How to Trade US Stocks as a Non-Us Resident?
Non-US Residents can easily invest in US stocks by opening a stock trading account with an online brokerage located in the U.S. When trading US stocks from another country you have to be vigilant of tax concerns that play major role when it comes to opening an International Brokerage Account in the U.S. So if you decide to engage with the US stock market, you can buy and sell a multitude of publicly traded US companies' stocks listed on US stock exchanges such as NASDAQ and NYSE.
ARE YOU A NON US RESIDENT
At the most brokerages, queries will allow you to enter your foreign information regarding your contact details, source of your investment and tax number and later you'll need to fill a W-8BEN form to verify your country of residence for tax purposes which is mandated by the US Internal Revenue Service. IRS collects non-US taxpayer information from those who earn US-sourced income, for tax reporting purposes and to document their status. As a non-US investor you trade US stocks in the expectation of earning US-sourced income.
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» At least two of the followings,
1. Passport
2. Driver's License
3. National ID Card
4. Other Government-Issued ID Card
- Full address
- Phone number
- Email address
- Proof of address (recent utility bills, bank statements, or official government correspondence)
- Social Security Number (SSN) or national tax ID number
- Your employer's name, address and phone number
- Bank account information (BIC, routing, account# or IBAN)
- 3rd party broker account number (if any) for alternative funding purposes
- Information about your
1. source of stock investment
2. level of your stock market- and trading skills
3. financial state, including salary, source of income, your other types of investment
4. financial goals regarding your stock investments with an estimate of your investment equity at account opening and in the short- and long-term.
Bear in mind you must be from a country that is a member of the Financial Action Task Force (FATF) on Money Laundering. You can read more on www.fatf-gafi.org site.
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Though direct account with a US brokerage is recommended there is another way how non-U.S. investors can open an international brokerage account. You can open an account with a financial services company in your country (if available) that offers access to US stocks.
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1. You're subject to Chapter 3 withholding. When investing in a US stock, any dividend income is subject to withholding by your brokerage at the time of payout. You may not have a year-end tax bill, because the withholding is sent to the IRS on your behalf when the income is cleared on your account. The statutory tax rate is 30%. In case of those countries which entered into a treaty with the U.S. you may be entitled to a lower rate and you can claim the benefits on the W-8BEN form.
2. Dividend income derived from non-US stocks may already have the country of incorporation's tax deducted yet prior to the receipt of the income. The net amount is remitted to your stock broker account, whereas additional tax withholding is not applied.
3. For all non-US stock traders a Form 1042-S will be issued in March for the preceding tax year on any reportable activity. You can download 1042-S online and it is sent automatically to the IRS, which then delivers it to the tax authority of your country of residence. In general non-US tax filing is mandatory but depending on your country's tax laws you may be required to report your stock earnings in your country as well.
4. Non-U.S. investors with US stock broker account are required to provide their brokerage firm with a complete and valid IRS Form W-8BEN to certify their tax status. This form expires every 3 years after the signature date, unless fundamental account information changes. You are notified when new W-8BEN is due to be re-filled.
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