Investing in Taiwan with Interactive brokers and taxes

Hey all,
I’m a Canadian expat living in Taiwan. I’m considered a non- resident of Canada and recently I’ve been trying to get into investing. I’m leaning on opening an account with Interactive brokers. I’m just wondering what happens at tax time. Does anybody know do you have to pay taxes in the USA if your brokerage account is there, or do you pay in Taiwan. If someone buys stock from different countries do you have to pay taxes there?

I’ve found there’s little information on tax situations, so I’d appreciate any help, Thanks in advance.

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Really, ask a professional.

Any professional in mind? I’ve looked in both countries for people who could give good advice for this kind of situation, but haven’t found any.

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TDAmeritrade (USA) let’s a non American open an account for trading. U can sign a form so u do not pay US tax.
Currently there’s zero commission on trades. Their apps are easy to use. You’ll have to transfer money to them in the USA to buy stocks.

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As for paying Taiwan taxes. Don’t know. Haven’t got that far yet but I’m assuming it’s up to U to declare your income on money made outside of Taiwan.

Thanks ted, I’ll definitely check this out.

If I understand correctly, there are four places where you can get hit with taxes:

  1. The country in which the stocks are issued. Usually you’ll get hit with a withholding tax on dividend income. For instance, if you are a tax resident in Taiwan, you’ll pay 30% withholding tax on US dividends.

  2. The country where the broker is located. IB for Asia seems to be in HK and I don’t think they charge additional taxes.

  3. The country in which you are a tax resident. Taiwan has no capital gains tax, but taxes dividends. I think you only get hit on income from investments abroad if your income or assets exceed a certain level.

  4. Not sure if Canada taxes your income outside of the country.

There are some ways to avoid some taxes, for example by investing in Irish ETFs of US stocks instead of US ETFs of US stocks. But I am no expert on this.

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Thanks a lot for the information! I will dive deeper into this but it definitely give me a good starting point.

I can comment as a fellow Canadian who has done a ton of research on non-resident tax obligations.

If you are living in Taiwan, and are an official non-resident of Canada (you have been declared as one by the CRA, not just you decided to be one without doing the forms), your tax obligations are to Taiwan, not Canada. The location of the Brokerage is irrelevant, really, in that all that is withheld is dividend related (see below), the remainder is your responsibility at tax time.

And, (drumroll) Taiwan does not have Capital Gains Tax !!! (Very good news!!!) So any gains you make are tax free (it is as good as a TFSA in this way).

However, dividends are a bit different. There are 2 issues with any dividends you receive:

  1. Any dividends you receive will likely be taxed at source by the government of that country (it is often 25% or so). However, this is done at source, so you don’t really need to worry about it. It is the only tax obligation you have to the country of issue.

  2. You must pay tax on dividends you have earned to the Taiwan government at tax time. If they are non-Taiwan based stocks, they are treated (as far as I know) as income.

(On a side note, this makes more pure growth, non-income based stocks a good idea.)

Important: If you are a declared non-resident of Canada for tax purposes, you do not need to pay anything to Canada for your stocks. All of your tax obligations are to your country of residence, ie Taiwan.

(This is not true if you have RRSPs or a pension in Canada that pays out income to you based in Canada. That is a different story.)

I hope this helps.

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Not tax advice or any other kind of advice –

Check with IB. Ask them about the location of your account. Don’t open it if it is located in the USA and your primary purpose is to trade non-US stocks. Only do it if the account is domiciled in HK. Also, ask them about the brokerage and/or custodial fees that they charge for Taiwan trades and holdings (Schwabb has ensured zero brokerage commissions in US markets as the new normal, but I am very confident that it’s not zero for trading in Taiwan).

If your account is legally located in HK and you are a non-resident of Canada for tax purposes, you should be fine with CRA too. So you shouldn’t have to pay taxes outside of what you have to pay in Taiwan (see above comments – your Taiwan tax burden for stock holdings here is small and can be zero depending on what you own).

My main point is, don’t do it unless the location of your assets is in HK or more specifically any country that is not not not the USA. Non US persons who have financial assets that are legally located in the USA will be subject to US tax at some level. Non-US persons don’t have to pay capital gains but are subject to 30% taxation on US dividends, as mentioned above.

