What is the 30% withholding on U.S. pensions paid to nonresidents?

U.S. pension and retirement distributions paid to nonresident aliens are subject to a 30% default withholding rate, reduced by treaty to 15% or 0% in many cases. The recipient files Form W-8BEN with the payer to claim the reduced treaty rate (IRS: Publication 515).

Common treaty rates on pension distributions:

To claim the reduced rate:

• File Form W-8BEN with the pension payer (not the IRS).
• Provide tax ID: SSN, ITIN, or foreign tax identification number.
• Treaty article: specify which article applies (often Article 17).
• Renew every three years or sooner if circumstances change.

Without W-8BEN, payers must withhold 30%. Tax paid can be recovered by filing Form 1040-NR for the year and claiming treaty-based refund.

Covered expatriates face the same 30% withholding on U.S.-source pensions after expatriation, with treaty relief depending on the new country of residence.

For more, see our Taxation of Nonresident Aliens.