# W-8ce



## sw2b

Hi!
Finally I have filed I-407 and received the paperwork from the US embassy. Now I want to make sure of that I understand the process of W-8 CE. As far as I know after checking about covered expatriates, I am not one of them (no high income, no 2m, 5 years tax filing). But I am expatriates due to 8 years or more of having Green Card. 

Should I, as non covered expatriates, send W-8CE to 401K companies in USA anyway? I don’t fully understand of what W-8CE will do if I, as non covered expatriates, send it to companies. Can anyone explain about how W-8CE may affect non covered expatriates? If yes, should I also send to Traditional and Roth IRAs companies (I believe they are not qualified for W-8CE)?

If anyone can give me advice asap, I will appreciate it because 30 days after acceptance of I-407is coming up soon.

Thank you!!


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## Moulard

I have to say this is way out of my depth.. but I would trust what Phil Hodgen has to say as a starting point.

https://hodgen.com/income-taxation-of-a-covered-expatriates-401k-plan/


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## Bevdeforges

Generally speaking, it's the financial institution that holds your 401K or other investment account that will ask you for either a W-9 or a W8CE or other form. The purpose of these forms is to cover the financial institution's butt concerning whether or how much withholding to take on any and all withdrawals from your account(s).

W-9 is for "US persons" - i.e. those subject to filing US tax returns and taxable at normal income tax rates. Using this form, you can request that no withholding be taken (say, if you won't owe taxes or are covering your tax obligation by filing quarterly payments or by having withholding taken from another source that will cover your eventual obligation). Or you can have regular withholding taken on your withdrawals for the fund based on the standard withholding tables.

The various forms of the W8 are for non-US persons. Generally speaking, all financial institutions in the US will be required to withhold 30% of all withdrawals, based on the notion that you are subject to non-resident tax provisions. If you have US source income from business activities within the US, you may wind up having to file a 1040NR (non-resident) to settle up your US taxes. But if your US income is limited to your US investments (including the 401K or other deferred tax plans), the tax rate is 30% and there is no need to file any forms at all with the IRS.
Cheers,
Bev


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## JustLurking

sw2b said:


> Should I, as non covered expatriates, send W-8CE to 401K companies in USA anyway?


*No*. Absolutely *do not do this*.



sw2b said:


> I don’t fully understand of what W-8CE will do if I, as non covered expatriates, send it to companies. Can anyone explain about how W-8CE may affect non covered expatriates?


W-8CE is the US's "voluntary" waiver of tax treaty rights (done under duress, so of course not voluntary at all). It implements part of the 'exit tax', making it one of the ways by which the US has unilaterally overridden some of its tax treaty commitments, so on that score alone it is odious.

In your case, it is both odious _and_ completely inapplicable, since it only applies to 'covered' expatriates, and you are not one and so do not need to "voluntarily" waive your US tax treaty rights.

If you did send a W-8CE to your 401k provider anyway -- note that no provider would ever _request_ one -- it would probably trigger a round of perpetual future financial difficulty from which you may never be able to fully extricate yourself.

From now on, forget you ever heard of W-8CE would be my advice.

What you _should_ do fairly soon, now that you are no longer a 'US person', is send each of your US 401k and IRA providers a W-8BEN to override any existing W-9 they may hold.
.


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## Bevdeforges

Good advice - don't send anything until and unless you are asked to do so. (In any event, many financial institutions use their own forms - the W-9 and W8 are not required, since they don't go to the IRS anyhow.) In many cases, the institution's own form will ask in a less officious (and less bureaucratic) tone for precisely what information they actually need (to cover their own butts).
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> Good advice - don't send anything until and unless you are asked to do so. ... In many cases, the institution's own form will ask in a less officious (and less bureaucratic) tone for precisely what information they actually need ...


Not entirely. Sometimes you have to proactively let them know of something.

Vanguard, for example, won't let you do much of anything with an account until they have either a W-9 or a W-8BEN (or equivalent) on file. But once they have one, they have no way of knowing of any change of status from one to the other unless you tell them. Which you do by sending them the "opposing" form. They aren't going to ask though, because they have no reason(*) to.

Recall that we saw what happens when you don't update a broker just last week. This was mild compared to what can happen when 401ks and/or IRAs become involved.

(*) A W-8BEN can 'expire' after a period, so a provider _should_ ask again if that happens. A W-9 can however never expire on its own.


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## sw2b

Thank you for all advices. To be sure, should you recommend me to contact my 401k providers what to file with them due to change in my status in USA (my GC abandonment)? Are they need to be done within 30 days as well?


