Does anyone know what has to be done on this issue:
I own 150 shares of Enterprise Product Partners for almost 2 years, and last week I received in my mailbox an envelope from US company EPD with my Schedule K1 form for taxation purposes. I am a foreign investor, non US person, who invested through online platforms such as Trading 212 and Revolut. I thought that every tax I might pay will be withhold at the source. Needless to say that I should be a brilliant tax advisor to understand what’s in that paper I’ve got. Any help would be appreciated, thank you. I don’t know what to do.
After searching online I found out that EPD is an MLP which is somethimg different, but what am I suupose to do ?
What country are you based in, that would help us try and give advice on your tax position.
Well, US law regarding MLPs says that foreign investors are taxed at the highest rate, with withholding. Some 38% i think. In reality, they ought to be taxed less, but the IRS hopes that you would then file your taxes to them, where they would then correct it… From your other incomes taxed by the IRS. Big ■■■■ no.
As far as I can tell, us getting 0% withholding tax here is not supposed to happen, and as a foreign national you are never required to file with the IRS. They just try to bait you in.
I am from Romania. The brokerage firm that works with Revolut app (Drivewealth) where I hold the 150 shares, doesn’t seem to withhold any percent from the quartely dividend (distribution), so I’ve got entire amount of it, no withholding. I also have 25 shares of EPD on the Trading212 app for a year and a half now, and there have not been any withholding here either, except in the last distribution which was in february, where they applied a 21%. I would have been happier if they applied that percent at the source and leave me alone now.
i have the same question im based in Greece the tax on dividend is 5% but i got 30% withhold and i cant understant the reason
This got reverted to 0% a few days afterwards. Can’t figure out why though, by all looks we should be withheld 37% on all MLPs distributions.
Not gonna complain while it lasts, and I sure as heck won’t be filling anything to the IRS!
Yes, that’s correct. Yesterday I’ve received dividends from EPD, both from Revolut and Trading 212 and there was no tax withholding in any. Still, other dividends received were taxed with various percents. As a non us person, I think that tax withholding is a broker responsability and I won’t file any IRS schedulek1. I wonder though that at some point they could do something against me. Any thoughts?
Against you, nothing. If there is any repercussions coming out of this, it will fall on the broker.
The IRS has no authority over you.
I still wonder if there would be any good reason for the effective 0%, as you mentioned Revolut does the same, so maybe every checks out? Just cannot find anything supporting this. Foreign investors in MLPs that aren’t holding shares in their name is a rather undocumented topic, but all points to 37%.
Ive just read in other threads that MLP distributions (dividends) aren’t considered regular dividends but rather Return of Capital and not withhold at the source. So it seems that these dividends must be reported to tax authorities in the country of residence.
Well, that is the case in the US; MLPs distributions aren’t dividend, but Return of Capital indeed, and hence have a 0% withholding tax as well as no income/dividend tax in the US.
Instead, it lowers your cost basis (to a minimum of 0), and when you are selling shares, you are taxed (higher) on Capital Gain instead. Also, US investors have to file their taxes in every states that the pipeline crosses, a bit of a hassle.
But when it comes to foreign investors, it is a different story.
Here is an example from the dividend announcement from MMP (also a Pipeline MLP, with the same tax requirements to EPD)
While US investors have indeed 0% withholding and 0% income tax, but instead Capital Gain, we foreign investors are subject to the maximum rate of 37% (and apparently not lowered by tax treaties), which is over taxation from the IRS in order to bait us into filing tax returns to them; if we did, we would get a tax reduction on our other taxable incomes. And if you wouldn’t file with them, then they’re happy with the 37% in any case.
Thank you for taking your time to answer me. I came to realize that you are well informed and that’s indeed the case. The tax package schedule k1 document I’ve got in my mailbox is from the EPD and it contains informations for a typical us taxpayer, at least a dozen of states in which EPD has bussines and it’s way beyond my understanding what I should do with it. I even thought to sell my EPD shares as it’s too complicated. But I think you are right: it’s american broker responsability to withhold any tax before the payment is passed to me.
Point is, you have nothing to do, nor to worry about. Just file your standard taxes in your own juridiction and you will be fine!
You might want to add a disclaimer when giving tax advice, you never know
Exista un tratat intre Romania si SUA pentru a evita dubla impunere fiscala. Declara la ANAF venitul din dividende din strainatate si vei plati 5% impozit. Este declaratia unica. Oricum trebuie sa declari si venitul din dividente impozitat la sursa, iar daca este sub 5% diferenta va fi impozitata, daca depaseste 5%, nu vei mai fi impozitat. Daca depasesti 12 salarii minime pe an, platesti si contributia la sanatate de 10%.
I too got dividends from SCCO with 0% tax withhold, these seems odd to me, would rather the usual taxation at source than having to loose time understanding if it means problems for me in the future.
We replicate the exact same charges applied to us by our intermediary when distributing dividends. In this case, no tax was withheld on their end, hence why no tax was applied to the amounts paid out by us.
Hi @Momchil.G, thank you for the clarification. This means i can be tranquil about it ? And, do you have any explanation why there was 0% tax withhold for this stock ?
Due to the company’s foreign revenue sources, the paid-out dividend was not taxed in this case. While this in itself is not a rule of thumb, and we cannot dive into the specifics, you can rest assured that everything was executed accordingly on our end.