W-8BEN and 1042-S: The US Tax Taken From Your Dividends

When a US company pays a dividend, a tax is withheld on behalf of the US before the money reaches you. The rate depends on who you are, and the document that tells your broker is the W-8BEN form. The document that shows how much was withheld over the year is the 1042-S. Together they form the first link on the tax side of investing in foreign stocks.

What the Form Says

The W-8BEN is a short form that declares three things: your identity, the country you're resident in, and your claim to treaty benefits. For someone resident in Türkiye, the claim rests on the dividends article of the double taxation treaty between the US and Türkiye.

The form isn't sent to the IRS; it goes to the broker. The broker keeps it on file and checks it to decide the withholding rate on each dividend payment.

The Rate: 20% Instead of 30%

The US withholds 30% on dividends paid to a foreigner with no form. The treaty cuts that to 20% for individuals. Over the years the difference isn't small: the cash reaching your account from the same dividend rises by one seventh.

What the Form Doesn't Cover

Capital gains. The US doesn't withhold tax on gains a nonresident foreigner makes from selling shares, and the treaty leaves those gains to the country of residence. So the tax on a sale gain arises in Türkiye, not the US. More: How Gains on Foreign Stocks Are Taxed

Some special structures. Since 2023, 10% of the sale proceeds can be withheld when selling publicly traded partnerships (PTPs). These rules differ from those for stocks and ordinary ETFs; before buying such a product, ask the broker what it withholds.

ADR dividends. On dividends from a foreign company's ADR, the tax is withheld by the company's home country; the US rate on the W-8BEN doesn't apply. More: What Are ADRs and SPACs?

The Form's Lifespan

A W-8BEN doesn't last forever. It stays valid until the last day of the third calendar year after the year it's signed; roughly three to four years. If your address or country of residence changes, a new form is due within thirty days.

What to Do With the 1042-S

The 1042-S shows each type of income for the year on its own line: the income code, the gross amount, the rate applied and the tax withheld. For the Turkish tax return it does two jobs: it documents the gross dividend and it shows the tax paid in the US.

To claim the credit, the tax paid abroad has to be documented, and Turkish rules can require conditions such as certification by the competent authority. Whether a 1042-S alone will be accepted is worth discussing with a tax adviser before filing.

This article is general information, not tax advice. The rates are based on the 1996 text of the US-Türkiye tax treaty and the IRS form instructions published as of 2026.