Foreign withholding at source

[jkharvey]

The 401k plan has as one of its investments a few Brazilian ADR shares. Each year there is a small amount of tax withholding at the source that is removed from the trust. Is this something that can be recouped or is it simply a trust expense? Should the trust be exempt from this withholding?

[masteff]

It sounds like a Brazilian tax so you'd need a Brazilian tax advisor to determine if a US trust could be exempted. You might see if a US-Brazil tax treaty exists and if it addresses such entities. But given a small number of shares, the cost-benefit of such research may point you more quickly to the conclusion that it's simply an expense of the investment.

[mbozek]

It sounds like a Brazilian tax so you'd need a Brazilian tax advisor to determine if a US trust could be exempted. You might see if a US-Brazil tax treaty exists and if it addresses such entities. But given a small number of shares, the cost-benefit of such research may point you more quickly to the conclusion that it's simply an expense of the investment.

IRS pub 901, tax treaties, does not list a treaty with Brazil as of Apr 2010. Check to see if there is a later edition. One possible way to recoup tax is if UBIT is imposed.