The U.S. stock market is one of the foundations of the nation's economic system, and there is no citizenship requirement when it comes to small investors owning shares in a U.S. company. However, there are some extra hoops that non-citizens have to jump through in order to get U.S. stocks in their portfolios. Below are some of the issues you'll face as a non-U.S. citizen.
Getting a brokerage account
In order to trade U.S. stocks, the easiest thing to do is to open a brokerage account with a U.S. broker. However, brokerage firms have different procedures for non-citizens based on their residency status, and non-citizens therefore have to produce more documentation in order to comply with their internal rules.
Different brokerage firms impose different restrictions on non-citizens. In some cases, brokers will accept applications but require paper filings rather than online application forms. Other brokers are less friendly to non-citizens, especially nonresident aliens, and will demand legitimate visa information before opening an account to trade stocks.
If you can't find a broker you like in the U.S., then some foreign financial institutions will allow you to open brokerage accounts that will give you access to U.S. stock exchanges. For U.S. residents, however, those foreign institutions might also consider it a problem if you don't have a local address in your country of citizenship.
Another option is to buy shares of U.S. companies that are listed on foreign exchanges. You'll find that many blue-chip stocks trade on exchanges overseas.
Dealing with taxes
Non-U.S. citizens trading U.S. stocks potentially have to deal with taxation issues. In general, nonresident aliens pay a 30% tax on investment income, and the tax will typically be withheld at the source by the brokerage firm involved. Citizens of countries that have tax treaties with the U.S. often pay a lower rate of tax. However, capital gains are often exempt from U.S. tax for nonresidents.
For resident aliens, the IRS imposes tax on worldwide income from all sources. Therefore the tax considerations are generally equivalent to those imposed on U.S. citizens, and you'll typically file similar tax returns to those for citizens.
Not being a U.S. citizen shouldn't stop you from investing in U.S. stocks. Just be aware that there are some additional hurdles you might need to overcome to do so.
The $15,978 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.
This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors based in theFoolsaurus. Pop on over there to learn more about our Wiki andhow you can be involved in helping the world invest, better! If you see any issues with this page, please email us atknowledgecenter@fool.com. Thanks -- and Fool on!
The article Can a Non-U.S. Citizen Trade U.S. Stocks? originally appeared on Fool.com.
Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
Copyright © 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
