How to get refund of withholding tax deducted @ source in US

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VaniB
Posts: 9
Joined: Sat Apr 27, 2013 9:42 pm

How to get refund of withholding tax deducted @ source in US

Post by VaniB »

Without getting into too much details....
I have a client who works for a Canadian sub for a US company. He exercised/sold his stock options on which withholding taxes were withheld in US. He is a Canadian citizen and has no connections to US. I was told to file 1040NR to obtain 100% of the withholding taxes back based on Section 865(a)(2) i.e. income from the sale of personal property by a non-resident shall be sourced outside US. This is according to US tax laws. Would this work?

Second question, the US company has asked the client to file W8BEN so that 0% taxes are not withheld at source in the future. Is there relief from the US Canada treaty so that no withholding taxes are deducted at source. I am only aware of US laws that gives relief in this situation. Could I use the tax treaty provisions in this case.

Your advice is greatly appreciated.
nelsona
Posts: 18675
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes, and Yes. Cdn residents are exempt from withholding by US brokers if they submit either a W-9 (as a US person) or in this case a w-8BEN, citing the treaty.

1040NR (using the NEC portion of the return with 0% taxrrate) is the way to recoup the taxes already withheld.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
VaniB
Posts: 9
Joined: Sat Apr 27, 2013 9:42 pm

Post by VaniB »

Many thanks Nelsona
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