Any tips for non-US citizen re withholding tax and choosing PP funds?

[stylo]

Any tips for non-US citizen regarding US withholding tax and various PP funds?

I know some here are in the UK, so I'll mention I am not. I reside in a country that does not have a tax treaty with the US so it is a 30% withholding tax on - as I understand it - dividends and interest. We also don't have a developed market here to do a local PP.

What would that tax mean on typical PP stock/bonds/gold ETFs?

If it means a problem, any better fund options? I think if the fund is not US based, there is no withholding tax. ?

Any tips?

(And what happens if I sign the W8BEN form for my citizenship country which does have a treaty, though I'm not resident there? I assume they'll get that eventually from the US then want income taxes paid there?)

[Plurimus]

I am certainly not a tax expert, but if you let me know, in which currency and/or market you like to choose fund for a PP, then just let me know and I will have a shot at it later this week and post it on my website for you.

I tried to build a Swiss Franc PP, which I posted in other threads and I haven't reached a final conclusion yet, how easy it is to do. But so far my gut feeling says that it is also possible to create a PP in non-US Dollar currencies that behave similarly. 

I guess, that currently in most "advanced economies" the interest rates are so low that interest income doesn't seem to affect the P/L of a PP much. 

[stylo]

I would prefer the US but not sure what that means for the various categories. Otherwise no exact preference.

[Plurimus]

If your question is only tax related and you are domiciled somewhere without any tax agreement with US, then you probably need to focus on Funds/ETFs with lower dividend disbursement. I unfortunately have no idea here. Sorry.
I guess that you might have to find out which domiciled funds are best regarding tax situation. Withholding tax varies from country to country.  In Switzerland the withholding tax is even higher at 35%. 
At least in current low interest, the effect of the withholding tax is not too large. 

[stylo]

>>then you probably need to focus on Funds/ETFs with lower dividend disbursement

And no interest.

Yes, this is what I'm asking about and how the suggested funds pay out and, if not good, what some other options might be.

For example, TLT is paying you via interest or how does that work? Or a non-US GLD-like ETF or other funds? Etc.

[D]

What I could figure out so far is:

1. There are no taxes on treasuries that you hold directly. I am trying to figure out if this carries through if you hold them as a part of ETF such as TLT.
2. I am not able to figure out what is the tax on collectibles (gold) for non-USians. I believe USians get taxed 28% on sales proceeds. It's not mentioned anywhere in IRS 519 document.

So, you can have 0% tax on the fixed income part of you portfolio if invested directly in treasuries. Stock part is 0% on capital gains and 30% on dividends. Gold we have to figure out, but US is pretty much like an offshore tax heaven for non-USians.

[stylo]

Thanks.

Can we buy treasuries directly as foreigners? Sounds like a pain over buying an ETF.

Anyone else outside the US have some tips?

[D]

Thanks.

Can we buy treasuries directly as foreigners? Sounds like a pain over buying an ETF.

Anyone else outside the US have some tips?

Yes, through any broker. I think many recommend Fidelity. As for it being a pain, it's probably worth the hassle for 30% savings and HB recommends buying bonds directly anyways.

[D]

I've seen it discussed on the Canadian boglehead forum and the last paragraph here: http://invest-faq.com/articles/trade-non-us-nat.html

"Various instruments sold by the US Treasury are also available for purchase by NRAs. NRAs can buy, hold, and sell normal Treasury instruments through the TreasuryDirect program, and will not be charged any tax as long as they file a Form W-8BEN. However, the NRA must first get an individual tax identification number (ITIN) by submitting a Form W-7, which is required for opening a TreasuryDirect account. Second, the account holder should really have an account at a US bank to allow for direct payment of purchases and direct credit of interest and sales proceeds. Finally, note that US Savings Bonds are not available to NRAs."

Also here: http://www.thefreelibrary.com/Nonreside ... a013922633

"One reason for the popularity of Treasury bills among nonresident aliens is that the interest, or discount, is free from U.S. income tax. What many may not realize, however, is that Treasury bills of 183 days or less in duration are considered U.S. property for U.S. estate tax purposes. Consequently, the obligations may be subject to U.S. estate tax when a nonresident alien dies.

The idea that Treasury bills owned by nonresident aliens may be subject to U.S. estate tax may come as a surprise to many. Most U.S.-source debt obligations, such as Treasury bonds, municipal bonds and corporate bonds, are generally not considered U.S. property for estate tax purposes. Why are Treasury bills with less than 183-day terms treated differently? And why should a six-month Treasury bill be treated differently than a one-year Treasury bill? The answer lies in a literal reading of the Internal Revenue Code. Whether this result was intended is unclear."

It's frustrating that IRS 519 document is not clear about any of this. I guess treasuries fall under the "portfolio interest" section of that document.

[stylo]

What I could figure out so far is:

1. There are no taxes on treasuries that you hold directly. I am trying to figure out if this carries through if you hold them as a part of ETF such as TLT.
2. I am not able to figure out what is the tax on collectibles (gold) for non-USians. I believe USians get taxed 28% on sales proceeds. It's not mentioned anywhere in IRS 519 document.

Any update on these 2?

Why do you think we are taxed 28% on gold etfs? (I assume you mean if I gained $100 when I sold a GLD position, I'd only get $72 from my broker, correct?)

I live in Asia. I can just go and buy little gold bars at any gold shop in the local market but import is restricted here so there's a big premium over the world price and worried about that collapsing at some point. Hmmm...

[D]

I held few shares of SHY for a month and my broker withheld 30% on the received interest. Still have no clue how this will be classified on the tax documents and if I'll be able to get it back from IRS. It's so hard getting any correct info for non-residents  . 

[D]

I hold a wad of CHY (Calamos) that I bought when the yield hit 13%+ and with a W8-BEN completed/filed the US only withhold 15% on dividends as a consequence of the US-UK tax treaty.  Without that treaty the standard rate is a 30% withhold by the US.  Worse still is I believe that in some countries you're also liable for full taxation at the domestic end as well.

Yes, 30% on dividends but SHY is treasuries which generate "portfolio income" supposedly exempted from any tax for NRAs (similar to interest on bank deposits and unlike dividends)...