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## JustLurking

sw2b said:


> Thank you for all advices. To be sure, should you recommend me to contact my 401k providers what to file with them due to change in my status in USA (my GC abandonment)? Are they need to be done within 30 days as well?


_At some point_, you will want to have lodged a W-8BEN with your providers. Unlike the execrable W-8CE, though, this has no deadline.

It is however best if you do send them the W-8BEN well _before_ you take any payments or withdrawals, execute any rollovers, or otherwise take any other 'significant' actions in your pensions. Without the W-8BEN the provider will probably take inappropriate tax withholding, and leave you having to file a 1040NR with the IRS, and perhaps a whole heap of other forms, to get your money back. In practice, then, you might as well do them now as later on.

Ideally you will want nothing more to do with the IRS ever again in future. Having the W-8BEN completed for your 401k and IRA providers, as well as any US banks or brokerages where you also still hold financial accounts, will help to ensure that happens.
.


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## Bevdeforges

I'd tend to wait and see whether your financial institutions contact you to request some sort of documentation of your status.

I know that the outfit where I have my IRA (which also has 401K plans) has a policy that they will withhold 30% on any withdrawals transferred outside the US - regardless of whether the plan holder is a US person or not. Once you're no longer a US citizen, you're stuck with that 30% rate - but the good news is that, if they have already withheld that, you have no need to file a 1040NR. They have their taxes. They are happy and you have your money.

For US citizens living overseas, it makes sense to have the financial institution make all payments to your US bank and then you transfer the money from there to your home country account.
Cheers,
Bev


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## Bevdeforges

I'd tend to wait and see whether your financial institutions contact you to request some sort of documentation of your status.

I know that the outfit where I have my IRA (which also has 401K plans) has a policy that they will withhold 30% on any withdrawals transferred outside the US - regardless of whether the plan holder is a US person or not. Once you're no longer a US citizen, you're stuck with that 30% rate - but the good news is that, if they have already withheld that, you have no need to file a 1040NR. They have their taxes. They are happy and you have your money.

For US citizens living overseas, it makes sense to have the financial institution make all payments to your US bank and then you transfer the money from there to your home country account.
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> I'd tend to wait and see whether your financial institutions contact you to request some sort of documentation of your status.


I'm afraid that I disagree entirely with this approach, Bev.

If a financial institution already has you on record as a US person, typically with a completed W-9, they have no reason to request anything else from you in future. In that case it's up to you to set them straight, without waiting to be asked. Because they almost certainly won't ask.

As mentioned upthread, we've already seen what happens when you don't proactively tell your financial institution that you are no longer a 'US person'.



Bevdeforges said:


> I know that the outfit where I have my IRA (which also has 401K plans) has a policy that they will withhold 30% on any withdrawals transferred outside the US - regardless of whether the plan holder is a US person or not.


If this were my 401k or IRA provider, I would be transferring away from them. For them to do this is both deeply unhelpful and also completely unnecessary.

Is this by any chance Fidelity? Either way, my suggestion would be to transfer to Vanguard. They do exactly what they should.



Bevdeforges said:


> Once you're no longer a US citizen, you're stuck with that 30% rate - but the good news is that, if they have already withheld that, you have no need to file a 1040NR. They have their taxes. They are happy and you have your money.


But that is not the case here. Many non-US folk, including the OP, will not be "_stuck with that 30% rate_" at all.

The US/Sweden tax treaty specifies a 0% withholding rate for pensions and annuities. This is because US pensions paid to NRAs living in Sweden are taxable only to Sweden (treaty Article 19, para 1, and see also the IRS's tax treaty withholding rates table, that shows this 0% rate to be used by 'withholding agents').

If the provider withholds 30% for any reason then the OP would have to file a 1040NR to get that 30% back from the IRS. And of course wait months for the IRS to refund. Potentially up to a year and a half, if you have the poor judgement to take a payment right at the start of a year. (Sweden will of course not allow a tax credit for this 30% over-withheld, or any non-zero rate of US tax on this for that matter -- why would it?, since the tax treaty clearly states that the US cannot tax pension payments made to NRAs living in Sweden.)

The main point of sending a W-8BEN to a broker or provider is to get them to apply the right US tax withholding rate for the payment in question. If they're not going to do that, but instead stick to some random blanket policy, then again, the thing to do is to transfer to a provider who _will_ handle things correctly.


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## Bevdeforges

JustLurking said:


> Is this by any chance Fidelity? Either way, my suggestion would be to transfer to Vanguard. They do exactly what they should.


Actually, this IS Vanguard. Found this out when I was setting up payments from my IRA because I needed to have some level of withholding in order to avoid the expense and hassle of making quarterly payments on my US taxes.



