Hmm. Maybe I misunderstood things, I thought I’d file a W8BEN and not have exposure to this US tax.
Also, I likely will not be a Tax resident this year and the following few years (if that means 183 days thing).
I tried sending back 100 bucks to myself in Taiwan from the FirsTrade account, I wasn’t taxed in the US. I had to pay:
$35 to Firstrade as wiring fee (flat fee)
$12 to the intermediary bank (unclear if variable or flat)
$0 to CUB (I have a so called VIP account)
CUB did call me when the wire came in to disclose this for Taiwan income
Again, I’m kind of a newbie here, so I may misunderstand.
A bit wary of using IBKR, since 1st they were quite slow in opening the account, 2nd they are not “SIPC” protected, 3rd seems Brexit brought some changes in their operations, saw a lot of international investors moving away from them, 4th IBKR fees tend to be higher (albeit same for ETF).
But again, I don’t have a 100% grasp on these things yet.
Also not at all interested in investing in Singapore, just SP500 + some Taiwan market
This would only work if Taiwan and the US had a double taxation avoidance agreement that regulates these taxes. A W8BEN by itself is just an identification of the counter party, you need the tax agreement to end up not paying.
Got it, so it seems I have two options to avoid this
Transfer my account from Firstrade to IBKR or the like right now, and likely pay limited capital gain tax (my Fitrade account is 3 weeks old and gained ~$200 so far).
Be a tax resident of a country that has tax agreement with the US at the moment of Cashing out
Is that correct to your understanding? Thanks a lot for your help, important to make sure I dont make a mistake that will bite me back in the long run.
If you want to pay no tax at all you would have to reside in a country that
a) Has a double taxation agreement with the US where all US capital gains are tax free in the US
and
b) has no capital gains tax for residents on dividends and sales of stock (VOO will pay you dividends every quarter)
I doubt such a country exists, but you can check the list of US double taxation agreements (it’s not long). The point is that you have to pay tax somewhere, either the US or in the country of your residence. Which is why so many ETFs are domiciled in Ireland, since that country does have an agreement with the US and the rate is just 15%.
You might want to listen to the @rooftopclown and check out VUSD and not worry too much about it.
I checked, and can easily be tax resident of a country that has double tax agreement with the US at the moment of cashing out (In fact I will be tax resident of Japan, which is on the list, for the next few years at least)
I couldn’t find VUSD on Firstrade, do you mean to buy this through IBKR?
Not really. But if you are a US citizen, you’ll have to pay US taxes instead of withholding taxes anyway, so it usually makes more sense to just buy the US-listed version, which comes with lower management fees.
Cashing out only impacts your capital gains taxes and the US doesn’t tax foreign investors on capital gains. So you better just be a tax resident of a country that doesn’t charge capital gains taxes e.g. Taiwan.
However, as long as you hold the ETF and it pays dividends, you will be charged withholding taxes if you are not a US tax payer. Withholding taxes for people in countries without a tax treaty are 30%. Since Ireland has a tax treaty with the US, Irish ETFs only pay 15% withholding tax and there is no additional withholding between Ireland and Taiwan. Thus, Irish ETFs make more sense for most foreign investors.
Also, in the unfortunate event that you suddenly die, the US will charge you 50%(?) estate tax on any US assets, which include US registered ETFs and stocks.
But then I am in the entertainment business, so what do I know. You’ll probably find a better explanation by Duckduckgo-ing.
there are different brackets for US and non US citizens. estate tax for US citizens starts at ~2 million usd iirc. for non citizens it starts at 60,000 usd.
Indeed. You can either go for an index ETF with low fees or a mutual fund with low fees. But if they invest in US stocks and pay dividends, make sure they are registered in a country that has a tax treaty with the US and imposes no additional withholding tax on you. Ireland is preferred, Luxembourg is an option, and there might be other places.
Check www.fundrich.com It’s in Chinese only but you can register as foreigner. As far as I know this is what the government setup not so long ago for the people to save money due to the low pension. I use it and I think it’s great, you can setup periodical transfers and a friend told me that US investments are not taxed until very very high sums. It has a lot of good funds from BlackRock, Morgan Stanley, etc (USD) and many national ones with investments in China and Asia in general (TWD)
a tldr: In the long term, if you’re a non-US citizen living in Taiwan, it might be best to buy an Irish based ETF like VWRA (for worldwide coverage) or IWDA (excludes emerging markets). Best platform might be Interactive Brokers, will have to convert TWD to USD, then send it there