A trader in the US is subject to capital gains taxes when trading anywhere including US exchanges. A trader in Singapore can trade on US exchanges with 0% tax. I'm curious, why does the US government allow this? There must be some really good reason for it, otherwise they would have imposed tax on traders in all countries on US exchanges. Note: I'm not for such taxes. Just curious.
We pay taxes in our home country on any profits derived from trading regardless of the geographical base of the exchanges/brokers used to generate those profits.
In general, the US taxes residents and citizens on their worldwide income. The US taxes nonresidents only on their income sourced in the US which may or may not be subject to tax by their country of residence. By treaty, income from interest, dividends and royalties is taxed at a reduced rate and capital gains are exempted. This is presumably to encourage foreign investment in the host country.
As we all know most traders fail...If they (foreigners)loose it will benefit US. If they make profits, they will reinvest in the market. It's a win win situation, hence no taxes for our fellow earthlings..
The reason is that you see 2 different things and want to treat them as one. One is capital and the other one is money. US markets are based on the principle of free capital flows including cross-border flows. Hopefully it will stay like that and any restrictions on capital flows like financial transaction tax will not materialize in the US Tax is imposed on capital gains/earnings for residents, citizens and other persons deemed to be residents. In that case there is no legal way to tax foreign non-resident person on pure capital gains.
That's not quite correct. The US claims source jurisdiction over income of nonresidents, including capital gains, that are from US sources. It is only by bilateral treaty that US-source capital gains of nonresidents are exempt. If the nonresident is from a non-treaty country, he would be subject to taxation here on his US source income.
U're mistaking witholding tax (possibly among other taxes), which applies for instance on US sourced dividends and is subject to taxation on source income and dependant on double taxation treaties, and capital gain tax. Foreigners' cap gains made on us exchanges are not subject to taxation from the irs regardless of tax treaties between their country of residence and the us. Wether they will end up paying cap gains will depend on the tax policies of their residence country.