How can my parents in India invest in U.S

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perseus
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Joined: Tue Oct 18, 2016 8:26 pm

How can my parents in India invest in U.S

Postby perseus » Mon Mar 20, 2017 8:50 pm

Hi All

This may be a complicated question. My parents in India would like to know how to invest some of their money in U.S stock Index fund and the remaining in real estate. They are not permanent residents so do not have a SSN. I hear a lot of people from countries like China, Emirates, Saudi invest in U.S very easily. Are there any country specific limitations? How can they file taxes without having a SSN. I am not looking for shortcuts, just legal means to invest in U.S without paying taxes twice, once in India and then in U.S.

Thanks.

moneywise3
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Re: How can my parents in India invest in U.S

Postby moneywise3 » Mon Mar 20, 2017 9:00 pm

Probably not a good idea. It's the whole package deal: you invest where you live, where you get mortgage, where you pay income taxes, where your local currency is etc. All the rates and returns are linked. Amaravati real estate may still be the best bet for them.

saver007
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Re: How can my parents in India invest in U.S

Postby saver007 » Mon Mar 20, 2017 9:39 pm

Have them open an interactive brokers account and buy Irish domiciled US ETFs.. one not need SSN to invest in US market.

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Watty
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Re: How can my parents in India invest in U.S

Postby Watty » Mon Mar 20, 2017 9:45 pm

Among many other problems sending a large amount of money to the US could cause major problems when they die because there is an onerous "non resident alien estate tax"(Google this) and their estate might need to go through a US court too.

If they want to invest in US stocks then I would think that there would be some sort of mutual fund or ETF in India that consists of US indexes that they could buy.

If they wanted to get some money out of India for some reason then there are likely better places than the US, even if it is invested in US companies. There have been a number of threads about investing for expats(expatriates) that you could find and many of their choices would have similar issues.

AlohaJoe
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Location: Saigon, Vietnam

Re: How can my parents in India invest in U.S

Postby AlohaJoe » Mon Mar 20, 2017 10:03 pm

It is a perfectly fine idea and many people do it.

Interactive Brokers is a good choice but you'll also need to investigate things like currency controls and taxation of foreign companies.

fm3040
Posts: 42
Joined: Tue Apr 07, 2015 10:07 pm

Re: How can my parents in India invest in U.S

Postby fm3040 » Mon Mar 20, 2017 10:40 pm

Franklin India Feeder - Franklin U.S. Opportunities Fund

http://www.franklintempletonindia.com/e ... ities-Fund

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ray.james
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Re: How can my parents in India invest in U.S

Postby ray.james » Mon Mar 20, 2017 11:01 pm

To buy real-estate, first they will need ITIN and then may need an attorney to check the property etc but essentially if one has assets/money to do so without mortgage, it should be feasible. I think this is much more easier than opening taxable account in united states for foreigners, since real estate can be purchased by corporations too.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

Valuethinker
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Re: How can my parents in India invest in U.S

Postby Valuethinker » Tue Mar 21, 2017 6:38 am

There's no reason for them to invest in US real estate unless they plan to live there, or you plan to rent it from them (sometimes families from the Old Country arrange that with their kids). Usually in my experience with Asian families (and Sicilian) the plan is to bring the parents over when they are too old to care for themselves (at least in the Italian case, it's usually a bad idea-- although the parents may come and visit for a few months in summer, and you did need a bigger house for that. It is a bad idea because these older Italians lose contacts with their friends and people who speak Italian around them, living in big houses in exurban suburbs*-- it would be different if they lived downtown in Little Italy, of course).

If they do want a house in the USA that you would not be living at (and this begs the question why? Why concentrate risk in one house, one country, one currency, one location-- unless they plan to live there some day) then they could get you to be the manager of the rental. You or another family member in the USA. In my experience, it's hard to manage these things internationally, and family is best (because they won't automatically cheat or neglect you).

They would be better off buying a REIT fund (US or global) if they just want exposure to real estate as an asset class.

I am given to understand that Mauritius has made itself the fund management centre of India. It is probably there that you will find funds that are most tax efficient for Indians? And ETFs?

