EU/Int'l - Saxo Bank alternatives without custody fees

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banoffeeape86
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EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

SaxoBank are insisting on charging me 0.12% annual custody fees. Which for a 36 year term investment until retirement age means a large loss for nothing in return.

I checked TD Direct Investing (Luxembourg) charges 0.05% per quarter, too.

Any recommendations? Does anyone think I should stick with the larger brokers instead of shop around for no-custody fees? I can make it a part of my rebalancing ritual - call Saxo Bank and negotiate the fees waived every 12 months!
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

TD Direct Investing (Luxembourg) updated their fees, starting April 1st - they do not have custody fees anymore.

Does anyone have experience working with them? How does one pick a good broker?
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

I am not too keen about InteractiveBrokers as it's US based, and that means probable surprise US tax issues. Correct me if I'm mistaken.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

amerk86 wrote:
I am not too keen about InteractiveBrokers as it's US based, and that means probable surprise US tax issues. Correct me if I'm mistaken.
Here is an example problem - estate taxes as the broker is US based:
http://www.bogleheads.org/forum/viewtop ... &p=2260298
hlfo718
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by hlfo718 »

Are the charges because of the low Euro denominated rates? Many, if not all, custodians started to charge a fee for Euro deposits. If this is the case then is really hard to avoid unless you keep in other currencies like USD or GBP.
mro02rz2qz
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by mro02rz2qz »

http://trade.dnb.lv/en

They're actually situated in Lithuania and using SaxoBank platform, but there are no custody fees that i'm aware about. The banking group itself is Norwedish or something - https://www.dnb.lv/en/about-us/dnb-group
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

hlfo718 wrote:Are the charges because of the low Euro denominated rates? Many, if not all, custodians started to charge a fee for Euro deposits. If this is the case then is really hard to avoid unless you keep in other currencies like USD or GBP.
Not really sure what "low Euro denominated rates" mean, but no, my cash is in USD and the ETFs are USD based.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

amerk86 wrote:
I am not too keen about InteractiveBrokers as it's US based, and that means probable surprise US tax issues. Correct me if I'm mistaken.
Yeah you are mistaken. You just have to worry where ETF that you are buying is domiciled in. And even if you are foreigner you assets are covered up to 500K SIPC.

In general, I think US has the best financial system and it's the best offshore destination. Heck, even China and Russia keep pretty much everything they have in US :-)
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

Tylenol Jones wrote:Yeah you are mistaken. You just have to worry where ETF that you are buying is domiciled in. And even if you are foreigner you assets are covered up to 500K SIPC.

In general, I think US has the best financial system and it's the best offshore destination. Heck, even China and Russia keep pretty much everything they have in US :-)
Well, details like that are what worry me. The US has so many of them, I feel like rebalancing day should include an annual US tax attorney consultation. Here is what I found regarding estate tax:
Estates of NRA individuals are subject to U.S. estate tax only on U.S. situs assets. The tax is assessed at the same rates as for U.S. citizens, up to 35% for 2011 and 2012, but with only a $60,000 exemption (as opposed to the current exemption of $5,000,000 for a U.S. person). [I read that since 2014, it's up to 45%-55%!]

U.S. Situs Assets for Estate Tax Purposes: The following is a partial list:
  • Shares of stock of U.S. corporations, including shares of a U.S. co-operative corporation representing a co-op apartment. (I.R.C. § 2104(a)) Shares of non-U.S. corporations are not U.S. situs property. The location of the certificate is immaterial. Mutual funds (including money market funds) organized in corporate form are U.S. situs property if incorporated in the United States. (I.R.C. § 2104(a)) If the fund is structured as a partnership or grantor trust, the situs of the fund depends on the situs of the underlying assets of the fund.
  • Cash deposits with U.S. brokers, money market accounts with U.S. mutual funds and cash in U.S. safe deposit boxes are U.S. situs property.
    ...
Source: U.S. Tax Planning for Non-U.S. Persons and Trusts: An Introductory Outline

Luxembourg for example, if the owner and the recipient are non-residents, 0% estate tax.

Is it simpler to invest through EU broker and Ireland ETFs via LSE, or am I over thinking it?
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

amerk86 wrote:...Is it simpler to invest through EU broker and Ireland ETFs via LSE, or am I over thinking it?
There's a grey area between sensible caution and paranoia, and while you may have gone far, far into sensible caution I don't see paranoia here.

There are, as you rightly state, a lot of US tax law details in this area that seem almost designed to trap the unwary NRA. Worse still, the US regularly changes the rules, invariably to the detriment of the NRA. And just when you think you do have things nailed down, along comes congress with a tax treaty override such as HEART or FATCA to mess up even the most carefully laid plans (I know Jordan doesn't have a treaty -- just pointing out that even when you live in a country which does have a treaty with the US, the US might unilaterally void the part of it that you're relying on, without warning, with retroactive effect, and likely in contravention of the Vienna Convention on treaties...).

If you are supremely careful you could probably use a US based broker without overwhelming risks. Only buy non-US domiciled ETFs. Never keep more than $60k in uninvested cash in the account (and yes, this means you have to make sure not to die on rebalancing day!). Abide by all the W-8BEN and other US paperwork. And be very, very wary of FATCA, which applies 30% US withholding not just to dividends but to gross sale proceeds where the non-US receiving institution has not agreed to abide by US tax laws (for info, