Thread: US Brokerage Withholding Tax

I'm thinking about setting up a US brokerage account because it's cheaper to do the trades.


My question is -- I am NOT American: So will I have to deal with a US Withholding Tax on my profits from trading?

And will I have to deal with a US Withholding Tax on my dividends?

Ed? I think you mentioned this in a previous post but I can't find the answer.

Thanks for your help!
Matt

Hey No-Non-Sense, you gonna ride the forex train? I have to admit I have been looking at it as well.

Forex? Probably not, too unpredictable for my taste.

I'll go for just good old stocks. I'm patiently waiting for the next correction.

Matt

I got a feeling you won't be waiting long. Every time I see the Dow go up I ask myself, "Why"?

Exactly -- there's always "lag time" before reality sinks in for most people isn't there?

Matt

Hello Matt

I happen to know alot about trading, investing, brokerage in the USA etc...

I trying to find some of my old posts I posted in the past on this board about opening brokerage accounts in the USA so I can help you out.

Yes... here they are....

http://www.panamaforum.com/living-pa...oad-taxed.html (Financial income sourced abroad? is it taxed?)

and here...

http://www.panamaforum.com/business-...ck-market.html (Investing in the stock market)

This might be helpfull to about why you can't use the stock brokers in Panama..

http://www.panamaforum.com/new-membe...enda-bank.html (Introduction & Banvivienda Bank)

For dividends there is a with holding tax regardless but not on bank intrest, stock gains from investing or trading income if you follow the directions and fill out the proper forms I talked about in the above posts..

Hope this answers all your questions, if you have any more questions ask away or PM me if you need more info....

Darryl

Thank for the nice Thank you ..

Your welcome Matt....

Just remember Matt to file a W8-BEN with your broker in the USA, so they know you are not a resident there for tax puropses and you can invest in the USA tax free.

You can download the W8-BEN form here...

http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Failure to properly fill out this form and you could be looking at a 30% with holding tax on all your investing, trading and intrest gains.

Please Remeber you must also renew your W8-BEN every three years by law or they might still charge you a 30% with holding tax after the 3 year grace period ends, so be carefull there.

Also make sure you do not spend more than 6 months a year in the USA or 4 months a year over a 3 year period or they will call you a non resident alien, and you will have to pay taxes to the USA then.

So as you can see the USA is the biggest tax haven of them all...

Take care all now...

Darryl

Thanks Darryl!

Tremendous advice all around (including your old posts!)

Matt

---------- Post added at 01:06 AM ---------- Previous post was Yesterday at 11:43 PM ----------

Question Darryl:

Do you like Zecco?

They are certainly CHEAP!

Thanks,
Matt

I opened 8 brokerage accounts in the USA, just incase you can't open new accounts in the future I would be safe in case a few ever closed down etc..

I have a Zecco account, and you get 10 free trades per month, and just $4.50 a trade after that. Cheap.. Better than cheap...Free actually..

I have not used them much but there is nothing to complain about for free. There service, rates and online features blow away anything I used for brokers in Panama before... Although Thales Securites has good online platform in Panama, but the fee's are sky high compared to USA brokerages... As are all Panama brokers...

About Zecco if memory is right they might charge a little higher if you want margin for the intrest rates to borrow, plus all brokers give you 0% intrest rates anyways, but they might give you smaller rates than some brokers on intrest rates once the rates get back up if they ever do.

Other great brokers that allow and are licensed for foreigners to open accounts that are also real cheap rates and fully insured are...

Speed Trader Direct Access Trading Broker for NASDAQ, NYSE, AMEX, OTC BB, Pink Sheets daytraders and more.
Just2Trade - Online stock trading, low cost trading and broker, stock market investing | Just2Trade
ChoiceTrade - Online broker, Internet stock trading and web stock trading
Free Online Stock Trading, Discount Options Trading, & Discount Stock Brokerage
Real Fast Trader - FREE Level 2 II Quotes Day Trading Direct Access
https://www.thinkorswim.com/tos/client/index.jsp
TradeStation Securities
MB Trading - Stocks Options Futures Forex Online Discount Trading
Online Stock Trading, Discount Online Brokerage - Online Trading with Firstrade
https://www.trademonster.com/
TD AMERITRADE : WELCOME
TradeStation Securities
Fidelity Investments
Charles Schwab


That should keep you busy Matt...

I also learned that you can open up accounts at some brokers in Canada as well, I never knew they let foreigners do this but I still reasearching that one...

I prefer that since the USA dollar might fall 10% a year...

Any more questions just ask...

You're on fire!

Let me know if you find any solid, cheap solutions for foreigners in Canada!

That would rock!
Matt

I was gonna post some other stuff for you Matt but I could not log on to this site for a very long time and I forgot what it was now... Let me know if you want any more help or have some more questions....

