A question about cash dividend and commission

[dasinsin]

Hi, I am a foreigner and also do my invest in stocks and mutual fund. As a foreigner, I don't have to pay capital gain tax but there is a very high withholding tax when receiving cash devidend.
The main invest I did is in ETF and Vanguard mutual fund. I have some question need your help.
1. What ETF or mutual fund I should buy to minimize cash dividend for me?
2. I have to pay US9.99 per ETF trade and USD49.99 per mutual fund trade since there is few brokerage offer to foreigner. Is ETF a better way for me to do my asset allocation? Is there a discount brokerage can offer me lower commission?

Thanks for your help in advance. There isn't no one around me can answer my question and I need your comment about how to do.   

 

[mikew]

Hi Dasinsin

1. What ETF or mutual fund I should buy to minimize cash dividend for me?

That probably depends on the asset classes you want to invest in. You can look at this for starting ideas.
http://www.altruistfa.com/dfavanguard.htm
If you follow the links in the 4th collum, it gives suggestions for different asset classes for taxable accounts.

2. I have to pay US9.99 per ETF trade and USD49.99 per mutual fund trade since there is few brokerage offer to foreigner. Is ETF a better way for me to do my asset allocation? Is there a discount brokerage can offer me lower commission?

If you look at the posts of ben another foreigner, they may be helpful.
http://early-retirement.org/forums/index.php?action=profile;u=43

I think he switched from mutual funds to etfs because of the expense and headaches with the new rules and possible future rules in the US.

I keep all of my nonresident alien wife's account in ETF's for the same reasons. I think it is possible to set up a pretty good portfolio only using etfs.

Mike

 

[dasinsin]

Hi Mike, thanks for your help. You solve my question... :

 

[Texas Proud]

Hi, I am a foreigner and also do my invest in stocks and mutual fund. As a foreigner, I don't have to pay capital gain tax but there is a very high withholding tax when receiving cash devidend.

I am saying this from a small memory way back.. so it can be very wrong.... BUT, I think that your should say I don't PAY capital gains tax.. not that you do not HAVE to... I think the US requires that you do pay on any income earned in the US.. and capital gain is income in it's books... now, just because you do not fill out a return does not mean you do not 'owe' it...

And, if you want to get back your withheld dividend... fill out the return also... the withholding is an prepayment of an estimated tax.. but it might not be owed at all... if you did not owe it, you fill out the tax forms, send them in and get a check back... easy (yea right)...

 

[Texas Proud]

I keep all of my nonresident alien wife's account in ETF's for the same reasons. I think it is possible to set up a pretty good portfolio only using etfs.

Mike

Just curious... are you a US citizen?? If so, do you fill out a married filing separate?? I would think that if you filled out a joint return then that offshore income would be included... I have nothing to base this on except knowing how congress thinks on getting everything taxed...

 

[dasinsin]

And, if you want to get back your withheld dividend... fill out the return also...  the withholding is an prepayment of an estimated tax.. but it might not be owed at all...  if you did not owe it, you fill out the tax forms, send them in and get a check back... easy (yea right)...
Hey, I think you are right. I just review IRS and I can get the dividend back if I return Form 1042S. http://www.irs.gov/publications/p515/ar02.html#d0e5501
For some foreigner who have the same question as me.

 

[mikew]

Just curious...  are you a US citizen??  If so, do you fill out a married filing separate??  I would think that if you filled out a joint return then that offshore income would be included... I have nothing to base this on except knowing how congress thinks on getting everything taxed...

Hi Texas
Yes I am a US citizen but file seperately so DW's account isn't included. I don't know very much about taxes but I am afraid you would be right, if we filed jointly.

Mike

 

[Texas Proud]

Hi Texas
Yes I am a US citizen but file seperately so DW's account isn't included. I don't know very much about taxes but I am afraid you would be right, if we filed jointly.

Mike

Mike.. thanks... I did taxes for about 4 years.. but that was over 20 years ago.. I did some expat returns, but mostly trust and estates and rich individuals.. so my memory is foggy and they have changed the law a lot...

I do know that the US taxes worldwide income and it just made sense that if you put your wife down you would have to include her income....

How about a tax strategy... if you have a good marriage, gift some of your assets to her and invest offshore.. then the income is hers and you can exclude it.. just a thought..

TP

 

[Meadbh]

How about a tax strategy... if you have a good marriage, gift some of your assets to her and invest offshore.. then the income is hers and you can exclude it..  just a thought..

TP

Before doing that, check to see if Mrs. TP's country of citizenship has a tax treaty with the US. If so, she may find herself paying taxes there.

 

[Texas Proud]

Before doing that, check to see if Mrs. TP's country of citizenship has a tax treaty with the US. If so, she may find herself paying taxes there.

Not a bad idea.... but remember that other countries only tax their 'domestic' income... maybe someone from overseas will know... but I remember some Aussies in the UK that had investments 'offshore' and did not pay tax in Aussieland or the UK.. and they did not pay Aussie taxes on their UK earnings.. AND they were incorporated for some PAYE tax deal... not that I know what that is and how to avoid...

 

[mikew]

We are in Japan. As far as I know both of us have to pay the new emeror taxes on world wide investments after America takes its share. So we are trying to minimize all taxes. When we FIRE, we are thinking of living in a low tax country for a couple of years before returning to the states. Towards that, we are putting almost all savings into DW's account so we won't have to pay taxes during that time.

Mike

 

[Meadbh]

.... but remember that other countries only tax their 'domestic' income... maybe someone from overseas will know...

I was born in Europe and live in Canada and I can tell you that each country is different! In many countries, offshore income is taxed. Tax authorities are becoming stricter over the years and there have been many crackdowns.

A list of tax treaties that Canada has with other nations can be found at
http://www.fin.gc.ca/treaties/treatystatus_e.html .

The US tax treaties can be found at
http://www.irs.gov/businesses/international/article/0,,id=96739,00.html . For example, the US-Japan tax convention dates from 1971. You can download it in PDF format.

Hope this is helpful!

Meadbh