Good day folks Futher into the question, what if the foreign resident concern is residing in a country without a double taxation agreement with the US ? Will he need to pay tax in US or in this home country ?
Back to dlincke point as a US citizen your kinda screwed one way or another but I know of several Canadian residents whom trade outside of Canada for half the year in a tax free country as we're taxed on residence status and not citizenship...thus these guys are trading tax free...kinda sweet...if your Canadian a few of these gents will be at the next Daytraders USA chapter meeting in toronto i believe... http://www.worldwidetraders.com/chcncn.html...
If there's no tax treaty you will be subject to backup withholding at the 30% rate. Depending on the specifics of your income situation you may be able to reclaim some some of those funds by filing a form 1040NR with the IRS.
You're correct about the 30% withholding tax..... this will be automatically deducted in most cases. I have an account with Datek, and have had deductions for tax withholding. When you open your account, or whenever, send in a W8BEN form - this is available online from the US IRS service (not a bad site, considering). This will get you out of withholding tax problems since you have to state where your residence is for tax purposes.....
Filing a W-8BEN will only do away with withholding tax if there is a tax treaty between the US and your country of residence. Otherwise the only thing it does is establish status as a non-residential alien. Even with a tax treaty you will be subject to withholding but at reduced rates set forth in the applicable treaty. Usually there is no withholding of capital gains, but dividend and interest income is commonly withheld at a 5 to 15 percent rate.
Replying to a question a few posts back about countries to live in as a trader, the best tax havens appear to be Monaco, Campione D'Italia (an Italian enclave in Switzerland) and Cayman Islands. It is easy to get residency if you have sufficient assets. A tax free income from trading is a huge advantage, but the higher cost of living needs to be taken into consideration. As pointed out before, the above is only really useful for non US-citizens.
A helpful page where you can find more information about how to legal save taxes will be: http://www.escapeartist.com The way to a successful trader is far and if you break even I think you should save you winnings so long
I am from Panama (Central America) and as I investigated in my country there is no capital gain taxes if those gains are from overseas (not gained in Panama) so essentially I am tax free from all my gains in daytrading. I think Panama is also classified as a tax haven because a lot of money laundering is made in this country by our neighbors from Colombia In fact, cost of living here is cheap. Food is cheap. Clothing is cheap, only my internet connection is expensive compared to U.S. hsanson
hello all, I was wondering if, being a french citizen and french resident, and working for an american company, I could choose, not to fill my w8ben, and enjoy my stock options benefits when travelling in the States ? If I choose to pay the 30% in the US, would the IRS not forward the info to french fisc (France and USA do have a tax treaty). thanks
hsanson, How is the internet connection in Panama, e.g. connection speed, DSL or Cable Offer or Satellite dish.