taxes for foreigners

Discussion in 'Taxes and Accounting' started by gerritjan, May 11, 2001.

  1. hsanson

    hsanson

    Crazy Trader:

    DSL internet connection is good, although a little overpriced compared to the US. For example, I pay 75$/month for 128kbs ADSL, but if I want 256kbs it will cost 100$/month, in other words the higher the speed, the lower the $/kbs ratio. We have Cablemodem here too, but the Cablemodem provider is not as reliable as the ADSL provider which is Cable and Wireless, although a cablemodem can be used as backup connection. As for the downtime of ADSL, it goes down about 1 time every 15 days on average (taking into account from 8:00-5:00)
    Hope this helps,

    hsanson
     
    #21     Sep 12, 2001
  2. trader_uk

    trader_uk

    Hi,

    I am a new trader from the UK who is about to start trading the S&P 500 e-mini. I was hoping that there may be somebody from the UK who could tell me specifically what tax rules apply to day traders in our country.

    In particular, are all trading profits subject to capital gains tax?

    Is there any advantage to be gained from setting up a company and trading through that?

    In addition, I would like to know how profits are reported to the Inland Revenue. Is it sufficient to send an account balance for the year from your broker?

    If there is anybody who can answer any of these questions or point me in the right direction that would be much appreciated.

    Cheers,
    trader_uk
     
    #22     Sep 20, 2001
  3. Dear gerritan:

    The answer to your question is purely a function of international tax treaty. In the absence of such a treaty, each sovereign state (U.S. and the Dutch) can tax their own residents + any income generated by business activity within their borders, and it doesn't matter if the person who initiated the business activity resides on the far side of the moon. So to avoid the double taxation problem, sovereign states sign tax treaties. The U.S. has tax treaties with some states and not with others. International taxation is a complex subject that requires a practitioner to have expertise in the tax systems of each of the states involved plus expertise in whatever tax treaty, if any, the two states have signed. As you can gather, this is a specialty area of tax law. Hence you need to consult a tax expert with a specialty of international tax, and even that might not do it. You might need someone with a sub-specialty of international tax between the U.S. and the Dutch.
     
    #23     Oct 31, 2003
  4. Cutten

    Cutten

    Speak to an accountant or tax attorney and get some proper advice. Don't rely on the internet.

    Having said that, if you are non-US citizen who is not resident in the US, and you trade through a non-US broker, then you don't pay the US any tax at all. You only get subject to US tax if you become a citizen or get residence in the US i.e. if you get a green card and move there. Marriage to a US citizen makes no difference, unless you apply for and get citizenship as a result.

    You can also get taxed on business done in the US, however a trade by you on an American futures exchange is NOT classed as business in the US *unless* you do it with an American broker. If your broker is non-US, then the trade is classed as business between you and the brokerage in the country where the brokerage firm is resident. So if you used a Dutch broker it would be entirely a Dutch tax matter - US tax has no effect at all. The reason for this is the legal definition of counterparties - you do not, in a legal sense, trade with the exchange. Rather you trade with the broker; the broker then trades with the exchange. So your "business" is purely between you and the broker, NOT between you and the US futures exchange.

    If you do open a US account, you will be able to claim back tax via the double taxation treaty with Holland. You will fill out form W8-BEN which then allows you to avoid US witholding tax.

    Holland has no capital gains tax, so you do not need to declare any capital gains from a US brokerage account.
     
    #24     Nov 1, 2003
  5. Cutten

    Cutten

    I will repeat what I said above, which is to ask a qualified tax professional (i.e. an accountant), rather than rely on a bunch of strangers on an internet forum whose knowledge is based mostly on hearsay and educated guesswork.

    I trade from the UK and have employed both an accountant and tax lawyer for several years to handle my affairs, so I have a reasonable idea of how the tax structure works here. But you should not take my word for it, ask a good accountant.

    Having said that, if you trade futures actively (e.g. intraday) then it will probably be taxed as income, not capital gains. So basically you would add your futures trading income to your income tax, and then calculate the extra tax payable on the additional income. If you trade infrequently, then it is a grey area. Generally you can choose to declare it either as income or capital gains, but you must be consistent each year.

    There are some advantages to getting trading profits treated as capital gains, and some disadvantages. If it is classed as capital gains, you are exempted from any tax on the first £7700 per year. However, you cannot claim business expenses (e.g. quote feeds, market subscription services etc), and you cannot offset profits one year against losses another yeat. With trading income you can claim expenses so long as you can convince the Inland Revenue that your trading is a "business" and not "common speculation" (this can be hard unless you genuinely trade full time). You can also offset losses against previous profits (so you get a tax rebate) or against future profits (so you future years are tax free until you make back the losses).

    You report the income by asking for a self-assessment tax return, and then simply stating on that what you earned (or lost). The Revenue simply accept your assessment, and charge you the tax payable, which you must then send to them.

    There are advantages to incorporating, which include limited liability, the ability to claim expenses (a ltd company is assumed to be a business by default, so you don't need to convince the IR that it's not "common speculation"), and a lower tax level on profits retained within the company (this allows you to compound at a much better rate after-tax). The downsides are more paperwork, higher accountancy fees, loss of privacy (your name and address go on a public register; company profits are public knowledge), sometimes higher overall tax rates if you withdraw profits, and in some cases higher commissions from brokerage firms.

    IMO it is not worth incorporating unless your strategy has a risk of you going broke and ending up owing money, you have large business expenses, or you are making £100k+ per year fairly consistently and don't need to draw the majority of it out each year.
     
    #25     Nov 1, 2003