Investing in the US Stock Market for Non-US Citizens

 

Guide to Investing in the US Stock Market for Non-US Citizens

 

The US stock market has been the favorite of many investors as the world's largest stock market, and people want to invest in it. Having a US trading account is one of the ways to gain access to the US stock markets, but whether it is possible for a foreigner to open a US trading account is a question mark.

 

Of course, a foreigner can open a US trading account, but this may require additional documentation. Examples of these extra documents are Identity Documents, Tax Documents, and sometimes Visa Documents. After providing these, an account can be opened through a US-based stock broker.

 

There are several ways to invest in US stocks. You can continue reading the post to learn about these ways and tax situations.

 

The information in this article is not investment advice. Be sure to consult an expert to get precise information about taxation and opening an account.

 

As a foreigner, what do you think about investing in the US stock markets?

If you don't live in the US and want to trade in the US stock market, there are two ways to do this:

 

1. Opening a trading account with a local financial institution / broker where you can trade the US stock markets

Some local financial institutions and major brokerages can access the US stock market through global depository receipts or by partnering with US financial companies such as Merrill Lynch. So be sure to check with your country's financial institutions to find out which organizations offer such services.

 

For instance, if you are a UK citizen you have the chance to open a brokerage account with Saxo Bank or Barclays to trade on the US stock exchange, similarly, if you are in Malaysia, you can use CIMB Bank to invest in the US stock exchange. Each country has brokerage houses or other financial institutions that offer similar services; It will be sufficient to consult the competent authorities to find them.

 

2. Opening a Trading Account with a Broker Operating in the USA

Although some US-based brokers mostly do not allow foreign customers to open a trading account with them, a few offer online services to customers in some countries.

 

Some of the US-based brokers serving international clients online can be listed as Firstrade, MBTrading, Zecco, TradeStation, TD Ameritrade, Etrade, Interactive Brokers, Sogotrade, and Just2Trade. Each has a list of countries where it accepts customers, so before choosing any of them, it's helpful to find out if they support your country of residence.

 

There are some brokers with international presence. That is, although their headquarters are located in the USA, they have offices spread around the world. Two brokers in this group are Charles Schwab and InteractiveBrokers. These brokers have offices in the UK, some European countries, Hong Kong, Singapore and Japan.

 

How to Open a Trading Account in the USA (brokerage account for non-US residents)

The first requirement for opening a US trading account is to find an online, US-based broker that accepts clients from your country of residence. When you find a broker that you think suits your needs and trading strategies, you can read the FAQ pages or even call them to find out all the documentation you need to provide and the process involved.

 

You may be asked to provide your international passport and current utility bill as proof of your identity and non-residency status, so having it with you will make your job easier.

 

Go to the broker's website and click the "open account" link to fill in the required forms, then some of the forms may need to be signed, so printing them will make things easier. As a foreigner, you will need to complete and sign the form W-8BEN, which is a very important form showing your foreign residence status regarding Income taxes.

 

Once you have finished filling out and signing the forms, scan them and email them to the broker or upload them to the broker's site with a scanned copy of your passport and final invoice. Next, the broker will review your application and send you an email stating whether your application was successful.

 

If your application is accepted, you can continue to deposit money into your trading account using the money transfer methods supported by your broker. Bank Transfer, PayPal, ACH Transfer, etc. You can use the option that suits you. Once the money deposited is reflected in your trading account, you can now start trading comfortably.

 

In addition, by integrating US Stock APIs, Live Market Data APIs and Algo Tradin APIs into your broker account, you can obtain a lot of real-time and historical data on US stocks and take more accurate steps in your investment strategy.

 

Tax Status in Foreign Trade Accounts

Normally, all income from your investment in the US market is subject to tax. Below are some essential tax issues you need to know:

 

It is essential that you consult a financial advisor before acting on any of the information below. Finage cannot fully guarantee that the information is current and accurate. It will be of your benefit to check.

 

Dividend Income Tax and Capital Gains

Because you are not a US citizen, any dividends you earn from your investments in the US stock exchange are subject to a 30% tax deduction by your broker. However, this rate may be lower depending on your country of residence.

 

Some countries have tax treaties with America. If you are a citizen of one of these countries, you may be able to pay lower taxes. To receive this low tax rate exemption, you must indicate it on the IRS Form W-8BEN you submit when registering your trading account.

 

The validity of Form W-8BEN is three years from the day it is signed. Before the form expires, your broker will always notify you of your renewal. If yours has expired, your account and earnings will be subject to normal taxation for a foreigner, even if you are from a tax-exempt country.

 

To Sum Up

As a result, you do not need to be a US citizen if you want to trade on the US stock market. You just need more documents than you need in your home country to start business. In this way, as a foreigner, you can open a trading account with a US broker and invest in the US Stock Market. In addition, if you don't want to deal with documents, you can invest through local financial institutions that have access to the US stock market. The most important point is that you have information about the relevant tax policies.