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Taxation of Foreign traders
- Thread starter une_mon
- Start date
Quote from heech:
I believe government debt (t-bills) are specifically excluded from tax / withholding, precisely because the US government desperately wanted to encourage foreign ownership.
Other forms of interest earned would be subject to taxation, however.
Oh you are right.
"Interest (including OID) received by U.S. nonresidents on obligations of the U.S. government (e.g., Treasury bills, notes and bonds) which were issued after July 18, 1984 (âportfolio interestâ obligations) is generally exempt from U.S. withholding tax, as long as a Form W-8BEN has been provided to the payer."
http://www.crossborderalliance.com/Resources/NRA Tax guide.pdf
which is excellent.
Quote from heech:
I believe government debt (t-bills) are specifically excluded from tax / withholding, precisely because the US government desperately wanted to encourage foreign ownership.
Other forms of interest earned would be subject to taxation, however.
I didn't get taxed when I owned Citigroup corp bonds a few years back
Quote from Daal:
I didn't get taxed when I owned Citigroup corp bonds a few years back
The tax treaties with many countries specify a zero rate of withholding on interest payments on a reciprocal basis:
http://www.irs.gov/publications/p515/ar02.html#en_US_2012_publink1000225127
Zero is very common in the case of the treaties with major European countries, but the default in the case of no treaty is 30%, and you also see 10%, 12% etc, in the case of some countries.
Dividends are taxed at a separate rate also governed by treaties, but never less than 15% that I can see. Again, some countries may allow a credit for foreign tax paid where they also tax the same dividends.
Quote from une_mon:
Hi guys, I'm considering to open an account with a major Futures brokerage house in the U.S.
I live in Europe had don't have any like to the U.S.A. Do you know if I would have to pay any taxes in the U.S.A. if I am trading (from europe) with a U.S. broker?
thanks ..
Non-resident aliens are not subject to U.S. taxes on portfolio income, except for dividends, sometimes interest and MLPs. Trading futures and forex is tax free for non-resident aliens. Forex rollover interest is not really interest, it's trading gain or loss.
Even if you are an owner in a pass-through entity in the US - like an LLC filing a partnership return - if the entire activity is portfolio income, even with trader tax status, it's not U.S. ECI or source trade or business income.
See more on our site here
Non-Resident-Alien
http://greencompany.com/EducationCenter/Trader-Tax-Center/Non-Resident-Alien.shtml
Quote from Robert A. Green:
Non-resident aliens are not subject to U.S. taxes on portfolio income, except for dividends, sometimes interest and MLP. Trading futures and forex is tax free. Forex rollover interest is not really interest, it's trading gain or loss.
See more on our site here
Non-Resident-Alien
http://greencompany.com/EducationCenter/Trader-Tax-Center/Non-Resident-Alien.shtml
What do you mean by "sometimes interest"? Is the case above (corporate bond interest) subject to tax?
Quote from Daal:
What do you mean by "sometimes interest"? Is the case above (corporate bond interest) subject to tax?
I'll ask our tax attorney to help answer this question.
Portfolio interest is tax free, which includes corporate bonds.
But, promissory notes are different. See this site http://www.unclefed.com/AuthorsRow/Kleinman/nonresidentaliens.html
It's always important to read the tax treaty between the U.S. and your home country if one exists.