Foreign Stock taxation

[skippybangkok]

Opened an Interactive brokers account, and plan to buy stock in US, Australia and Singapore.  How does it work with Taxation ? Do they deduct from the account automatically ie dividends payment, or do I need to file tax return for each country ? 

 

Thanks 

[KittenKong]

It depends on the country that the dividends are paid from. Some have rules about withholding tax, some dont. Some expect non-residents to declare the dividends and some dont. So you need to check country by country.

 

I know that the US, for example, will tax you quite heavily unless you complete a form W-8BEN and give it to your broker. If you complete it then they tax you less, but I think they still tax you.

[skippybangkok]

Thanks


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[Oxx]

In the case of the US, the tax withheld will depend upon (a) whether the US gives a reduced rate of WHT for your country of residence, and (b) whether your broker implements the reduced rate (in my experience HK and Singapore brokers don't).  So, in practice and assuming you're Thai resident, you'll have tax withheld at 15% or 30%.  Australia is the same.

 

There is no WHT for Singapore dividends for non-residents.

[Oxx]

38 minutes ago, SantiSuk said:

Anyone know the witholding tax position for investments in UK authorised funds and equities (investment trusts in my case) bought through a non-UK broker? I would be considering Luxemborg, Singapore, Hong Kong and using a lo-cost broker like Interactive Brokers.

 

There is no UK withholding tax on dividend income from funds or investment trusts.  There is withholding tax (non-reclaimable) for interest income.

 

Note that Singapore and Hong Kong brokers typically don't have access to the whole of the LSE; you may find that you are unable to transfer some of your IT holdings to a broker there.  Haven't had that issue with Luxembourg (Internaxx).

 

You will experience issues trying to buy UK funds offshore.  Most offshore brokers don't offer funds.  Those that do don't offer UK funds.  Internaxx does offer a modest range of funds, though they are typically Luxembourg versions of funds, have higher charges than the UK, and are denominated in EUR or USD, rather than GBP.

 

There is at least one UK broker that I believe is still accepting non-resident clients, Investec.  (At least, they were at the end of last year.)  You can open an account online.

Edited November 11, 2017 by Oxx

[skippybangkok]

Thanks - good help ! Will not be investing in UK, brexit worries me


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[fletchsmile]

US stocks will depend among other things on 1) your nationality and/or residence 2) whether there is a tax agreement between your resident country and US 3) whether your broker actually implements that correctly and/or whether they choose to. 4) type of stock you are buying, eg US MLPs may be great for US citizens in US bought can be poor for others

 

eg I used Stan Chart Singapore as a broker. A couple of experiences:

i)As a UK or Thai resident we were supposed to be entitled to the discounted rate of 15% WHT on US stocks after completing a W8BEN form (saying you're non-US). Stan Chart messed it up and were still applying the full 30% rate. The people I talked to in Stan Chart said 30% was the correct rate. They even checked with their "expert". Yes it was for them as they are Singaporeans and not entitled to the discounted rate like Thais or Brits. Singaporeans get the default rate of 30%. Took me ages to explain to them and get it corrected.  

ii)A few months back they took the commercial decision not to bother with all the admin of implementing the discounted rate for people entitled to it. They wrote and said regardless of your personal situation they would be applying the flat 30% default rate to US stocks for everyone. I assume that's because most of their clients are Singapore based

 

So bottom line if you pick a broker, give them all your tax situation details and ask them what rate of WHT they can facilitate for you. Will they get the tax treaty rate and implement it if applicable or do you just get the 30% default WHT.

 

Singapore stocks have highly favourable tax treatment for individuals

 

Australian stocks you need to be careful from a tax perspective. They generally have a high dividend paying culture with high pay-out ratios, compared to say the US company which generally tends to have lower payout ratios and retains more profits. Obviously these are generalisations and there are exceptions. The WHT rate on AUD dividends is often 30%, which is higher than US preferential WHT rates where there are tax agreements in place at 15%.

So relative to US stocks you can get hit twice on Aussie dividends: 1) higher like for like payout ratio 2) higher WHT rate which together can equal more return lost to tax.

So for a comparable (again generalising) US stock more of your return would be capital gains, and less would be dividends. Comparable Aussie stock would have have lower capital gains and higher dividend. For many people capital gains are more favourable for tax than taking dividend income

Aussie stocks weren't that favourable for me from a tax perspective, so unless there is something particularly compslling about the Aussie market or the individual stock I can't get elsewhere, then these days I don't bother so much with them

 

In terms of filing a tax return, as a UK national living in Thailand, I don't file tax returns in any of Singapore, US or Australia. The stuff I mentioned above is tax related and will affect how WHT on dividend is administered by the foreign companies/brokers. After they've finished with all their admin I pay nothing extra elsewhere. Depending on your nationality/ residency etc again that may not be the case for you. Some countries tax their nationals and/or residents on worldwide income. 

 

 

 

 

Edited November 14, 2017 by fletchsmile

[Oxx]

1 hour ago, fletchsmile said:

The WHT rate on AUD dividends is often 30%, which is higher than US preferential WHT rates where there are tax agreements in place at 15%.

 

I believe there's a OZ/Thai tax treaty that takes the rate down to 15% - same as USA.