I live in Europe and daytrade professionally US stocks in an US registered LLC . I would like to know whom do I owe taxes at the end of the year ? In particular I'm not sure whether I have to pay any US taxes at all and how I should declare the taxes in my home country. As far as I understand my gains will be distributed by the LLC as "non-earned income". Would I declare this to the tax authority in hy home country, or would I tell them my capital gains that I made during the year ? Any advice much appreciated ! Oliver
CHS, I looked at a few things in one tax guide, and can give you a general direction. But I think you need to contact an accountant in your area to do this right. It appears as though you are eligible for the same exclusion of $78,000 that a US resident working overseas would receive. However, this was defined a earned income so I am not 100% sure. There is a foreign residency test that you would have to pass. Not jumping jacks and push-ups but a test of HOW LONG you have been in Europe, etc. With that said, there is a second calculation for taxes paid to your home country. This allows you to take a deduction for taxes paid vs the aforementioned exclusion. Whichever is greater. All needs to be reported in US dollars to the US, and you can't live in a terrorist country or a country that harbors terrorists or you lose the deduction. The final consideration is that of the STATE that the LLC does business in. There may or may not be Local taxes due to them as well. Some states and municipalities have weird laws so I would check at least. Sorry I can't be of more help, but Im only 6. Best of Luck
Maybe I should point out that I am not an US citizen, but do have a social security number from a stint in the US a couple of years ago. Do you still think that I have to pay US taxes as a non US citizen, not residing in the US ?
I referenced JK Lassers Tax Guide, Ernst and Young also has a good guide. From what I can see, if you earned more than 78K it looks as though you might owe tax. But, this is an abstract of the code so I am not comfortable saying yes or no, hence the thought of talking to a professional. Here is an example, when I traveled for a LLP in the US I had to pay state taxes for the states where I worked, even though I was a resident of another state. I guess it depends too on how much your income exceeds 78K and how much you want to get it right or care. It is doubtful that anyone from our IRS will track you down. Your LLC may have someone you can talk to.
The US is one of the few countries that taxes its citizens when they live abroad. That's a pity. But, fortunately for you, the US does not (yet tax the income of citizens of other countries that live outside the US. The US tax code does not apply to you. That being said, the US tax code _does_ apply to the US broker you invest through and the US corporations you invest in and the US exchanges you trade on. Some countries tax the dividends, interest, and capital gains the corporations pay or the brokers collect on your behalf. (The US doesn't.) Countries can also apply per-transaction taxes (called "fees") on the domestic brokers and exchanges. (The US does.) But any taxes like these are the responsibility of the broker/corporation/exchange and not yours. The $78,000 earned income exclusion a couple other posters have referenced is a tax break for US citizens living abroad. Aaron Schindler
Oh, and about whether you need to report your income in your home country... I would suspect so, but I am not familiar with the income tax laws for your country. (You didn't even say which country or countries you are a resident of and a citizen of, but it wouldn't matter, if it isn't the US, I'm not even vaguely familiar with the income tax laws.) The US taxes the income of its citizens no matter where they live and no matter what the source of the income (barring some loopholes, municipal bonds for instance). The US taxes capital gains and income on foreign securities held in foreign accounts by US citizens. The US has tax treaties that enable information sharing so the IRS can find out about these accounts -- otherwise the IRS wouldn't know about them because foreign brokers don't have to report anything to the IRS because, like foreign citizens, brokers outside the US are not subject to US laws.
Now I remember why I left accounting. Arron made me dig a little deeper. When you left the US you should have gotten a certificate of compliance stating that you paid any taxes owed for your work in the US. Diplomats, Students, Workers of Foreign Govts are excluded. Assuming this was done, and you owe no tax. There is something called the 183 day substantial presence test. As long as you were not in the US for more than 31 days in 2001 this does not apply. If so, add 183 days within the last three years. Now here is the thing, and your situation is hard/impossible for me to find an example for. This is used to test Resident Alien status which would normally apply to someone from Mexico or Canada who works in the US. However, I don't see the US as caring much about that if your income is earned via an American Partnership. Which brings me to the Tax Home/ closer connection exception which should apply to you. It looks like you could file form 8840 which shows that your physical place of business and abode are not in the US, and that should keep you in check with our friends at the IRS. Again, this is just what I can dig up, and my assumption that the IRS would care about the partnership business may be way off the mark. I would look for a Case example that reflects your situation just to make sure if you are talking a big chunk of cash. As for me, time to hit the charts. Best of Luck
Thanks for your inputs guys. Just came back from an accountant here in the Netherlands. Boy, even she got confused. Seems like not too many people are in my situation. She'll put her junior on the case, and hopefully I'll get favorable results. The best case is that I only have to pay 1.5% tax on my net worth, independent of how and what I trade. Special situation here in the Netherlands, since they don't have a capital gains tax (neither short term nor long term). Any daytraders want to immigrate to the NL ? The worst case is that tax authorities declare me as a professional trader and that gains are taxed like those from any professional trader in the US. I hope she can find a basis for the best case. Fingers crossed !! Oliver
bluehorse_shoe: I know of 2 firms operating in Germany: http://www.tradag.de/ and http://www.aktien-handel.net/ But they don't compare very well with their US peers, IMHO. OLiver