There's certainly no need to own US stocks or ETFs directly, and trigger messy US tax rules (can't speak to the Indian ones). Certainly I imagine that whilst a US broker might open up you an account, they will not do so for a resident Indian?

Your parents can simply buy, in Mauritius, a Mauritius (or Dublin?) listed ETF that tracks US stocks.

http://www.stockexchangeofmauritius.com/etfs/

http://www.stockexchangeofmauritius.com/faqs-etfs

But, again, why would they do so? Why limit themselves to US stocks?

If they are going to internationally diversify, they should go whole hog and own the world stock markets, in my view (55% of which are USA). Unless there are specific tax reasons not to do so.

* this kind of social loneliness kills old people. Faster than any physical illness, and I see it time and again. At the very least, there needs to be a bus or some other amenity where they can go downtown to an Italian (or Indian) cafe or social club. Live in a suburb full of other South Asians (like Bramalea in Ontario; Woodbridge for Italians) where they have somewhere to go in the day.

The reason living on an Italian or Greek island gives you the longest life expectancy in the world is:

- Mediterranean diet (important, but not compared to the rest)
- daily exercise (you walk *up* and *down* hill every day to the village centre)
- social interaction every day

A friend's mother moved back from a suburban garden home in London England to *Moscow* where she can chat to her friends in her apartment building (read: this is a big ugly concrete thing way on the outskirts) watch her *Opera* channel (this is Russia, communism could not provide physical needs very well, but it did provide music). She would have died had she stayed in London (and her daughter is a medical doctor).

TedSwippet
Posts: 1174
Joined: Mon Jun 04, 2007 4:19 pm

Re: How can my parents in India invest in U.S

Postby TedSwippet » Tue Mar 21, 2017 7:09 am

perseus wrote:This may be a complicated question. My parents in India would like to know how to invest some of their money in U.S stock Index fund and the remaining in real estate. They are not permanent residents so do not have a SSN. I hear a lot of people from countries like China, Emirates, Saudi invest in U.S very easily. Are there any country specific limitations? How can they file taxes without having a SSN.

Not complicated at all. It's very simple. Open a brokerage account and you can buy any US domiciled stock index ETFs you want, since they trade on the NYSE. For real estate, just pick the house you want to buy, and buy it for cash (or using an Indian loan or mortgage). As far as filing US tax is concerned, obtain an ITIN as an alternative to a SSN, and you're away.

Now, they can do it. But should they?

The US will tax all dividends from US domiciled ETFs at 25%, which may or may not be creditable against Indian tax. It will tax any rental income from US sited property at 30%, and will also tax any capital gains on selling the property as if income and at 30% under FIRPTA. Under US estate taxes, the US will tax everything above $60k in aggregate at around 40% should either of your parents die holding these assets. On top of these rapacious taxes, the US non-resident filing requirements may be excruciatingly complex, and so costly in terms of accounting fees.

Or... They could buy Ireland domiciled ETFs instead, get the same return, benefit from the 15% US/Ireland tax treaty rate on dividends, and escape US estate taxes entirely on that holding. They could hold a selection of REITs in place of holding real US property, get the same return, and again reduce the tax rate on dividends, avoid FIRPTA entirely on capital gains, and also escape US estate taxes on this portion. And no need for expensive accounting for US tax returns, since none are now required.

If these were my options, I know which of them I would choose!

perseus
Posts: 32
Joined: Tue Oct 18, 2016 8:26 pm

Re: How can my parents in India invest in U.S

Postby perseus » Tue Mar 21, 2017 9:32 pm

TedSwippet wrote:
perseus wrote:This may be a complicated question. My parents in India would like to know how to invest some of their money in U.S stock Index fund and the remaining in real estate. They are not permanent residents so do not have a SSN. I hear a lot of people from countries like China, Emirates, Saudi invest in U.S very easily. Are there any country specific limitations? How can they file taxes without having a SSN.