> The US/Sweden tax treaty specifies a 0% withholding rate for pensions and annuities. This is because US pensions paid to NRAs living in Sweden are taxable only to Sweden (treaty Article 19, para 1, and see also the IRS's tax treaty withholding rates table, that shows this 0% rate to be used by 'withholding agents').
> 
> If the provider withholds 30% for any reason then the OP would have to file a 1040NR to get that 30% back from the IRS. And of course wait months for the IRS to refund. Potentially up to a year and a half, if you have the poor judgement to take a payment right at the start of a year. (Sweden will of course not allow a tax credit for this 30% over-withheld, or any non-zero rate of US tax on this for that matter -- why would it?, since the tax treaty clearly states that the US cannot tax pension payments made to NRAs living in Sweden.)
> 
> The main point of sending a W-8BEN to a broker or provider is to get them to apply the right US tax withholding rate for the payment in question. If they're not going to do that, but instead stick to some random blanket policy, then again, the thing to do is to transfer to a provider who _will_ handle things correctly.


There are a few other countries that claim the right to tax US pension proceeds. I'd be really interested to hear from folks out there if they have been successful in getting their financial institutions to waive withholding on international transfers in those cases. (Not that I don't believe it - just that I'm curious how these things work. Recently went through a long and round-a-bout process of validating a friend's identity with her US bank via phone and was just wondering if there might be a way to avoid the hassle somehow.)
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> Actually, this IS Vanguard. Found this out when I was setting up payments from my IRA because I needed to have some level of withholding in order to avoid the expense and hassle of making quarterly payments on my US taxes.


Well, that's disappointing, since it completely contradicts statements made elsewhere by Vanguard, for example this one. If I were you, I'd pursue this further, raise a complaint, and so on.

As an NRA customer of Vanguard, a policy being applied to non-resident US citizens won't affect me, but it doesn't bode well for what I might expect as an NRA. I've been personally assured by Vanguard that they _will_ follow the treaty as claimed on a W-8BEN, with no withholding on pension withdrawals, but I've not tested this yet. I plan a modest Roth conversion later this year, so perhaps that will flush out any bugs.

It's very dispiriting that even with all of this international withholding regulation carefully spelled out, brokers and providers can ignore it all and just apparently do what they want to do anyway (and always to the detriment of customers). I also can't imagine the IRS being too thrilled by receiving a lot of nugatory 1040NR returns claiming repayments for withholding that should never have occurred in the first place.



Bevdeforges said:


> There are a few other countries that claim the right to tax US pension proceeds. I'd be really interested to hear from folks out there if they have been successful in getting their financial institutions to waive withholding on international transfers in those cases.


It's not a pension, but Vanguard have correctly withheld 15% on dividends and 0% on interest for me on my _non-wrapped_ account there, and reported all of this correctly on a 1042-S based on a filed W-8BEN.

Their actions on my IRA and 401k are still to come, including my imminent Roth conversion. Even though they've assured me personally I'll face no US withholding on my pensions, I'll watch with interest. And some mild dread.

As if cross-border pensions and investing were not already complex enough without providers flouting the rules...


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## Bevdeforges

Actually, I prefer handling my IRA the way I'm doing at present. (Lots of reasons for that, which I won't go into here.)

The other difference may be NRA vs. USC. And, as with any bank or financial institution, there is always the matter of the regulations vs. internal policy. Since I do owe taxes on the IRA withdrawals (that was the deal when I took the deductions for my IRA contributions), I'd prefer to keep all my tax relevant transactions and accounts in the US for the time being. 
Cheers,
Bev


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## sw2b

I am very thankful to all of your advices and time. After reading all, now I have other questions in regards to how to handle pension plans. I have 401k with 4 different providers and Roth and Traditional IRAs in Fedility. What should I do with them? Shall I combine all to one company or just keep them as is? I do not want pay any transfer or extra fees if possible.. I am intend to keep US bank without sending them any W form because, somewhere, I read that bank account cannot be kept after green card is relinquished. At this point, my plan is to retire in Japan. 25 years to go before my retirement so I have plenty of time to think through this. Thanks again!!


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## Moulard

sw2b said:


> I read that bank account cannot be kept after green card is relinquished.


There is no law that I am aware of that says a NRA cannot have a US Bank account. There are NRA tax withholding rules the banks are meant to comply with but that is all. A bank in question could have that as its own internal policy not to allow accounts for NRA, but that is it.

Most banks do require you to be physically present to prove your identity when setting up an account (or in some cases before you are allowed to withdraw funds), but that is different to retaining the account.


