Although we may be an ocean or border apart, you're never too far from taxes. Below are common questions regarding how profits or losses are handled so you can adequately file for taxes.
tasyworks does not provide tax advice. Please consult a local tax professional who is familiar with trading on U.S. markets to help assist you with your specific tax inquiries.
Are taxes deducted from stock or options trade?
Taxes are not deducted from your trades
Taxes are not deducted from trades on stock, options, or futures trades since each country’s tax treatment from profits or losses from trading is different. That said, in mid-February, we will provide a tax worksheet in the form of a CSV file (spreadsheet) of all of your trades made in the prior calendar year, as well as a Year-to-Date Export file (CSV).
For example, if you need to determine your profit or loss on equities and equity options and the tax period in your country is a normal calendar year, then you may refer to the tax worksheets when issued. However, if your country's tax year is not a non-calendar year, for example, from April 2020 to March 2021, you must use the 2020 tax worksheet and 2021 Year-to-Date Export file to reconcile your total realized profit or loss.
The Tax Worksheet and Year-to-Date Export (CSV) files are made available in the Tax Center. Since international customers are not subject to U.S. Capital gains/loss rules, the Tax Worksheet, and the Year-to-Date Export file can help you determine your profit or loss, or P/L for short. If you trade futures, please refer to your latest futures confirmation for the day or month ending of your tax period to determine your futures P/L.
Taxes Withheld on Sources of Income
Dividends, interest, or any cash distribution are subject to taxes withheld
Although your country may not charge taxes on profits made from trading–dividends, interest, royalties, or any other cash distribution is generally defined as a source of income in the eyes of the U.S. tax system. As a result, taxes are withheld on any sources of income. In most cases, a nonresident alien is subject to a 30% withholding rate on sources of income. Some countries may have a lower withholding rate if there is a tax treaty between your country of residence and the U.S. Important.
When you receive any form of income over a calendar year, you will receive IRS Form 1042-S accounting for the taxes withheld. To learn more about this form, please click here.
The IRS requires nonresident aliens and foreign entities to provide financial institutions with their Foreign Tax Identification Number (“FTIN”), or a reasonable explanation as to why the account owner does not have an FTIN, in order for their W-8 BEN to be valid for a payment of U.S. source income reportable on Form 1042-S. If an account does not have the account owner’s FTIN, the account will be subject to 30% withholding on all U.S. source income. For more information on tax withholding on U.S. source income, please visit IRS Publication 515 by clicking here.
Are gains from trading charged the same tax withholding rate?
Non-resident aliens are not subject to U.S. capital gains tax. In the eyes of the U.S. tax code, the withholding amount is assessed on income. Although you may define a profit from a stock or options trade as income, it has a different definition in the eyes of the IRS. Rather, profits from trading are defined as a capital gain. For more information on tax withholding on U.S. source income, please visit IRS Publication 515 by clicking here. To read more about the withholding rate applied to your trading account, please click here.
To view other frequently asked topics, please visit our international account help section.