Dividends from US securities categorized as REITs (Real Estate Investment Trusts) are subject to a withholding tax at source. At HeyTrade, we currently apply a 15% withholding, based on the W-8 BEN form that is signed automatically when you open an account with us. This rate is applied based on our custodian's current policy regarding these types of assets. If this policy changes in the future (e.g. if a 30% withholding is applied), we will update the withholding rate accordingly and inform you of any changes.
REITs are entities that invest in real estate and distribute most of their earnings to shareholders as dividends. However, the tax classification of these dividends may vary. At the end of the fiscal year, REITs review their income and determine what portion of their distributions should be classified as ordinary income, capital gains, or return of capital.
The reclassification process can affect the applicable tax treatment of each payment. Even though we apply a 15% initial withholding on REIT dividends, once the final classification is published, the company will review the applied withholding and, if necessary, make the appropriate adjustments, either crediting or debiting your HeyTrade account to reflect the correct amount.
This process takes place in the second quarter of the year following the year of withholding and are published on each company's official website. Keep in mind that the final withholding rate may differ from the initial one, depending on how the distributions are ultimately classified.
In summary, while a 15% withholding is initially applied to U.S. REIT dividends, this may later be adjusted based on the REIT’s final tax reclassification.
We hope you have found this information useful. If you have any questions, please write us through our chat or send us an email to support@heytrade.com. It will be our pleasure to help you! 😊