Investing in Taiwan with Interactive brokers and taxes

Found this in the link below

“ Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent’s dying in 2010 and 2011 (note: there are special rules for decedents dying in 2010); $5,120,000 in 2012, $5,250,000 in 2013, $5,340,000 in 2014, $5,430,000 in 2015, $5,450,000 in 2016, $5,490,000 in 2017, $11,180,000 in 2018, $11,400,000 in 2019, and $11,580,000 in 2020.”

But the above seems inconsistent with the following:

“ Executors for nonresidents must file an estate tax return, Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States, if the fair market value at death of the decedent’s U.S.-situated assets exceeds $60,000. However, if the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). See Unified Credit (Applicable Credit Amount) Section in Publication 559, Survivors, Executors, and Administrators, and the Form 706NA Instructions for more information.”

Both from IRS website. Which of the 2 statements is valid?

The differences are based on the deceased’s status as either a US person or a non-resident alien.

The former (i.e., the very high threshold) applies to US persons.

The latter applies to non-resident aliens. But not to ALL non-resident aliens because some countries have negotiated tax treaties that may or may not change the rules.

So if you are a US person the estate tax threshold is quite high and in practice almost nobody pays it. If you are a non-US person and your country does not have a tax treaty with the US, the estate tax kicks in at 60K (I previously thought it was 50K but that was wrong).

I hope it’s clear that I am not a fan of the US tax code. You couldn’t design a more arcane and jumbled system. It’s hilarious, in a demented and sad way, that even the IRS statement is to consult a tax attorney if you have questions.

Look, I don’t know the answer in your case, but I would definitely figure this nonsense out if I were you.

And if I were the OP, I certainly wouldn’t subject myself to this insanity if his\her primary purpose is to buy Taiwan stocks via a US-based brokerage account while living in Taiwan. Just do it in Taiwan, or if it has to be Interactive Brokers then make sure that the account is with IB Hong Kong, and not IB USA.

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it is full of bumps and turns most definitely. I will look into it with more attention and time.

I also found this easy summary, of course nothing very detailed, but a brief reading for anyone who wants to check it out:

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My problem is that I pretty much invest in the US stock market for 80% or so of my investments, and I prefer to do it through US dollar ETFs. Is it possible to purchase these through a Taiwanese broker? Maybe we need a discussion thread for this …

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Possible, but not cheap. That’s why many of us work with US brokers like IB.

Thanks so much for all of this, I am a non- resident, so I’m not worried about the CRA. However, I am weary of the estate tax if I get an IB account. Does that mean as soon as I’ve invested over 60K then whoever inherits them will get hit with estate tax?

Pretty much yes. I was not aware of that, I thought I would fall into the category of up to 11million threshold. I am seriously thinking about moving my assets now

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Is anyone else a little weary of having their brokerage in HK at the moment due to the … ahem… current political situation? I wonder what it’s like to have one in Singapore?

Finally a thread with some meat on it on Forumosa!

Great info by @gator

I would like to add:
The 60K limit includes US securities, US bonds and the cash balance in your brokerage account Click me
As of 2018, IB in the US is the carrying broker of client assets globally (but ask them anyway, would be good to get latest info).

This limit only applies to local US securities. VUSD (traded in London in USD, domiciled in Ireland) is not a local US security, for example.

PS: If you plan to put a lot of money into any investment account over your life time and have kids, here is a tip: Companies don’t die.

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Ahh thanks for that… I actually for this link that kinda gets closer to the fine line of what you’re saying!

https://www.northerntrust.com/united-states/insights-research/2018/wealth-management/tax-consequences-non-citizens

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That link is great and very clear. So basically, if you are nearing the great beyond, and have more than $60K US in individual US stocks, be very aware of the tax implications.

Very good point. I think this would also apply to similar index etfs that trade on the Canadian market in US dollars - I will just have to do some research in this area as I age.

Owning stocks through a company? Wow, fantastic idea. Any tips? (I have so many questions … This is awesome).

I just had a long talk with my current brokerage. It seems that I can just keep my investments where they are after we move, without issue (my investment accounts will be open before we move, so no issues). I will still have to be aware of estate taxes, etc., in relation to US based stocks for estate taxes, but other than that, it is much, much easier.

Now I just need to figure out an easy way to transfer money from Canada to Taiwan on a month to month basis … Both in large amounts (maybe once or twice for APRC) and in smaller amounts (monthly) when it comes time to start using my pension money as income.

We are all skating the edge of death, by virtue of being alive.

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from my experience the best way is to accumulate and transfer a lump sum every 6 months or so, that is the most efficient way in terms of bank fees.
another option is atm withdrawals, but that depends if your bank in Canada charges a fee for overseas withdrawal or not. if it doesn’t, then this is even a more convenient way to do it
my bank charges fees for overseas withdrawals, so I just transfer every 6 months or so.

the broker has no way of knowing you died. in the event of sudden death, just tell your family to sell everything before they go to tell your bank you died :slight_smile:
once you reach old age, if you have enough assets you can plan accordingly, like setting up a company or a trust.

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Doing this assumes that you know when you’re gonna go. But you don’t – that’s the funny thing about death. You might get hit by a bus tomorrow.

Or you give all your account details to your estate beneficiaries today, which sets up other problems.

Lastly, this plan forces your beneficiaries to commit tax fraud, which in the US is not a risk-free exercise.

But I suspect that this is what many folks do. This is advocated on Taiwanese investment chat groups on FB. In practice I’m sure it happens a lot. But it’s illegal and there are ways to avoid it, so…

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The consensus among entrepreneurs in the US is that the US Government is bankrupt and will do anything and everything to take as much as it can from who ever it can. Its appetite is insatiable and only getting worse with each election promise of each and every politician. The main reason so many US business owners are investing outside of the US is not to “evade” taxes. That’s an ever increasingly loosing proposition with the outlandish penalties and forced spying and “compliance” requirements the US places on every bank on earth since the IRS does not recognize the sovereignty of any nation that is not the US, but to move profits to other jurisdictions where tax rules are more favorable. They are still substantially burdened by US taxes even when locating assets overseas as the US taxes its citizens on all income regardless of what country it was earned in, but it can lower the tax rate and or increase deductions.

That being said, and the US global death tax aside, the IRS also uses what it calls a “substantial presence test” to determine if non citizens are required to file annual US tax returns. While most people point to the percentage of time non US citizens would have to spend in the US during a given time frame, I believe there are also asset location aspects to the test. This would mean that you, as a non US citizen, could end up being required to file and pay US income taxes because you have invested enough in the US that the IRS wants a sizable chunk of you even if you are not a citizen and have never stepped foot in the US.

I’m not a tax professional and don’t have accounting or legal training, so take that into consideration with my comments. But if I were not a US citizen, I would avoid investing in the US or at least consult with a US tax professional about ways to mitigate my US liabilities before investing. Maybe an L.L.C. is in order, or maybe there are better opportunities in growing countries without the risk.

Good luck to you, what ever you decide.

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I cannot help with answering questions but I just read “The Global Expatriate’s Guide to Investing: From Millionaire Teacher to Millionaire Expat”

It may answer some questions…