Withholding tax on inheriting an US IRA in the case of a beneficiary in the UK

Good evening.

My step-dad passed away recently and had an IRA in the US. There were three beneficiaries named, 2 in France and myself in the UK. I was about to fill up the form to apply the mandatory 30% withholding tax but realized that there are some tax treaties with France and the UK preventing double taxation. After a few hours of research, I am struggling to figure out what should be the exact rate, and the articles and paragraph that mention it (17 ?).

I was wondering if you had any good link to use where I could find both information? (at least for the UK, but hopefully the French part is available to in the treaties).

Thanks in advance for your help!

As a non-resident alien you will need an ITIN or SSN. Do you have one?

Hi, thanks for your reply. I will provide an ITIN yes. I might have an old SSN from when I worked in the US 15 years ago, but not everyone concerned has one. As described on the US guidelines, a SSN is not mandatory. My main concern is not regarding the ITIN but finding out which withholding tax applies in the case of an IRA under the tax treaties with the UK. Thanks again !

If you do not have an SSN and are not eligible to get
one, you can get an individual taxpayer identification
number (ITIN). To apply for an ITIN, file Form W-7 with the
IRS. It usually takes 4–6 weeks to get an ITIN. To claim
certain treaty benefits, you must complete line 5 by
submitting an SSN or ITIN, or line 6 by providing a foreign
tax identification number (foreign TIN).

Withholding tax is not really relevant. It is the final tax liability that you will care about. If you are a non-resident alien and take a lump sum the treaty says you will owe US tax US graduated rates of tax.  The withholding agent can do whatever you ask them to do, but the final liability will be calculated by you when you file your own US tax return.

I don't plan to file a tax return. I don't even have a social security number to do so. The amount at stake is so small that i am not even sure I would be subject to tax.

The form W8-BEN that I have to fill is very clear that I am the one to provide which is the tax rate for my country. If I choose the wrong one, the withholding agent will automatically apply the 30%.

More information about it here:
newcomer link: https://www.irs.gov/pub/irs-pdf/iw8ben.pdf [nonactive]

I think the source of the information should be below but I am not certain which figures should apply for an IRA:
newcomer link: https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1.pdf [nonactive]

Thanks again for your help!

The withholding agent is required to withhold. It is your choice if you want to donate money to the US government or reclaim some/all of the tax withheld.

I am not sure we are understanding each other here.

As you can see on the form, I need to state what should be the rate of withholding tax that should be applied by the withholding agent according to the UK-US tax treaty referring to the right Article & paragraph of the tax treaty instead of the 30% that applies for all countries with no tax treaty.

I cannot invent/decide that figure, not reclaim the money after as I am not going to fill any tax return.

Thanks again for trying to help though! 

US law requires that you file a tax return. You have already said you plan not to file.  A W-8BEN simply wants your SSN or ITN and a signature/date. 

There is no reduced rate of withholding tax for a payment within 17(2), as this payment is solely taxed by the United States. Consequently, you have chosen to donate 30% to the United States.