Trading the US Markets

[Alpine Dragon]

A bit offtopic, But here goes.

Has anyone tried setting up a US brokerage account and trading the US markets? As I understand it you have to fill out an W-8ben Form and hand it to the broker, Also it seems I am suppose to apply to the IRS for a US Taxpayer identification number before I hand this from in?
Apart from dealing with the above and the Broker's application process (including wiring funds to the account) is there anything else that has to be done?

In the end, is it worth it for a New Zealand resident to be trading the US stocks? Apparently the IRS will deduct about 30%? I also gather the IRD will probably have it's take as well?

Is there prehaps a better way to structure this?

[Ricardo]

The process is not difficult. I did mine through etrade. From memory they sent me the W 8ben form at the end of their year. IRD here wont take any more, as US is on the grey list. You have paid tax on your divs over there, so don't pay it twice. As the rate at which they are taxed is slightly different than your likely tax rate here IRD may pick up if you claim credit for divs at a greater rate than you are entitled too, but no big deal - they should just correct your return. Not many US cos pay divs anyway.
Hope that helps - only downer with US has been any gains you make trading are wiped out by exchange moves, but before too long it may just go the other way.

[Tyke]

No, you don't need a IRS number.
You should be able to download a W8-ben form from your broker's site, I use Ameritrade (www.ameritrade.com)

As for the IRS taking 30%, there is a witholding tax on dividends ( not as high 30% I think) but nobody trades in the US for income; not many US companies pay dividends anyway.

[Alpine Dragon]

Thanks for your replies,

Just seeking clarification, on Page 4 of the http://www.irs.gov/pub/irs-pdf/iw8ben.pdf W8ben Instructions, under subcategory "line 6" as I am applying as individual at this stage, it appears to suggest that I need to go register a Taxpayer number with the IRS?

[Ricardo]

Just pulled my file out of the cabinet. After the line that says you must provide a TIN (Taxpayer Identification Number) if claiming benefits unde an income tax treaty, there is a let out clause that says a TIN is not required to be shown to claim "dividends and interest from stocks and debt obligations that are actively traded".
I didn't get a TIN. I signed off my W-8BEN at etrade's request. They ley you know when your status as a "foreign person" expires, so I am sure thay would have let me know if a TIN was needed.

[George]

Ricardo
Can one trade the US the same as Aussie ie. keep any profits in the US account but no tax unless bought back to NZ (not trading for divs)??
Also, would there be a broker similar to AOT in Aus, where one can trade the same stock a number of times in a day for the one brokerage??
Thanks.

[Ricardo]

George, you would have to talk to your accountant. My one is using the accruals rules method, where profit is calculated from stock at end minus stock at start, plus sells minus buys. Repatriating the money has nothing to do with when the tax is paid. US cash at start and end is also factored in (something you don't do with NZ shares by this method.
If I buy and sell the same day etrade takes brokerage for both. For me this is not usual, so not an issue for me. Paying just one lot of brokerage would certainly let you take advantage of much smaller movements.

[Contrarian]

Gidday

Any updates on setting up a US trading account?
I am wishing to get some greenbacks & then worry about what to do with them.

Etrade won't do aliens, which is a shame.

[BigBob]

Contrarian,

You may want to consider using CFDs - very easy and I think you can have a USD account with NZ providers. I use CMC Markets, but my base currency is NZD...

[Steve]

quote:Originally posted by BigBob

Contrarian,

You may want to consider using CFDs - very easy and I think you can have a USD account with NZ providers. I use CMC Markets, but my base currency is NZD...

You can always change your CMC accounts base currency to USD if that is what you prefer...

[Contrarian]

Gidday

Ameritrade don't want me either :-(
Thanks for suggestions.

[Deev8]

quote:Originally posted by Contrarian

Etrade won't do aliens, which is a shame.Must be a change in policy over the past few years - I opened my E*Trade account using a photocopy of my NZ passport for ID back then, and the account is still active today.

[Mr_Market]

Try Charles Schwab:

http://www.schwab-global.com/public/schwab-gcb-en/what_we_offer/accounts_features/open_an_account.html?cmsid=P-1053855&lvl1=what_we_offer&lvl2=accounts_features&refid=P-1057850&refpid=P-1057766

[hairdresser]

Do you know wht the tax implications for direct investment in US securities? DO you have to complete a US tax return or is it all covered under the tax treaty. I know that investing in the US from tax is a lot more complicated than in NZ due to CGT.

[Contrarian]

Hairdresser
It just comes under the new FDR regime. You pay tax on 5% of the holding.

[Deev8]

quote:Originally posted by hairdresser

Do you know wht the tax implications for direct investment in US securities? DO you have to complete a US tax return or is it all covered under the tax treaty.


quote:Originally posted by Contrarian

It just comes under the new FDR regime. You pay tax on 5% of the holding.It is important that you complete a form W8-BEN and submit it to your US broker. That declares that you are non-resident for US taxation purposes, so that any dividends that you receive will be subject to 15% non-resident witholding tax rather than a higher rate. When you complete your NZ tax return you can claim a credit for the US witholding tax that you have paid.

[drcole]

Does anyone know what the current situation is or have recent experience regarding opening accounts with discount brokers in the US? In this and other threads people have alluded to the fact that the likes of E*Trade / Ameritrade won't set up new accounts for people resident in NZ anymore. Is this still the case? Are there any brokers that will?

I'm keen to get some exposure to US markets but the fees local brokers charge is putting me off.

[Deev8]

I'm keen to get some exposure to US markets but the fees local brokers charge is putting me off.You're not kidding. ASB Securities brokerage fee is fairly typical at 0.8% with a minimum of US$50.00 per trade - compare that with E*Trade's US$12.99 per trade.

Although I know that it won't be easy, I can't help on the question of just how difficult it is to open a new account, I've had mine for quite a few years. However I do know that if you are successful you will have to jump through all the 'know your customer' and anti-money laundering hoops. That means providing proof of identity (certified copy of your passport or drivers licence) and address (a recent utility bill in your name).

Good luck.

[JonJ]

Hi fellow Forum users. I'm intersted in starting a investment club or share club. I'm an absolute rookie. I'm mainly inerested in US market ie NYSE. I intend to invest for the short term. I thought about put a notice in a newsletter somewhere. Ideally a group of 10 to 12 seems to work best. Keep it real. :cool:

[percy]

Hi fellow Forum users. I'm intersted in starting a investment club or share club. I'm an absolute rookie. I'm mainly inerested in US market ie NYSE. I intend to invest for the short term. I thought about put a notice in a newsletter somewhere. Ideally a group of 10 to 12 seems to work best. Keep it real. :cool:

I have been in two share clubs.I would warn against having more than 5 members,or you will end up going around in circles.We made too much money and had to wind them up as tax,and ownership,and tax numbers were becoming an issue.Good luck,try and have an accountant as a member to save costs.

[JonJ]

I read it's in idea to have a comitte of about 3 members to make the decision and change the comittee each time so most people get to have a turn of having a say. I found a site with software that helps with record keeping. Thanks for the reply.

[Phaedrus]

Here is an article from Kiplinger's rating the top 10 US online brokers.

http://www.parsintl.com/22099.pdf

I have found TD Ameritrade to be the best by far, but I understand that they are not taking any new NZ investors.