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## iota2014

Moulard said:


> There is no law that I am aware of that says a NRA cannot have a US Bank account.


Indeed. Capital import is what the USA is about. 

The US is the world's leading tax haven, now FATCA has blighted all the others.[/QUOTE]


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## JustLurking

sw2b said:


> I have 401k with 4 different providers and Roth and Traditional IRAs in Fedility. What should I do with them? Shall I combine all to one company or just keep them as is? I do not want pay any transfer or extra fees if possible.


There _should be_ no restrictions on you doing this, although there's also no compelling tax or other reason to do it besides it just being easier to track and manage one pension provider's accounts than four of them.

However, some providers may be more NRA-friendly -- or rather, less NRA-hostile -- than others, so if you do consolidate try to be sure to do it into a provider that won't give you problems when you later want to access the money. It's the usual spread risk problem. Four providers means four times the likelihood of one of them being problematic, but if they are then it only affects a quarter of your funds and you still have access to the other three while you sort things out.



sw2b said:


> I am intend to keep US bank without sending them any W form because, somewhere, I read that bank account cannot be kept after green card is relinquished. At this point, my plan is to retire in Japan.


As already mentioned, a bank does not have to force an NRA to close an account, but neither are they required not to close it. Some banks have a commercial policy of not handling NRAs because of the huge reporting hassles imposed by the IRS, but others are okay. Right now, it's a bit of a gamble over which your bank might be (or might later become). I've personally had no issues with my credit union account, and anecdotally it seems that the larger a bank is, the more likely it is to have a no-NRAs policy. All in all, though, rather unsatisfactory.

As for retiring in Japan, now you will also want to closely read the US/Japan tax treaty, in addition to the US/Sweden one. To give you a head start... the US/Japan treaty rate for US tax on pension payments to a Japanese resident is also 0% (article 17, paragraph 1), so like already noted for Sweden, you _should_ receive payments from your IRAs and 401ks with no US tax deductions or withholding by your provider.

One final point. The US applies estate taxes for NRAs when holdings exceed just $60k, compare to the $5.49mm allowed to US citizens. Japan has an estate tax treaty with the US, but Sweden does not. Estate tax treaties tend to be governed by _domicile_ rather than residency. If you are domiciled in Sweden you might be at risk of US estate taxes if you are unwise enough to die while still holding these IRA and 401k investments. Japanese domicile should however protect you, since if covered by a US estate tax treaty you generally get the higher $5.49mm or whatever limit allowed to US citizens. Unfortuntely, domicile is a horribly slippery and elusive thing to define.

If you find all of this a major pain in the rear to navigate, you're not alone. The US makes holding cross-border pensions a complete nightmare. Typically also a lifelong one. My general advice to anyone temporarily working in the US would be to think _very carefully indeed_ before saving into IRAs or 401ks at all.


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## sw2b

Are there any better 401k company for NRA among T.Row Price, American Funds, MassMutal, or Fedility?


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## JustLurking

sw2b said:


> Are there any better 401k company for NRA among T.Row Price, American Funds, MassMutal, or Fedility?


Unfortunately, it's likely that nobody really knows. And of course, the ground keeps shifting anyway, so that last year's fine provider for NRAs becomes next year's nightmare one.

For what it's worth, I've seen both Fidelity and TIAA-CREF called out elsewhere as becoming increasingly NRA-unfriendly. In my own experience, Vanguard have been okay, though at times it seems you have to do their work for them in terms of interpreting the treaty correctly -- not entirely satisfactory, but at least that way you ensure the correct tax treatment.

Beyond that, though, unless anyone else has more on the others you mention, you're probably on your own here.


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## Bevdeforges

If what you have is a 401K, I thought it was the employer who determines where the fund is held. If you are no longer with that employer, you have the option of either leaving things right where they are until you're ready to start making withdrawals, or you transfer the balance into an IRA in your own name.

It actually could be "safer" to leave your money in the 4 different 401K institutions, as the fund holders usually aren't as, well, persnickety with the large employer funds. It's the individual IRAs and Roths that are subject to the internal policies. I think they have to treat all members of the employer funds on an equal basis. (To a certain extent, anyhow.)

If in doubt, ask - online or by calling the fund manager. This might be a place where you could set up the withdrawals from the 4 different funds to go to a single US bank account - and then transfer the money from there to your Japanese bank. If you've still got 25 years to go before retirement, I'd say the best plan is to do nothing for the time being. There's no telling how the laws may change over that period of time - and as long as you're still in the employer's account, they can't treat you any differently than any other employee in the plan. I let my 401K sit for some 20 years after I left the employer. Just keep them updated on any changes of address.
Cheers,
Bev


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