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Corporate Accounts with IBKR

Posted: Thu Sep 03, 2020 4:02 pm
by galeno
We've been using a Panamanian corporation to hold our IBKR assets. After 6 years IBKR no longer likes our Panamanian corp.

So we're going to form or buy a BVI corp. IBKR is fine with corp accounts from BVI.

But what if we create or buy a corporation from Nevada or Delaware?

Theoretically we'd have access to USA domiciled ETFs without withholding taxes and without the harsh USA-NRA inheritance taxes.

What are the downsides?

Re: Corporate Accounts with IBKR

Posted: Fri Sep 04, 2020 6:44 am
by TedSwippet
galeno wrote: Thu Sep 03, 2020 4:02 pm But what if we create or buy a corporation from Nevada or Delaware? Theoretically we'd have access to USA domiciled ETFs without withholding taxes and without the harsh USA-NRA inheritance taxes. What are the downsides?
My guess, based on very limited knowledge, is that while this might bypass the US's appalling estate tax for NRAs, at least if done right, you would still be stuck with 30% US tax on dividends, and potentially more.

For LLCs it seems there is a flat 30% tax on US source profits. For C corporations, double tax appears possible, 21% or so at the corporate level, and then potentially a further 30% to you as a US NRA. Details are a bit hard to pin down, but if you Google something like "Delaware corporation nonresident alien double tax" you might be able to find more.

The lack of detail for things other than actual business operations in the US suggests strongly that using a US corporation to hold US stocks is not particularly useful relative to the alternatives (that is, non-US corporations). Absent any hard proof that this is solves all the US tax issues, I think the usual NRA rule applies here: Avoid all direct financial contact with the US, to the maximum extent possible.

Re: Corporate Accounts with IBKR

Posted: Fri Sep 04, 2020 7:51 am
by galeno
Thank you Ted.

I had a suspicion that I was missing something big here. Otherwise many of us would dress our money into Nevada or Delaware clothing.

I guess pass-though corporations are like cars. Our Panamanian car is 25 years old and needs to be replaced by a newer BVI car.

Re: Corporate Accounts with IBKR

Posted: Fri Sep 04, 2020 9:04 am
by galeno
A crazy bonus may come out of this.

Apparently our Panamanian corp (basically an old box) may be worth a lot of money because it's OLD.

Our Panamanian attorney thinks he could sell it for a good sum of money to a Chinaman or a Russian seeking to expatriate his money.

My wife and I were talking about the costs of switching to a BVI passthru corp. Selling the OLD Panamanian corp could possibly NET us money instead of costing us money.

I wish we could trade in our old cars for new ones like that.

Re: Corporate Accounts with IBKR

Posted: Fri Sep 04, 2020 4:56 pm
by galeno
More stuff on this topic.

Apparantly if you form a new Panamanian corporation and the stockholders are of certain nationalities. The good Panamanian banks will NOT open a bank account for that corporation.

But if you buy an OLD Panamanian corp with an old corporate account attached you're in.

Only IBKR is rejecting certain jurisdictions. The other major US based brokers have no problems whatsoever with Panamanian or other Central American (except Nicaragua) corporations.

Schwab wants us back. After all we were there for 21 years. If they had access to UCITS ETFs we'd go back tommorro. But I cry thinking how much money we paid to the USA in L1 and L2 withholding taxes during the last 12 years we were there.