However, estate taxes on US-domiciled financial assets are insanely high for non-US persons. The US Federal Government will keep/take/disembowel your fresh corpse of 50% of your US-domiciled financial assets (of above I think $50K) when you join the choir invisible. I know, I know, it won’t matter to you because you’ll be dead and smoking dope with Janice and Jimmy and Lemmy… but it should matter to you while you’re alive.

So don’t do it, if your account is domiciled in the USA. That would be my advice (if not for the fact that this is not tax advice or any other kind of advice).

On the other hand, if you’re a resident of Taiwan, and you only really care about investing in Taiwan stocks, the very easy workaround to all of this would be to just open an account with a domestic broker in Taiwan.

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Wow, I had no idea the US was so vicious for that. Insane.

Any recommendations on a decent self-directed broker in TW that allows a US dollar based account (preferably with a good online interface)?

Sorry, no. I have used a couple of Taiwanese brokers and their platforms are fine for Taiwan once you figure out the “buy” and “sell” characters. They offer sub-brokerage to buy offshore stuff, but my current Taiwan broker (for the past 17 years) doesn’t seem to provide this service online. Anyway, I wouldn’t trust their execution capabilities as they would be dealing with a third party overseas in the transaction and I assume this would get fucked up in translation. But to be fair, I never tried – others may have better color.

Addendum: I always have problems transferring US dollars internally in Taiwan. It’s not the bank’s fault I think, but rather regulation. So my fear here would be that to trade (say) a US stock using a Taiwan broker’s sub-brokerage service, the transaction would involve something stupid like withdrawing US dollars from my US dollar account, changing the USD into NTD, then changing the NTD into USD at the sub-brokerage level of the transaction to buy the USD-denominated assets. I don’t know if that’s how it would work or not, but FX conversions always work out in somebody’s favor, and it ain’t yours or mine.

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So for non citizens non residents also? I thought it was only for non citizens but residents.

And I also thought it was only for real estate that they would keep 50% in case of death.

Could you explain more or provide a source?

For Me to buy US stocks in Taiwan I had to open an account in my daughters name as she is a Taiwanese citizen.
I used China Trust. The platform is in Chinese but easy to get the hang of. Each trade costs me something like US$25 and 0.5%

Again, consult your attorney and tax accountant but

Resident aliens of the US are treated the same as US citizens for tax purposes, I think. The punitive estate tax applies to nonresident aliens, or so I believe (with a medium level of confidence).

However, it looks like Canada has a tax treaty that raises the US estate tax threshold for Canadians to substantially higher than 50K. I found a Forbes article that says it is 2 million USD for Canadians (but maybe it is now 10 million after Trump raised it from 2 mil to 10 mil or US persons).

So II guess a few countries have negotiated their way around it.

As an aside, Taiwan does not have a tax treaty with the US so the estate tax kicks in at 50K, or anyway that’s my understanding which, again, might be wrong.

I also have no idea if that higher estate tax threshold for Canadians applies for Canadians who are non-residents of Canada (such as the OP) or only Canadians who are residents of Canada i I’m sure there is an answer but I don’t know what it is. Consult your friendly $500-an-hour tax attorney for greater clarity.

Wow, just don’t have your investments with a US based investment firm. This whole topic is insane.

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The thing is I have SSN but I am not a resident and neither a citizen. I don’t pay capital gains tax (up until certain amount) but only pay dividend income tax in the US. My broker is US based. Now, I am not a citizen AND also NOT a resident , does this 50% chunk after I die is still valid? Everywhere I see it shows they will take their bite upon death only for either citizens or resident aliens, no information on non-resident aliens. Anyone knows more about this?

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I need some links for this as well. I have never heard about non-resident’s getting hit this way either. I need more information.

I have never heard this before, and would like some actual links to tax law. It just doesn’t make sense in that people all over the world own stocks on the NYSE, NASDAQ, etc., through different brokers all over the world, and don’t pay taxes like you have mentioned. The U.S. tax system would be inundated and overwhelmed -unless tax is taken at source, like it is with dividends. I have been trading stocks for over a decade, and this is the first I have heard of it. It just doesn’t make sense. I would like to see some actual tax law links here.

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Ok, some information to digest in relation to death and estate taxes through ownership of US securities. Thanks for that.

However, I still don’t see it in relation to capital gains earned as a non-resident using a US based brokerage.

Once again, thanks for the above link. I have no knowledge of US tax law, and it has been very educational so far. Anything you can pass our way is appreciated.

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