I have a question for those owning an international account (preferably in euros) with Interactive Brokers. how are your profits taxed? US tax law or your home country's?also, do you have access to US margin as if in a regular US account(50% or 25% pattern day trader)? thanks in advance
I don't have an account with IB, but I don't think the tax law has anything to do with which broker you have an account - nor in what currency (correct me if I'm wrong). Anyways normally you fall under your country's tax law. And there is nothing different or special on the margin part, you have the same leverage, ... You might want to check out: http://invest-faq.com/articles/index-tax.html And more specifically: http://invest-faq.com/articles/tax-non-us-nat.html
ManhattanTrader, My family member in Asia has a IB account. You fill out W8-BEN, so nothing is send to IRS. There is no tax in the country they live in. If you are not a US Resident (Permanent Resident, or Alien Resident), you are not subject to US tax. But you do need to fill out form W8-BEN. You are not subject to US tax on proceeds from Broker (in this case trading profit), if you donot live in US for more than 6 months.
Babak, When you submit the account? After that, not quite sure. I think IB might notify you if there need you to re-submit form W8-BEN
I' ve been through all that sh.., so I can help you. As a non resident alien, you need to fill in the W8-BEN. Don' t mind the SSN and the Individual Taxpayer Identification Number. You don' t need them. Once your broker gets the W8-BEN, and has then the proof you' re a non resident alien, you' re OK. You don' t have anything to deal with the IRS. The tax laws that will apply are those from the country you are a resident of. The country where you pay your taxes. The only thing that will be taxed, automatically, by your broker, is any income resulting from the cash sitting on your account (if though your broker pays you income on your cash, they don' t always do it). There is a slight withholding on this, but nothing too big. This is done by your broker, so you don't mind about it. I called the IRS to know it this was right, ie taxing you on cash income, they said it was. So don' t worry. You' ll never be asked for a W8-BEN anymore. Once they get it, it' s ok(unless of course, you change your nationality, country of residence and other things that would affect your tax situation). For what regards margin requirements, and leverage, you' ll be bound to the same terms the US residents are bound to. There not any difference from that point of view. So yes, if your a daytrader, you' ll need $25K. So it' s not that complicated. Send the W8-BEN, and you' re in order with the IRS. Nothing to deal with them.