NON RESIDENT WITHHOLDING tax - Master Limited Partnerships (MLPs) stocks to avoid

[Digitalbanana]

Trading US stocks with a US broker only as a foreigner with a W8-BEN form normally only exposes me to withholding tax by the broker on dividend payouts. 

 

However I was hit with a new tax as a foreign investor that only applies to certain US stocks (Master Limited Partnerships) which are typically stocks with MLP or LP in their company name. Then then tax I was hit with was 10% of the sale value. E.g. Buy 1000$ worth of MLP stock, sell for 1010$ for 10$ profit, then 2 days later broker applies 10% of sell value as NON RESIDENT WITHHOLDING tax or 101$ tax!  The NON RESIDENT WITHHOLDING tax typically applies to certain types of US-based investments, particularly those considered "pass-through" entities or investments that generate US-sourced income.