Are their any cheap price stock brokers in Panama like ameritrade? I have not been able to find any. Their cost sheets are up there.

Zecco actually rejected me because I'm Canadian! Can you believe that? ARG!

What's your 2nd and 3rd choices?

Thanks!
Matt

Everybody knows that Canadians are the worlds troublemakers (Just Kidding Matt)

many brokerage firms in Panama are now rejecting customers from the USA. Even when the corporation is from Panama, most times the authorized signatory or beneficial owner is not. There are strict brokerage rules in the USA now with respect to withholding taxes and tax treaties and many firms do not want the complexity or hassle.

Originally Posted by No-Non-Sense-Matt

Zecco actually rejected me because I'm Canadian! Can you believe that? ARG!

What's your 2nd and 3rd choices?

Thanks!
Matt

Matt I have an account there with Zecco and I am Canadian....

You have to tell them you are a Panama resident..... Does not matter were you are born..... Your money has to come from Panama then, but if you are a Candian resident then no, you also need a Panama mailing address.

I just got an account with ameritrade for a Canadian friend living in Panama no problem, try them.

Try the other brokerages I gave you from the list...

Originally Posted by balboatropics

Are their any cheap price stock brokers in Panama like ameritrade? I have not been able to find any. Their cost sheets are up there.

Why would you want an account with a brokerage firm in Panama over the USA? there is no advantages.... Panama brokers have no english for the most part, bad service and real high fee's and to top it all off no insurance. The 3 that do have insurance report your account to the USA any ways.

Just realized you had replied to me. I was looking at Panama because I see that they have no capital gains tax, but if what you're saying is true, that the better ones report everything anyway then I guess it's a moot point :/

i agreed with u balboatropics

I just got a Zecco account, but not being a permanent resident in Panama I used my address in Europe. Apparently that country has a tax treaty with the US. Zecco is now withholding 30 % tax on dividend payments. Would this change to 0 % if I updated my W8-BEN with them?

Ed you should update your W8-BEN every 24 to 36 months to get full offshore tax break benefits....

There is a with holding tax on dividends no matter what on overseas accounts, even if you file a W8-BEN....

Now some countries have a tax treaties that might reduce that to say 5% to 20%, just depends on the tax treaty that was signed with the different countries, but generally with no tax treaty and in most cases anyways it is 30% and there is not much you can do about it.

You get a huge benefit with being a foreigner and having bank and brokers accounts in the USA, since you pay no taxes on bank interest or stock gains, but they have the 30% with holding tax on dividends, and like I said earlier nothing we can do about that.

I just happy to have the tax free status on my stock gains, also most stocks do not pay dividends any more any ways, and if it is part of your strategy, dividend investing, it is best to just change strategies, to maybe growth or value stocks for example or some form of trading even if you are so trained, to take advantage of the laws...

Hard to find a company paying out more than 3% a year in dividends anyways, a company that is any good anyways.

Most pay 0% ...

A few good dividend paying stocks that are safe are RY BMO TD all strong Canadian banks, that can be bought in USA market....

Hope this helps...

I am only concerned about having to file a tax return every year to get the money back.

I use form 1040NR. On the 2009 form, line 58d I put the dividend tax withholding. Do you agree with this approach?

It's not a huge deal with the withholding as long as I get the money back.

Big problem for me is that the ETFs and mutual funds pay a lot of dividends...... don't work too much with stocks.

I guess with Zecco and can dump and pump and keep track of the dividend days.

Best, Ed
PANAMA BANK GUIDE - LIST OF BANKS IN PANAMA

Yes Ed you are doing the right thing.....

I agree with this approach...

Yes on line 58d you put your dividend withholding tax...

This is what the law says you should do, and I know others that do it the same way, but as you well know things like tax laws are changing so fast.

You can read more about it here...

Form 1040NR - U.S. Nonresident Alien Income Tax Return

Actual directions for filling out the forms here...


As you know, I know alot about investing, trading and brokers accounts etc....

But I am not an expert on dividends and the taxes associated with them as a non resident in the USA....

I have never gotten dividends in the past in my USA brokers accounts, as I buy my dividend stocks in other countries....

Are you saying Ed that you get your with holding tax from dividends paid back to you from filling out form 1040NR?

If that is the case you taught me something since I was not aware of this, unless of course your home country in Europe through a tax treaty has a reduction of the 30% mandatory with holding tax on dividends paid to non residents in the USA...

You can read about tax treaties on what countries have what rates here...

United States Income Tax Treaties - A to Z


You are getting your withholding tax back? I was not aware you could do this, are you sure?

Now what you can do, is claim what you did pay to the USA as a deduction on your income tax return if your country of residency in Europe has a tax treaty with the USA, so you are not taxed twice, but you cannot get you with holdingtax back from the USA government unless this is a new law, since I never heard about this before.

