So if I open a trading account in the U.S. through an IBC, and I am also a U.S. citizen, will anyone be able to trace me back to the account somehow? Will the brokerage want to know who really is behind the IBC? TIA
as long as the money remain in the company, only the company is taxed based on its tax residency. your problem is when you want to get some money, since you are US resident/citizen, you have to declare the money. but as long as the money is in the company, only the company is taxed, it is a separated entity from its owners (unless LLC, which is pass through). tntneo
janko, they can't even keep track of taxes paid in the US. excellent point, tntneo, hell if you make $ trading, you should boastfully pay the vig. honus
That's only true if the country of residence has a tax treaty with the US that provides for full exemption. Most treaties declare full exemption only for capital gains and impose partial exemptions on dividend and interest income. If there's no tax treaty all income derived from capital gains, interest and dividends of US based companies is subject to withholding at the 30% rate. In that case you will need to file form 1040NR to receive a (partial) refund. Some brokers like IB won't let you open an account if they would have to do full backup withholding on it. Interestingly IB does not do any withholding on interest and dividend income even if the applicable tax treaty only provides for partial exemption from withholding on those sources. I guess this also explains why they don't send any 1042-S forms to their non-resident alien account holders which are needed to file for a refund with local tax authorities. Oddly enough for the last two years IB even sent me 1099 forms for two of my accounts even though they're set up under non-resident alien status. I suspect they decide based on whether they have an SSN on file. So far I haven't receive any 1099 forms this year though. True as long as the "183 days rule" is observed Dave
Probably not, if setup right. definitely not legal if you care about that. QUOTE Will the brokerage want to know who really is behind the IBC? If you figure out the above, I think you can get by this.
Not exactly legal, you will fall into the "Controlled Foreign Corporation" rules, if I quoted that right, whether or not you distribute, "legally" the income passes through as phantom income. Number of ways around it, get a very big and reputable accounting firm and give them around $25,000 and they will work it out.
Yes it will work; however you have to be "employed" by an entity, your entity, to turn it into qualifying income.