Now before anyone gets too excited about setting up an IBC and paying zero tax on trading profits, there are a few important details you need to consider. Firstly, setting up an IBC is not easy. An off shore bank will require a letter of recommendation from a reputable, and suitably large legal firm. These banks are under incredible pressure to ensure that terrorists and drug cartels are not using their services. Some countries of late have rolled over under US government pressure to reveal account details in very specific circumstances. The most obvious was the swiss government who revealed details of Nazi funds in accounts set up during the World War two. Just be aware that at some point in the future your friendly tax haven may not be so helpful. If you use a legal firm in your own country, there will be a paper trail detailing your dealings with the firm and the tax department if they suspected you were attempting to avoid your rightful tax obligation, could access that information. Now I hear you all saying well, I'll just get a firm from another country to give me a letter of recommendation. This too is difficult because: A) You have to declare all cash you take out of the country representing more than $5000 US (I think from memory) And any transfer will again leave a paper trail, as well as draw attention if more than a few thousand dollars. Any legal firm will need you to prove that you are indeed operating a legitimate business, otherwise they will not provide a letter of recommendation. They have their own reputations to protect. If you can manage to set up an IBC without leaving a paper trail, you are laughing. Assuming you do not declare to the tax department you are making money outside your country of residence. Dont tick the wrong box. By not declaring the foreign earnings your are effectively committing a crime. Even though it would be extremely difficult for them to prove. When you set up an IBC you can usually get a VISA debit card attached to the offshore account. To make cash withdrawals anywhere you simply go to the ATM. The money has to be in your account first. The account details are linked to the off shore account which is outside the scrutiny of the government. Unless you enter the country with cocaine residue on this card, Customs probably won't have much interest in it. However again, it is proof that you may have an off shore account, so be careful how its used. Again, To avoid having legal documents related to the IBC, entering the country you will need foreign legal representation to receive your company related mail. Also if you manage your accounts online give some thought to what would happen if your personal commuter was confiscated by the tax man as evidence. If you really wish to legitimately make this scam work, the best option is to remain transient. Residing in no one country for more than about 12 weeks. Hence the reason pro tennis players and formula one racing car drivers tend to pay such little tax. There lifestyle makes it near impossible for anyone to pin a tax burden on them. It's pretty easy. You just dress like a bum and make out you're a poor backpacker. If you have a mechanical trading system you don't even need to trade at all, simply give your code to a firm that can do the trading for you. Don't worry about brokerage rates outside the US, if you trade size most firms will match rates available in the US. Because you only transfer small amounts back to the IBC as and when required, you don't even have to worry about unstable governments stealing it. And no individual debit card withdrawal or purchase should ever exceed $2000US. Also, if you manage to make a fortune trading. Don't spend it on expensive houses and cars. This can tend to draw attention when you're a poor nomadic backpacker. Well I'm off to the beach. See ya. Runningbear
You have the general idea; but not the concept. 1) People doing this are usually in compliance with US tax laws; 2) You have to be making enough real money to make it worthwhile; 3) Setting up an IBC is easy; 4) Setting up a bank account is tedious; 5) The bank will require a letter of recommendation from your current bank that your account is in good standing and that you have done business with them for over a year; 6) $10K not $5K; 7) Remaining transient negates the largest benefit, foreign residency; 8) Brokerage rates outside the US are outrageous, that would be my largest concern, it took us forever to work that out; 9) The key thing is to comply and reap the not so obvious benefits.
A non resident alien trading a US brokerage account from a country that has no tax treaty.Will uncle scam just grab the interest or will he also grab the capital gains?
Interest and dividends, not the capital gains. However all you have to do is file a return and you will get them back.
That won't help if there's no tax treaty. In that case withholding at the 30% rate by the broker is mandatory. AFAIK your firm won't even open an account for a customer if withholding would be required. dave
I am not sure; however trading profits, i.e. capital gains are outside the scope of the withholding provisions. And, as traders, not investors, that is the key ...