Question Taxation risk when trading with IBKR US from UAE - request for confirmation

[Thomas67]

Hi,

Trading stocks in UAE with an IBKR account located in the US (instead of IBKR Ireland for Europe), I wanted to know if you see possible tax issues that might arise in the US, given:
- a residency and tax residency in UAE
- funds located at IBKR US
- the absence of international tax convention between the US and UAE
- my citizenship which is not American

I guess a dividend tax will remain held at source depending on the country of the traded stock, as is always the case, but was wondering if you would see a risk of taxation on capital gains.

In principle, tax residence in the US depends on the substantial presence test or green card (I wouldn't satisfy these conditions), so the risk would be more related to taxation as a non resident. All in all I think there is no risk (i.e. the location of funds wouldn't be a criterion) but I'd like to have the confirmation.

Thanks

 

[JackAlabama]

Hi,

Trading stocks in UAE with an IBKR account located in the US (instead of IBKR Ireland for Europe), I wanted to know if you see possible tax issues that might arise in the US, given:
- a residency and tax residency in UAE
- funds located at IBKR US
- the absence of international tax convention between the US and UAE
- my citizenship which is not American

I guess a dividend tax will remain held at source depending on the country of the traded stock, as is always the case, but was wondering if you would see a risk of taxation on capital gains.

In principle, tax residence in the US depends on the substantial presence test or green card (I wouldn't satisfy these conditions), so the risk would be more related to taxation as a non resident. All in all I think there is no risk (i.e. the location of funds wouldn't be a criterion) but I'd like to have the confirmation.

Thanks

No tax risk inmo. You pay the 30% withholding tax on usa stocks which is a minor nuisance as you can go with only non div paying stocks or just trade on SGX and HKEX and LSE.
Having any relations with USA can be a challenge in itself but they still seem to attract foreign capital and providing shelter for all kind thereof, so in the immediate future it seems ok.

 

[zzzzzz]

Hi,

Trading stocks in UAE with an IBKR account located in the US (instead of IBKR Ireland for Europe), I wanted to know if you see possible tax issues that might arise in the US, given:
- a residency and tax residency in UAE
- funds located at IBKR US
- the absence of international tax convention between the US and UAE
- my citizenship which is not American

I guess a dividend tax will remain held at source depending on the country of the traded stock, as is always the case, but was wondering if you would see a risk of taxation on capital gains.

In principle, tax residence in the US depends on the substantial presence test or green card (I wouldn't satisfy these conditions), so the risk would be more related to taxation as a non resident. All in all I think there is no risk (i.e. the location of funds wouldn't be a criterion) but I'd like to have the confirmation.

Thanks

Do you already trade through IBLLC-US? Are Irish accumulating ETFs available there, like CSPX? What about trading CFDs?

 

[Thomas67]

Do you already trade through IBLLC-US? Are Irish accumulating ETFs available there, like CSPX? What about trading CFDs?

I actually don't trade CFDs or invest in ETFs, not started with IBKR US yet. For CSPX additional trading permissions are apparently needed. I've seen CFDs sometimes available in TWS, but they don't seem to be reported on Exchange Listings | Interactive Brokers LLC. Perhaps is it best to reach IBKR's support even if you're not client.

 

[zzzzzz]

One risk that nobody talks about is US estate tax for nonresidents. The other one is estate distribution in UAE, if you don't have a will, assets are distributed under sharia law.

"The U.S. imposes a 40% estate tax rate on U.S. assets above a $60,000 exemption threshold on assets of the deceased nonresidents."

 

[TravelAfficionado]

To avoid the US estate tax risk, it may be worth asking IBKR if you can transfer your account to another jurisdiction (e.g. IB Ireland). They sometimes allow clients to select a non-default jurisdiction, but you might need to sign an agreement to be reclassified as a professional client rather than retail client, which might reduce your consumer protections.

Also, the following Bogleheads.org guides may be useful:

Nonresident alien taxation - Bogleheads

www.bogleheads.org

Non-US investor's guide to navigating US tax traps - Bogleheads

www.bogleheads.org

 

[Thomas67]

Many thanks zzzzzz and globaljetset for your valuable answers and suggestion.