in your account.
Plus500 customers who are private individuals will need to fill in one of the following forms in accordance with their status -
- Form W-8BEN (for non-US individuals) — Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.
- Form W-9 (for US citizens or residents for tax purposes) — Request for Taxpayer Identification Number and Certification.
For more information, please visit the IRS website.
By default, all individuals are subject to 30% withholding tax under the US regulations. However, the US signed tax treaties with certain countries that may entitle you, where eligible, to a reduced rate of withholding tax. For example, a UK resident may be eligible for 15% rather than 30% withholding tax.
In order for us to apply the relevant rate in accordance to the treaty you may be under, you should fill in the form to claim a reduced rate of withholding under your applicable treaty.
Failing to provide the form within the requested time frame could result in restrictions applied to your trading account.
In the case of CFD trading, the tax amount is paid by Plus500 without affecting customers' balance, therefore, our customers are entitled to 100% of the dividend adjustment. Nonetheless, as per US regulations, our customers are still required to provide tax forms to document their status. However, with regard to the Invest platform, the customers receive the value of the dividend after tax deductions.
This withholding tax applies to dividend adjustments paid for positions on one of the following in-scope instruments:
- Shares and Share CFDs in US incorporated companies
- ETFs CFD which track U.S. equities
- Any non-qualified indices CFD which contain U.S. equities
The tax does not apply to qualified indices: such as: Dow Jones (USA 30 - Wall Street), S&P 500 (USA 500)
The regulations apply to long positions on in-scope instruments opened on or after 1 January 2017.
In every dividend paid for an in-scope position, we calculate the dividend adjustment and deduct the 30% withholding rate (or less when a relevant treaty rate was applied to the account), the dividend adjustment will only reflect the remaining 70% (or more, if applicable).
In the case of CFD trading, Plus500 is taking on the payable tax amount and paying the tax on behalf of our customers, therefore, the dividend adjustments are reflected as 100% of the amount, until further notice. However, with regard to the Invest platform, the customers receive the value of the dividend after tax deductions.