As usual, TedSwippet is not incorrect. However, based on my personal experience receiving interest-related dividends from Vanguard (multiple ETFs and mutual funds over many years), how it works in theory is not how it works in practice. Vanguard withholds 25% (treaty rate) on my interest-related dividends and does not refund any of it. Vanguard does publish documentation indicating the income is NRA tax exempt, though. I file a 1040NR to the IRS in years with significant withholdings and ~ 6 months later receive the IRS refund. It's a minor hassle (after the first filing or two, a person becomes efficient) and involves a cost due to lost earnings on the withheld $. It is an annoyance though, because Vanguard should just get this right.
Maybe this?: Interest-related dividends of US-domiciled ETFs are exempt of withholding tax
From the linked thread:The way this is supposed to work in practice is that your broker will still charge 30% (or treaty rate) WHT over the full dividend when you receive it, but once a year in Jan-Mar they will refund the part of the WHT that was charged on interest-related dividends and backdate it to the date you received the dividends. This is because the broker has to wait for the information from the fund provider to know what percentage of its dividends qualified as interest-related dividends, and the funds provide this information only once a year in their annual report.
Every year, Vanguard asks me how they could improve service. Every year, I suggest fixing withholdings. Maybe next year ...
Statistics: Posted by Maple — Fri Nov 28, 2025 12:54 am — Replies 5 — Views 644