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  1. (1) if everything is working right the foreign institution should not withhold on the dividends. This is a bank problem not a tax problem. The bank should have a W-9 from you.

    (2) the decision on withholding by the employer is completely different from the decision on withholding on dividends. There are many triggers on the employer for withholding that do not exist for dividends.

    (3) For the withholding on wages the foreign tax credit does not apply since it is not a foreign tax, as you said. But the foreign earned income exclusion might apply.

    (4) for the dividends you are right. No foreign tax credit.

  2. Do you know what happens when a US citizen holds US stocks in a foreign bank account? Does the US corporation paying the dividend withhold 30% because it’s being paid to the foreign bank and not directly tot he US citizen?
    Can I assume that because the US citizen field W-9 no withholding should take place but the dividend will be reported through FATCA? If the 30% is withheld, would it be the same as tax withheld by a US employer? The foreign tax credit etc. wouldn’t apply since it’s not a foreign tax.

  3. Could the intent of this aspect of FATCA be to dissuade anyone except Pasadena international lawyers from having their websites done by Canadians?

    Of course the same would be true for any service provided by people and entities outside the US. And huge corporations that employ armies of lawyers would be in the same position as said Pasadena lawyer: they can do it, but Joe Blow can’t.

    Good for lawyers job prospects and big corporations.

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.