Wat is de "US witholding tax on options" ?

As a consequence of a change of US tax law, withholding tax may in certain cases, from 1/1/2017 on, be levied on dividends paid by the underlying US stock of the option.

What is the 'US witholding tax on options'?

Non US residents pay 30%/15% US withholding tax on the payment of a dividend from US source. The US tax authority IRS has noted that foreign investors often avoid taxes by buying options on US stocks. As a consequence of a change of US tax law, withholding tax may in certain cases, from 1/1/2017 on, be levied on dividends paid by the underlying US stock of the option.

In which cases will I have to pay withholding taxes?

The US withholding tax is payable on the dividend paid out by the underlying US stock of the option if the delta of the option is 1 or more at the time of purchase of the option.

If you have bought the option when the delta is 0.9, and the delta is 1 at the time of payment of the dividend, you will not have to pay any withholding tax. It is the delta at the time of the purchase that counts. If you buy an option with a delta 1 and you sell this option before the underlying US stock pays out a dividend, you don’t pay any withholding tax.

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