Not complicated at all. It's very simple. Open a brokerage account and you can buy any US domiciled stock index ETFs you want, since they trade on the NYSE. For real estate, just pick the house you want to buy, and buy it for cash (or using an Indian loan or mortgage). As far as filing US tax is concerned, obtain an ITIN as an alternative to a SSN, and you're away.

Now, they can do it. But should they?

The US will tax all dividends from US domiciled ETFs at 25%, which may or may not be creditable against Indian tax. It will tax any rental income from US sited property at 30%, and will also tax any capital gains on selling the property as if income and at 30% under FIRPTA. Under US estate taxes, the US will tax everything above $60k in aggregate at around 40% should either of your parents die holding these assets. On top of these rapacious taxes, the US non-resident filing requirements may be excruciatingly complex, and so costly in terms of accounting fees.

Or... They could buy Ireland domiciled ETFs instead, get the same return, benefit from the 15% US/Ireland tax treaty rate on dividends, and escape US estate taxes entirely on that holding. They could hold a selection of REITs in place of holding real US property, get the same return, and again reduce the tax rate on dividends, avoid FIRPTA entirely on capital gains, and also escape US estate taxes on this portion. And no need for expensive accounting for US tax returns, since none are now required.

If these were my options, I know which of them I would choose!


Thanks for the reply. One of the main reasons why they wanted to invest here is because of me. I've been living here for the last 20 years and they are assuming that I will not move back so they want to ensure they leave their inheritance so I can access it easily. Good Ol' Indian parents always living for their kids instead of living it.

perseus
Posts: 32
Joined: Tue Oct 18, 2016 8:26 pm

Re: How can my parents in India invest in U.S

Postby perseus » Tue Mar 21, 2017 9:34 pm

Valuethinker wrote:There's no reason for them to invest in US real estate unless they plan to live there, or you plan to rent it from them (sometimes families from the Old Country arrange that with their kids). Usually in my experience with Asian families (and Sicilian) the plan is to bring the parents over when they are too old to care for themselves (at least in the Italian case, it's usually a bad idea-- although the parents may come and visit for a few months in summer, and you did need a bigger house for that. It is a bad idea because these older Italians lose contacts with their friends and people who speak Italian around them, living in big houses in exurban suburbs*-- it would be different if they lived downtown in Little Italy, of course).

If they do want a house in the USA that you would not be living at (and this begs the question why? Why concentrate risk in one house, one country, one currency, one location-- unless they plan to live there some day) then they could get you to be the manager of the rental. You or another family member in the USA. In my experience, it's hard to manage these things internationally, and family is best (because they won't automatically cheat or neglect you).

They would be better off buying a REIT fund (US or global) if they just want exposure to real estate as an asset class.

I am given to understand that Mauritius has made itself the fund management centre of India. It is probably there that you will find funds that are most tax efficient for Indians? And ETFs?

There's certainly no need to own US stocks or ETFs directly, and trigger messy US tax rules (can't speak to the Indian ones). Certainly I imagine that whilst a US broker might open up you an account, they will not do so for a resident Indian?

Your parents can simply buy, in Mauritius, a Mauritius (or Dublin?) listed ETF that tracks US stocks.

http://www.stockexchangeofmauritius.com/etfs/

http://www.stockexchangeofmauritius.com/faqs-etfs

But, again, why would they do so? Why limit themselves to US stocks?

If they are going to internationally diversify, they should go whole hog and own the world stock markets, in my view (55% of which are USA). Unless there are specific tax reasons not to do so.

* this kind of social loneliness kills old people. Faster than any physical illness, and I see it time and again. At the very least, there needs to be a bus or some other amenity where they can go downtown to an Italian (or Indian) cafe or social club. Live in a suburb full of other South Asians (like Bramalea in Ontario; Woodbridge for Italians) where they have somewhere to go in the day.

The reason living on an Italian or Greek island gives you the longest life expectancy in the world is:

- Mediterranean diet (important, but not compared to the rest)
- daily exercise (you walk *up* and *down* hill every day to the village centre)
- social interaction every day

A friend's mother moved back from a suburban garden home in London England to *Moscow* where she can chat to her friends in her apartment building (read: this is a big ugly concrete thing way on the outskirts) watch her *Opera* channel (this is Russia, communism could not provide physical needs very well, but it did provide music). She would have died had she stayed in London (and her daughter is a medical doctor).


