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  1. #1
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    Default USA - tax dept reporting ...

    Hi all, I have a few US shares directly with the USA as an overseas customer, no dividends. Do I need to do any reporting to the US govt? I am aware of what I need to do with the NZ IRD.


    Cheers.

  2. #2
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    That all depends on your residency or ties with the US. Who is your broker (or where does it reside?)

    If you are a US citizen, the IRS requires you to file a tax return every year regardless of your residency elsewhere in the world. FACTA bounds most banks around the world to comply with US citizens living abroad ; their bank (or broker) accounts require their SIN so they can forward the tax information to the IRS every year (even joint accounts with a non-US national can not be exempted under FACTA).

    If you're not a US citizen and a non-US resident alien. Then as long as you file the IRS form W8-BEN (held by your US broker) you can be exempt from any reporting requirement to the IRS.

  3. #3
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    Quote Originally Posted by SBQ View Post

    If you're not a US citizen and a non-US resident alien. Then as long as you file the IRS form W8-BEN (held by your US broker) you can be exempt from any reporting requirement to the IRS.
    Thanks for that Yes when I applied I did it in NZ as a NZ resident customer with "Firstrade" via snail mail. I did provide them that W8-BEN form. Never lived in the USA.

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    Quote Originally Posted by rayonline View Post
    Thanks for that Yes when I applied I did it in NZ as a NZ resident customer with "Firstrade" via snail mail. I did provide them that W8-BEN form. Never lived in the USA.
    Rayonline, the W8-BEN has a limited life and at some point you will asked to submit a new one. I can't remember how long the first signing continues to be valid. But your broker should supply you with a new form to update your details when the time comes.

    SNOOPY
    To be free or not to be free. That is the cash-flow question....

  5. #5
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    Quote Originally Posted by Snoopy View Post
    Rayonline, the W8-BEN has a limited life and at some point you will asked to submit a new one. I can't remember how long the first signing continues to be valid. But your broker should supply you with a new form to update your details when the time comes.

    SNOOPY
    Form has to be kept updated every 3 years. It's also interesting to note that the recent "Common Reporting Standard" by OECD nations have enforced the W8-BEN forms to a more strict manner. Before the TAX ID# box wasn't required. Now they require your resident country tax #and your passport ID. Whether the US broker is required to report to IRD or not i'm not sure (my guess is not because to have countless of countries around the world, it's a big hassle ; that most brokerage firms no long accept overseas applicants).

  6. #6
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    I think that Snoopy has covered this before, but I think it bears repeating - if you hold US assets directly, you should be aware that the little b*ggers have an estate tax. . .

    Terry Baucher writing for interest.co.nz

    https://www.interest.co.nz/personal-...rk-interesting


    The US IRS

    https://www.irs.gov/businesses/small...-united-states

    Ireland
    There are quite a few US ETFs which also operate a "mirror" version domiciled in Ireland, denominated in US dollars. Handy.
    Last edited by GTM 3442; 06-11-2019 at 05:51 PM. Reason: Add Ireland

  7. #7
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    Quote Originally Posted by GTM 3442 View Post
    I think that Snoopy has covered this before, but I think it bears repeating - if you hold US assets directly, you should be aware that the little b*ggers have an estate tax. . .

    Terry Baucher writing for interest.co.nz

    https://www.interest.co.nz/personal-...rk-interesting


    The US IRS

    https://www.irs.gov/businesses/small...-united-states

    Ireland
    There are quite a few US ETFs which also operate a "mirror" version domiciled in Ireland, denominated in US dollars. Handy.
    Fully aware of the US estate tax on non-residents. One must be more clever and the best way is to hold the account in joint 'with right of survivorship'. I can't imagine any sole individual having an account abroad that is NOT held in joint status. Even better is to hold it in trust name. There are no restrictions removing or adding to the joint account holder and this can be done until the time comes when the person really wants to sell up and move the funds home.


    W8BEN has a validity of 3 years but the renewal has to be done within. Typically after 2 years the broker asks to renew the W8BEN and it must be filed BEFORE the 3 years is up.

    The $60K USD threshold before non-resident estate tax kicks in would be similar to NZ's FIF tax limit of $50K NZD. Such small figures in the realm of retirement investing.

  8. #8
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    Thanks SBQ.

    I quite like "structure", and these two "structures" look quite interesting. I shall have to revisit this stuff. . .

    However I suspect that joint ownership could become more complex if such ownership starts to cross state, provincial, or national boundaries - the rules may differ between countries, or between states/provinces within countries. And as you've noted, not all tax authorities respect national borders.

    Throw a changed or changing citizenship/residency/tax residency status into the mix, and there's the potential for further complexity. What works well with a particular combination of citizenship, residency, and tax residency may not work so well if even one of those things changes

    Add trusts, and the mix gets even murkier - does involvement with a trust in another country create enough of a "link" to that country to trigger a tax residency.

    To be honest, I must admit that I'm not looking forward to the research. It was hard enough last time*, and I'd bet that it won't have gotten any simpler over the years.

