Trust or Ibc for non-US

Discussion in 'Professional Trading' started by Sanz, Nov 20, 2012.

  1. Sanz



    Any thoughts or advice on setting up an ibc or trust to trade in the US market through IB.

    I am EU based and currently pay 30% dividend tax even on bond ETFs.

  2. I take it that your structure is trying to minimize taxes in your tax residency.
    Are you paying taxes in your own country?
  3. Sanz


    Yes, I am. Legislation is about to change, though, so I'd rather know exactly what I will be paying.
    At this point, I am liable for capital gains at my country and I get a 30% haircut at the broker for any dividend from US stocks and etfs. That 30% tax (the maximum) would be less if the ibc/trust is set up in a place that has a better treaty with the US.

    So, yes, I am looking to minimize taxes, be under stable legislation and have some level of protection from personal liability.
  4. Withholding is not a function of structure...
    It depends on the Tax Treaty rate and minimum is 15%.

    I reside in Canada and did this with IB:

    Form a US Corporation like a Delaware LLC...
    Which might cost $2,000...
    And call an institutional salesman at IB USA in Greenwich, CT...
    Then open an institutional account.

    There is no withholding on this account...
    It is considered a "US person"...
    And IB does not care where you live.
  5. Sanz


    Thank you for the response. I will have to look into this. Couple of questions, though:

    So IB does not withhold dividend. I assume the LLC files and pays closer to 15% at the end of the tax year?
    What about capital gains tax. Does the LLC fall under the US legislation? (wash rules, etc)? I know Delaware (and some other states) are tax heavens vis-a-vis doing business outside the US but not sure when trading in the US.

    Thank again.
  6. Daal


    Aren't you subject to US federal corporate income tax?I'm pretty sure you are
  7. Definitely - and also his U.S. corp will have to withhold appropriately on any payments made to non-U.S. persons, namely him.

    There are probably other special filing requirements as well for a foreign-owned corporation.
  8. Daal


    Getting a US bank account for that entity should also be a pain in the ass without personally being in the US. The US doesn't seem a good place to have a offshore company at all
  9. I only have one Canadian bank account for the Delaware LLC.

    Of course a Delaware LLC has to file with the IRS...
    But a single-owner one is viewed as a "disregarded entity"...
    And has very limited filing requirements...
    Especially if your country (Canada) has a good Tax Treaty.

    I'm still working on my first US filings... so not yet an expert.

    There is no Portfolio Margining in Canada (IB Canada)...
    So this is the only way for me to get 4:1 or 5:1 leverage on stocks...
    It's not about tax for me.
  10. Daal


    How was the process of opening that bank account like?Easy or difficult?
    #10     Nov 21, 2012