[Germany] Trading from US

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Topic Author
geri
Posts: 7
Joined: Thu Jan 18, 2018 4:04 pm

[Germany] Trading from US

Post by geri » Tue Sep 11, 2018 4:26 pm

Hi,

I am trying to start investing in Germany while temporarily living and working in the US. I decided to to go with flatex.de because they allow people with US address to register as well. Now I am trying to actually buy ETFs and it does not work. After submitting the order I get the following cryptic message:
Ein Kauf ist für die Gattung nicht erlaubt. (9900037)

First the support wrote that they don't have the Basisinformationsdatenblatt to that specific ETF. Now I tried with others as well and I always got the same message. For my second, more pissed email, they wrote that I actually cannot trade ETFs because I am from the US. At this point I don't even know what could I be doing if I cannot trade. So my three questions are:

- Is anybody using flatex.de from the US (also registered as a US resident)?
- Do you know any other german online broker that allow US residents to trade?
- If I start trading in the US through a US broker, and I moved back to Germany, can my stocks be moved to my a german broker to avoid future tax filings in the US? If so, is it worth it?

Best,
Geri

typical.investor
Posts: 522
Joined: Mon Jun 11, 2018 3:17 am

Re: [Germany] Trading from US

Post by typical.investor » Tue Sep 11, 2018 6:40 pm

geri wrote:
Tue Sep 11, 2018 4:26 pm

I am trying to start investing in Germany while temporarily living and working in the US
- Is anybody using flatex.de from the US (also registered as a US resident)?
- Do you know any other german online broker that allow US residents to trade?
From a US tax perspective, holding foreign funds (traded on non-US exchanges) is inadvisable due to PFIC rules. https://thunfinancial.com/home/american ... tual-fund/ . I am not sure how temporary you mean by temporarily, but if you will have to file US taxes, you do not want something listed on a foreign exchange (unless it's an individual stock which I am not advising).
geri wrote:
Tue Sep 11, 2018 4:26 pm
- If I start trading in the US through a US broker, and I moved back to Germany, can my stocks be moved to my a german broker to avoid future tax filings in the US? If so, is it worth it?
I am not sure about German brokers, but Schwab has an international account that you can use as a German resident to hold US domiciled funds that you purchased while in the US. Interactive Broker's can do the same I believe (but is a little more complicated and has monthly fees for accounts below $100k.).

You could contact Schwab about opening a regular US account ask about converting it to an International one when you move back.

You have to consider Estate taxes too if holding US domiciled funds as a German Resident. There may be a treaty that makes it possible to do so without worry of high US taxes on your estate.

Topic Author
geri
Posts: 7
Joined: Thu Jan 18, 2018 4:04 pm

Re: [Germany] Trading from US

Post by geri » Tue Dec 18, 2018 11:48 am

Hi typical.investor,

thanks a lot! I am still struggling with finding a German broker, I already inquired by at least 10, but none of them allow US residents. So it seams like your approach will be the winner.

By the way short term means that I will probably move back to Germany in Sept. 2019.

Do you know what kind of taxation consequences it would have if I use a US broker and move back to Germany? Would I still need to submit tax returns in the US?

Best,
Geri

assyadh
Posts: 28
Joined: Tue Sep 18, 2018 12:44 pm

Re: [Germany] Trading from US

Post by assyadh » Tue Dec 18, 2018 1:24 pm

Taxable investments are taxed depending on your country of residence if you are a non resident alien.

My plan is to move my ETFs to Interactive Brokers, move overseas, fail the US tax residency test and then sell.

Not a tax advice

TedSwippet
Posts: 2036
Joined: Mon Jun 04, 2007 4:19 pm

Re: [Germany] Trading from US

Post by TedSwippet » Tue Dec 18, 2018 3:33 pm

geri wrote:
Tue Dec 18, 2018 11:48 am
Do you know what kind of taxation consequences it would have if I use a US broker and move back to Germany? Would I still need to submit tax returns in the US?
Assuming you do not take out a green card or US citizenship before moving back to Germany, you would probably not have to complete any US tax returns beyond your final part-year 1040.