Are you saying that you get your with holding tax back, and anyone that files a form 1040NR and is a non resident alien in the USA gets there with holding tax back on dividends?, if this is the case this must be a new development since it was not the case in the past...

Unless I miss read something or am confused..

This is good news, but must be something new...

Please clarify....


I have never gotten any with holding tax back from the USA....

But I did use the tax I paid for dividends as credit toward my Canadian tax returns in the past, through a tax treaty between the two countries so I would not be double taxed..

Unless of course your country of residence in Europe negotiated a reduction of dividends in a tax treaty to reduce the 30% tax rate on dividends to 0%...

But generally this is not the case and is rare...

Hope I did not make things to confusing, but this is what it is.

Good info in this post.

Matt, did you find a good broker?

For a Canadian (non-resident), resident of Panama, your good to go with a W8-BEN?

I mean, withholding tax on dividends and that's it ? Nothing else to file every year?

Yes, of course I got the money back.

After I filed the 1040NR they wired my refund within 2 weeks.

58d is "Federal income tax withheld: On income not effectively connected with U.S. trade or business".

You can file an incorrect return and get your money back though.

Interest from a US bank is NOT effectively connected with a US business, although paid by a US bank. So I assume a dividend from a non-bank is NOT effectively connected as well.

A dividend from an ETF that contains only Europeans stock is sure as hell not effectively connected with a US business.

I think the IRS deliberately makes it impossible to interpret anytning they write. They can go f themselves as far as I am concerned.

Reading up a bit more on this I think a wash sale is the best way to go.....

Originally Posted by BEL-AIR

Are you saying Ed that you get your with holding tax from dividends paid back to you from filling out form 1040NR?
You are getting your withholding tax back? I was not aware you could do this, are you sure?

Zecco is the cheapest one. They have 10 free trades/mnt when you have >25k (in cash or stocks)

W8-BEN is just BS it appears. You give the form, then they withhold tax. If you give them a W9 instead they will not.... but then you would need to be a US person... and have an SSN number.

I am still a W9 with all the banks in the US that I dealt with before I left.

Originally Posted by Thegreatoggy

Good info in this post.

Matt, did you find a good broker?

For a Canadian (non-resident), resident of Panama, your good to go with a W8-BEN?

I mean, withholding tax on dividends and that's it ? Nothing else to file every year?

No -- I never found another broker. I should of used my Panamanian IDs when I opened the account. Maybe I should try again

This is an interesting twist ED, as I assumed that all stocks with dividends had a with holding tax as long as they were purchased through a USA broker...

But what you are saying makes sense, so if I buy a Canadian, European or Asian stock through a USA broker I can get my dividend withholding tax back by filling a 1040NR....

So it is something that I learned, if this is correct I could buy BP, which is paying 8% a year in dividends is a British company and get my with holding tax back, plus once the oil spill is out of mind in a few years the stock price can recover as well by then.

Not bad...

BP Company Profile - BP PLC Company Information

BP PLC, BP Stock Quote - (NASDAQ) BP, BP PLC Stock Price


Something to also be careful of is this...

If you are a non resident alien with a brokerage account in the USA, and lets say you die, and you are holding USA stocks in your portfolio, that is taxed as part of estate tax in the USA, and can be as much as 50% of your entire portfolio before your heirs can get at it...

Even if you are a non resident alien of the USA....

Crazy, many are just shocked when I tell them this fact.

But if you held foreign stocks like Asian, European etc in your USA brokers account, you pay no taxes or estate taxes on death.

Many people are not aware of that, just goes to show you there is alot to learn about taxes and investing as it is so complicated and always changing.

If you die in 2010 there is no estate tax in the US.

Too many attorneys lost their jobs so it's back in 2011 so they can setup BS trusts, generation hopping strategies and taxfree gift programs with expensive life insurance.

I think the basic excemption for 2011 is expected to be about 3 million dollars so does not really affect everyone.

The Europeans do the same withholding as the US, even if you have a US broker. I have had both Finish and Canadian stocks in my Ameritrade account.

Thegreatoggy

I assume you are a non resident of Canada now?

I was just wondering if you ever had any trouble with the CRA....

I mean did they want to show proof that you are now a resident of Panama?

Like show them a new pass port or resident card from Panama?

At one time as long as you were not a resident of Canada any more that was good enough, and you did not have any major ties to Canada any more like a home or bank accounts, but now they want you to show proof in many cases that you are now actually in another country as a permanent home and have that new country as your tax home and and that you are a legal resident there, not just a permanent tourist in Panama and not just merely traveling the world or as a perpetual traveler...

I just heard of a few cases were that is happening now.

Even the British just changed there laws a few months back, and is causing a shock to many...

Also Did you check on your taxes the box that says you are no longer a resident of Canada the last year that you filed?

Laws are always changing and so complicated...