Thank you for such a detailed and unique perspective. I will keep that in mind. As I mentioned below, one of the main reasons I think is for them to properly ensure they are leaving their inheritance in a place where I as their son has easy access.

Valuethinker
Posts: 31206
Joined: Fri May 11, 2007 11:07 am

Re: How can my parents in India invest in U.S

Postby Valuethinker » Wed Mar 22, 2017 8:51 am

perseus wrote:
Valuethinker wrote:There's no reason for them to invest in US real estate unless they plan to live there, or you plan to rent it from them (sometimes families from the Old Country arrange that with their kids). Usually in my experience with Asian families (and Sicilian) the plan is to bring the parents over when they are too old to care for themselves (at least in the Italian case, it's usually a bad idea-- although the parents may come and visit for a few months in summer, and you did need a bigger house for that. It is a bad idea because these older Italians lose contacts with their friends and people who speak Italian around them, living in big houses in exurban suburbs*-- it would be different if they lived downtown in Little Italy, of course).

If they do want a house in the USA that you would not be living at (and this begs the question why? Why concentrate risk in one house, one country, one currency, one location-- unless they plan to live there some day) then they could get you to be the manager of the rental. You or another family member in the USA. In my experience, it's hard to manage these things internationally, and family is best (because they won't automatically cheat or neglect you).

They would be better off buying a REIT fund (US or global) if they just want exposure to real estate as an asset class.

I am given to understand that Mauritius has made itself the fund management centre of India. It is probably there that you will find funds that are most tax efficient for Indians? And ETFs?

There's certainly no need to own US stocks or ETFs directly, and trigger messy US tax rules (can't speak to the Indian ones). Certainly I imagine that whilst a US broker might open up you an account, they will not do so for a resident Indian?

Your parents can simply buy, in Mauritius, a Mauritius (or Dublin?) listed ETF that tracks US stocks.

http://www.stockexchangeofmauritius.com/etfs/

http://www.stockexchangeofmauritius.com/faqs-etfs

But, again, why would they do so? Why limit themselves to US stocks?

If they are going to internationally diversify, they should go whole hog and own the world stock markets, in my view (55% of which are USA). Unless there are specific tax reasons not to do so.

* this kind of social loneliness kills old people. Faster than any physical illness, and I see it time and again. At the very least, there needs to be a bus or some other amenity where they can go downtown to an Italian (or Indian) cafe or social club. Live in a suburb full of other South Asians (like Bramalea in Ontario; Woodbridge for Italians) where they have somewhere to go in the day.

The reason living on an Italian or Greek island gives you the longest life expectancy in the world is:

- Mediterranean diet (important, but not compared to the rest)
- daily exercise (you walk *up* and *down* hill every day to the village centre)
- social interaction every day

A friend's mother moved back from a suburban garden home in London England to *Moscow* where she can chat to her friends in her apartment building (read: this is a big ugly concrete thing way on the outskirts) watch her *Opera* channel (this is Russia, communism could not provide physical needs very well, but it did provide music). She would have died had she stayed in London (and her daughter is a medical doctor).


Thank you for such a detailed and unique perspective. I will keep that in mind. As I mentioned below, one of the main reasons I think is for them to properly ensure they are leaving their inheritance in a place where I as their son has easy access.


That speaks to solutions like they transfer the money to you (and you can invest via Vanguard).

Or they lend you the money and you invest it (if that gets around issues like family inheritance, etc.).

Or they buy a home and you rent it from them.

What I am trying to avoid is the potential nightmare scenario of Indian taxes & exchange controls & US taxes, and an asset in the USA which will be volatile and may turn into a poor investment.

perseus
Posts: 32
Joined: Tue Oct 18, 2016 8:26 pm

Re: How can my parents in India invest in U.S

Postby perseus » Wed Mar 22, 2017 9:56 am

How does lending work? What kind of paperwork is needed?


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