Email of the day
Comment of the Day

July 17 2012

Commentary by David Fuller

Email of the day

On dealing with Singapore brokers:
"A few years ago I became "sold" on Singapore as a region of "good Governance" from Fuller Money. I opened a brokerage account there and learned that they withheld dividend payments on the order of 30% and even though no treaty with my Bahama domicile they would not release my dividends. So I transferred the account and they did everything they could to stall the transfer.

"Of course, had I known this in advance, I would have left all dividends to accumulate. I am now looking for a discount broker in Singapore but have not been successful.

"My observation is that in many ways Singapore and the U.S. are joined at the hip or at least Singapore is intimated by the U.S.

"Thank you for your on going effort to keep the "collective" informed. I don't particular like the socialist connotation of the use of the term "collective" "

David Fuller's view I did chuckle over you last sentence.

It is true that some perfectly good words that have existed for a very long time can be given a new meaning by special interest groups. However, I can assure you that in referring to the Collective of Subscribers, often shortened to the Collective, there is no socialist connotation implied. Perhaps you or another subscriber can suggest a more appropriate collective noun for all of you.

Meanwhile, we like referring to the Collective, feeling that it stands for our shared interests in the markets, some voluntary pooling of information, and Fullermoney's mission statement of Empowerment Through Knowledge.

Re Singapore, I have maintained for decades that it has the best economic governance of any country.

Eoin produced this PDF from Deloitt on international tax. On the first page, under the heading "Withholding tax" it says:

"Dividends - No withholding tax is levied on dividends paid by companies resident in Singapore."

This indicates to us that the problem is not with Singapore.

Eoin also produced this IRS form: Federal Income Tax Withholding and Reporting on Other Kinds of U.S. Source Income Paid to Nonresident Aliens

Here is the section which appears applicable to you, as a US citizen:

"Dividend Income
If the dividend income is from a U.S. source and paid to a nonresident alien, it is reportable for any amount in excess of zero. Withhold at 30% or lesser tax treaty rate (See Table 1 in IRS Publication 515 or 901). The beneficial owner of the income may claim the benefit of the tax treaty article which deals with "Dividend Income." The beneficial owner may claim the lesser tax treaty rate by filing Form W-8BEN with the withholding agent. The withholding agent will report the payment on Forms 1042 and 1042-S, even if the entire amount of income is exempt under a tax treaty."

While not exactly written to enlighten, the implication seems to be that the US IRS requires its trade partners, of which Singapore is one of many, to withhold 30% of any dividends paid to US citizens for Uncle Sam. It also seems that in order to get any of that back, you need to obtain from the IRS and fill in the forms specified above.

Note: tax is certainly not our areas of expertise so you might want to check this out with your accountant.

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