Non-US IB account holders- anyone else get this ITIN notice?

Discussion in 'Retail Brokers' started by lescor, Nov 6, 2006.

  1. I got an email from IB today saying every account requires a ITIN (taxpayer ID# for those not eligible for a SSN) or else my account would be subject to 28% tax withholding.

    The thing is my account is through IB Canada and I have no requirement to report my IB activity to the IRS. Is this some new blanket policy? If so IB will be tits-up in Canada as the only way to get an ITIN is to file a tax return with the IRS.
     
  2. I have not received anything like that.

    It doesn't really make sense...
    Canada has a comprehensive Tax Treaty with the US...
    Which was updated 2-3 years ago in light of the post 9/11 regulations.

    I'd love to see what you got...
    If you like... you can send me a copy at HoundDogOne@gmail.com
     
  3. riddle

    riddle

    It sounds to me like you didn't file the W8-BEN form with IB. That is the form that identifies you as a foreigner who doesn't need to file a return with the IRS.

    Steve
     
  4. Yeah, if a foreigner opens a brokerage account in the US. If a Canadian citizen (lescor, correct me if I'm wrong about that) has an account with IB Canada, why would either W8-BEN or the IRS itself ever enter into the picture?

    I'd put this right back in IB Canada's court and inquire what their basis is.
     
  5. riddle

    riddle

    IB Canada does require the W8Ben. They also enforce the SEC daytrading rules. I gather it has to do with clearing through the US, but don't really know. Either way, their rule on W8BEN was quite clear.

    Steve
     
  6. IB Canada is under the jurisdiction...
    Of the IDA (Investment Dealers Association) and the QSC (Quebec Securities Commision).
    Any US regulations are secondary to any Canadian regulations.

    All traders with US accounts MUST be identified...
    Either through one of 3 W8 forms... or a US Tax ID.
    The primary reason for this...
    So US residents cannot EVADE taxes simply by opening a Canadian account.

    In the IDA Rule Book... Canada's equivalent of the "NASD Manual"...
    There is an interesting clause for many sections...
    Such as margin, etc...
    Allowing a broker to simply adopt US regulations for US stocks...
    Or British regulations for London stocks...
    A sensible policy... no need to re-invent the wheel.

    When I opened my account 18 months ago...
    IB Canada compliance was UNAWARE of this very well-known clause...
    And was applying bizarre, home-grown algorithms to US stocks.

    For example, in US any stock > $5.00 qualifies for "minimum mantenance margin"...
    But through some torturous logic...
    IB Canada was allowing "minimum maintenance margin" ONLY for US stocks on some IDA "list"...
    Which meant ONLY interlisted large caps.

    They changed their margining policy a few weeks after I pointed this out.

    In general... in my experience...
    I run everything by my Auditor and his firm...
    And never assume IB Canada is up to speed on any regulation.