Frequently asked questions

Economically, almost. An ADR is a U.S. security issued by a depositary bank that holds the real shares with a custodian in the home country. You get the price exposure and the dividends (after fees and withholding), and usually voting rights through the depositary, but you don't hold the ordinary shares directly.

Three things usually reduce it: foreign withholding tax, the depositary's per-share fee, and conversion from the local currency at the rate on the payment date. Your 1099-DIV shows the foreign tax withheld in box 7.

In a taxable account, usually yes, up to the treaty rate, as a U.S. foreign tax credit. Tax withheld above the treaty rate can only be recovered by filing a reclaim with the foreign tax authority. In an IRA, foreign tax is generally lost, except that Canadian dividends can be exempt if the account is properly documented.

Not because of foreign stocks or ADRs held at a U.S. broker. FBAR reporting is triggered by financial accounts held at foreign institutions, such as a brokerage or bank account abroad, above the threshold.

Often. Dividends from companies in countries with a comprehensive U.S. tax treaty, or whose shares or ADRs trade on an established U.S. exchange, can qualify for the lower rates if you meet the holding period. PFICs never qualify.

Most never reach production, they fund themselves by issuing shares that dilute existing holders, many trade thinly on OTC markets in the U.S., and some are PFICs for U.S. tax purposes. They're also a favorite target of paid promotions.

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