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Where Taxpayers and Advisers Meet

US International Withholding Tax on sale of options

Joined:Tue Jun 28, 2022 6:49 pm
US International Withholding Tax on sale of options

Postby cs12ag » Tue Jun 28, 2022 7:18 pm

Hello all,

I'm hoping someone knowledgeable can assist.
I was given some stock options by my employer a few years ago. My employer is based in the US and traded on the US stock market. I am technically employed by the company's UK arm. I have a valid and current W8-BEN.
Time has passed since I was awarded the options and all of these options vested by May of this year. The company I work for has recently been purchased by another company, with the deal completing in June of this year. As part of the sale of my employer, all shares were dissolved and removed from the open market, at $95/share. Correspondingly, all vested options were also sold at $95/share (minus the original strike price). I have discovered that the proceeds of the sale of my options have been taxed quite heavily, which was unexpected. There is an 'International Withholding Tax' been applied to the sale of my options, which works out around 38% of the proceeds.

I have asked my HR department to explain what this tax is, and got a basic answer indicating that because the options were dissolved as part of the completion of the sale of the company, this is deemed a 'corporate event' and therefore this tax is applied. Is anyone able to explain what the international withholding tax is, and whether it should have been applied in this context?

I'm not sure this is relevant, but I have previously sold off other stock options on the open-market and not been charged any such International Withholding Tax - and I received the full proceeds of the sale each time.
Any assistance on this would be greatly appreciated. I have a feeling that I'm being fobbed off by my employer's HR department.
Thanks very much in advance.

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