    * Once you start crossing borders, even the most knowlegeable-seeming professionals have an unfortunate tendency to slide quickly into a swamp of waffly bullsh*t

  9. #9
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    Quote Originally Posted by GTM 3442 View Post
    Thanks SBQ.

    I quite like "structure", and these two "structures" look quite interesting. I shall have to revisit this stuff. . .

    However I suspect that joint ownership could become more complex if such ownership starts to cross state, provincial, or national boundaries - the rules may differ between countries, or between states/provinces within countries. And as you've noted, not all tax authorities respect national borders.
    Not that i'm aware of and i've done extensive homework over the years between NZ/Canada/& USA. The only province I know of where joint accounts are considered 'part of the person's estate upon death' is Quebec, Canada. Rest of Canada is like the US where any joint account follows the lines of "Joint with Right of Survivorship"

    Throw a changed or changing citizenship/residency/tax residency status into the mix, and there's the potential for further complexity. What works well with a particular combination of citizenship, residency, and tax residency may not work so well if even one of those things changes
    In this day of age, people move abroad and reside in many places over a lifetime. Any modern day broker should be able to handle the correct paperwork when a client change residency.

    Add trusts, and the mix gets even murkier - does involvement with a trust in another country create enough of a "link" to that country to trigger a tax residency.

    To be honest, I must admit that I'm not looking forward to the research. It was hard enough last time*, and I'd bet that it won't have gotten any simpler over the years.

    * Once you start crossing borders, even the most knowlegeable-seeming professionals have an unfortunate tendency to slide quickly into a swamp of waffly bullsh*t
    The problem with setting up a foreign trust is the operate no different in how you would incorportate a company. That is if you have a US broker and want to setup an trust or company account, you have must do so in the US ; which means that foreign trust or company will pay taxes to the IRS in the same fashion as any person that setups a company or trust in the US. This is different to a foreign individual that has an account in the US (ie like a bank account) where the tax is treated where the person resides in. I am not aware of a foreign corporation or trust being able to operate in the USA (and vice versa with a US company operating in NZ without being IRD registered as a separate entity).

    As I mentioned before, i've done the homework on taxation between all 3 places (NZ/Canada & USA). It's a shame to believe that the average working class family in Canada will have a larger pension than the avg working class kiwi family in NZ that contributes to Kiwi Saver. The benefits of share investing is far greater for those that live in N. America PERIOD! all due differences in taxation.

  10. #10
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    Quote Originally Posted by SBQ View Post
    The problem with setting up a foreign trust is they operate no different in how you would incorporate a company. That is if you have a US broker and want to setup a trust or company account, you have must do so in the US; which means that foreign trust or company will pay taxes to the IRS in the same fashion as any person that setups a company or trust in the US.
    Is there anything to stop you as a New Zealander, buying US shares in your own name and then transferring these shares to a company that you own or a trust you control in New Zealand, by using an off market transfer form?

    Quote Originally Posted by SBQ View Post
    This is different to a foreign individual that has an account in the US (ie like a bank account) where the tax is treated where the person resides in. I am not aware of a foreign corporation or trust being able to operate in the USA (and vice versa with a US company operating in NZ without being IRD registered as a separate entity).
    What is the issue with having a company in New Zealand or a Trust in New Zealand being registered with the IRD as a separate entity? They are separate entities are they not?

    SNOOPY
    Last edited by Snoopy; 10-11-2019 at 09:20 PM.
    To be free or not to be free. That is the cash-flow question....

  11. #11
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    Quote Originally Posted by Snoopy View Post
    Is there anything to stop you as a New Zealander, buying US shares in your own name and then transferring these shares to a company that you own or a trust you control in New Zealand, by using an off market transfer form?



    What is the issue with having a company in New Zealand or a Trust in New Zealand being registered with the IRD as a separate entity? They are separate entities are they not?

    SNOOPY
    If you're dealing direct from a US broker, it all depends on the type of account opened. It's even shown on the W8BEN form the various types of entities that the account is formed under. For eg. an "Individual" account holder is direct with the person that operates the account and has a foreign status that requires no IRS #. For an incorporated company or trust account, then that's a different can of beans because they are separate entities which you are correct. However, foreign entities (not persons) are not allowed to operate in the US purely as a foreigner, just like a US company can't simply operate in NZ without some corporate registration. ie we see Pizza Hut and other US icons in NZ but they operate ie. under Restaurant Brands NZ and thus pay taxes to IRD. This is very different to a foreign person that only just has an account and requires no registration with the overseas tax dept. (on a side note, the USA is not part of the OECD "Common Reporting Standard" which require the sharing of account information to the tax dept where the person resides). I suppose the key distinction is an individual account holder may have no intent to profit vs all corporations and (most trusts) operate in a way to make a profit which thus would always attract income tax.

    Something to consider is if you do incorporate in the US or setup a trust in the US, beware the US has estate taxes at the time when the company is wound up or the trust is wound up. So this may not be beneficial at all to the NZ resident that sets up such an arrangement in the US and later on the settlers and trustees have passed away. The JWROS does not apply to such accounts either.

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