With globalization, there are more and more expats living and working abroad nowadays. Many expats are interested in investing their income, especially in overseas markets like the US stock market. However, there are some key issues to consider when investing as an expat, such as how to open investment accounts abroad, how to manage taxes, and how to transfer profits back home. This article will provide useful information and advice for expats looking to invest overseas.
Open foreign bank and brokerage accounts before returning home
Many expats keep their US bank and brokerage accounts even after returning home, as the US offers tax advantages for non-resident aliens investing in US stocks and funds. Major banks like HSBC, Citi and ICBC have global banking networks that make it easy to transfer funds between accounts in different countries. Keeping accounts active with periodic transfers helps prevent them from being closed due to inactivity.
Consider taxes when structuring investments
As a non-resident alien, expats typically do not need to pay capital gains tax in the US for stock market gains. However, dividends are subject to a 30% withholding tax. Due to tax treaties between the US and countries like China, expats may get credit for taxes paid in the US and not need to pay additional taxes at home. Converting accounts to non-resident status and submitting W-8BEN forms can minimize dividend taxes.
Leverage expat-friendly money transfer services
Transferring overseas profits back home can be challenging due to foreign exchange controls. However, cities like Yiwu and Sichuan have special policies allowing tax-free conversion of foreign currency. Banks like HSBC and ICBC facilitate currency exchange between their Hong Kong and mainland China accounts. Other online remittance services like TransferWise offer lower fees but have transaction limits.
Invest through offshore centers with attractive policies
The US offers very favorable tax and investment policies to encourage foreign investment, making it an ideal offshore center for non-resident investors. Other popular offshore centers include Hong Kong, Singapore and some Caribbean jurisdictions. However, anti-money laundering regulations like FATCA and CRS mean investors need to comply with reporting requirements.
In summary, expats have several good options for investing overseas as non-resident aliens and transferring profits back home despite foreign exchange controls. With proper planning regarding taxes and foreign bank accounts, investing through expat-friendly jurisdictions can be very rewarding.