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The United States US is notorious for its complex tax laws and strict reporting requirements. International brokers diligently ensure their investors and traders are compliant, even if they are not US citizens.
In a previous article, we explained some of the tax requirements for individuals who are US citizens or resident aliens receiving foreign income. But what if you are neither a citizen nor a resident of the United States? Whether a nonresident alien is required to file a return and pay taxes depends on the tax treaty between the US and their home country. Under these treaties, residents not necessarily citizens of foreign countries are taxed at a reduced rate, or are exempt from US income taxes on certain items of income they receive from sources within the United States.
But what if there is no treaty between the United States and your home country? With no tax treaty in place, nonresident aliens are subject to the rules described in the instructions for Form NR and Publication There is relief for traders. IRS Publication states:. If your only US business activity is trading in stocks, securities, or commodities including hedging transactions through a US resident broker or other agent, you are not engaged in a trade or business in the United States. So for traders in Dubai, as with many other countries, if your only US-related income is trading, there is no requirement to file and pay taxes in the United States.
Of course, the rules are complex and you should always consult with your tax advisor to determine if there are other activities or transactions that are required to be reported. Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader.
The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.