Complete Guide to US Stock Trading Taxes: Capital Gains Tax and Dividend Tax
As a Chinese tax resident, the income you earn from US stock markets mainly involves two types of taxes: Capital Gains Tax and Dividend Withholding Tax.
Tax Identity of Chinese Investors
As a Chinese tax resident, your earnings from the U.S. stock market primarily involve two types of taxes: Capital Gains Tax and Dividend Withholding Tax.
Capital Gains Tax
Good news: The U.S. IRS does not tax capital gains from buying and selling U.S. stocks for Chinese investors. All the price differences you earn from U.S. stocks are yours to keep. However, note that if you hold U.S. ETFs or REITs, some products may involve complex tax treatment.
Dividend Withholding Tax
Under the U.S.-China tax treaty, when Chinese residents receive dividends from U.S. stocks, the U.S. IRS withholds 10% in tax (after filing Form W-8BEN). If Form W-8BEN is not properly filed, the default withholding rate is 30%.
Form W-8BEN
When opening an account, you must file Form W-8BEN to certify your non-U.S. tax resident status and claim treaty benefits. Most brokers will assist you during the account opening process. Remember to renew it every three years.
Domestic Chinese Taxation
In theory, Chinese tax residents are required to report and pay individual income tax on global income in China. In practice, however, regulatory authorities currently enforce taxation on individuals' overseas securities investment income rather loosely.