Taxes on a foreign stockholder

Dear Tax Talk:

I am not a U.S. citizen or resident. I’m a resident of Mexico. I made some money in the U.S. stock market in 2000 and lost most of it in 2001. Am I liable for taxes in the United States?



Dear Dave:
A nonresident alien does not have to declare gains or losses in buying and selling shares in the U.S. stock market. Therefore, the gains in 2000 are not taxable. Conversely, the losses in 2001 are of no tax benefit. No tax return is due on either.

Dividends earned on the stock, however, are subject to U.S. income tax. Generally, when a foreigner opens a trading account, he or she completes a
Form W-8BEN. This form advises the account custodian of the account owner’s income tax status for purposes of withholding income tax at the source.

Dividends paid to foreigners are generally subject to withholding tax of 30 percent at the source unless a lower rate applies because of a U.S. tax treaty. The United States has tax treaties with many European and Asian countries and a treaty with only one country to the south: Mexico. Under Article 10 of the U.S. and Mexico treaty, the withholding tax rate is generally 10 percent on dividends.

A full list of tax treaties is available