After leaving, you become a 'non-resident alien'. At that point you can provide your broker with a W-8BEN form. This gains you access to the US/Germany tax treaty. This provides for a 15% US tax rate on dividends, which you can probably (don't know German tax laws) take as a credit against your German tax on this income. No US tax on capital gains, though again you'll have to consider the German tax here. And Germany has a decent estate tax treaty with the US, so no worries provided you own less than $11MM in assets worldwide.

With a W-8BEN in place, your US tax liability is exactly matched by the 15% withholding that your broker will implement, and in those circumstances there is no requirement for non-resident aliens to file a US 1040NR tax return. (If you don't file the W-8BEN and/or the broker withholds the 30% standard US tax rate on dividends though, you would want to file a 1040NR to get the over-withholding back from the IRS.)

Two wrinkles to holding US domiciled funds or ETFs on a move back to Germany.

Firstly, you will want to check to see if Germany has harsh or punitive taxes for non-EU and non-UCITS funds or ETFs held by German residents. Something like the US's appalling PFIC regime. As far as I know, while some countries make life a bit hard for folk holding 'offshore' investments, no other country goes anything like as far as the US when it comes to punishing foreign investments. Germany may have something that makes US domiciled ETFs sub-optimal though. So check for that.

And secondly, the EU recently implemented PRIIPS and MiFID regulations. The effect of these had been to make it hard to impossible for EU residents to buy US domiciled ETFs. That's not to say you couldn't hold what you already have across a move back to Germany, and probably sell them after the move. But given the current problems with trading US domiciled ETFs for EU investors, it would be best to be certain that you can seamless sell after moving if planning to hold these across a move. Failing that, all you can really do is sell to cash before returning to Germany, perhaps taking the tax hit, and then re-investing in the same underlying assets once back in Germany, but this time using UCITS-compliant funds or ETFs.

Even as the world becomes more generally globalised, so countries apparently become more fiscally parochial and Balkanized. Cross-border financial planning is an eternal and, currently, inexorably worsening headache, I'm afraid.

Topic Author
geri
Posts: 7
Joined: Thu Jan 18, 2018 4:04 pm

Re: [Germany] Trading from US

Post by geri » Tue Dec 18, 2018 3:55 pm

TedSwippet, thanks a lot those are very good points. I will investigate further the German side of the question.

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Epsilon Delta
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Re: [Germany] Trading from US

Post by Epsilon Delta » Tue Dec 18, 2018 4:34 pm

typical.investor wrote:
Tue Sep 11, 2018 6:40 pm

you do not want something listed on a foreign exchange (unless it's an individual stock which I am not advising).
For people who intend to change countries a lot owning individual stocks may be the best option. Transaction costs are low enough that a you can get a reasonably diversified portfolio in a reasonable size. This was how some people invested in the '60s even with far higher transaction cost.

The hassle of dealing with a large number of holdings is offset by not having to deal with coflicting national laws on investment vehicles such as mutual funds. The laws for individual stocks have far fewer conflicts.

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galeno
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Re: [Germany] Trading from US

Post by galeno » Tue Dec 18, 2018 4:47 pm

Instead of Schwab International why not Interactive Brokers in the USA?

While in the USA you buy and hold USA domicled ETFs: Schwab's ETFs are excellent. E.g. 50% SCHB + 40% SCHF + 10% SCHE ~ 100% VT.

When you leave the USA you can sell your USA-domciled ETFs and buy Ireland domicled ETFs.

That way you don't have to change brokers which is a real pain if you're a USA-NRA.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

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bubbasour
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Re: [Germany] Trading from US

Post by bubbasour » Sat Dec 22, 2018 7:44 am

As galeno mentioned, I'm as a NRA slowly shifting my portfolio towards IBKR too. This is while being a Schwab and Saxo customer. You can shift from US ETFs to Irish domiciled ones and save on the tax.. especially if your country has no tax treaty with the US. While IBKR may not have the most user-friendly interfaces or advanced features, it is really lean. Net net, if you wanna be a really cost efficient platform, I would explore IBKR, here are some easy to understand videos worth exploring https://bullishbears.com/interactive-brokers-platform/. thx bubba
NRA, Prefer VUSD (VOO) and VWRD (VT), No capital gain tax.

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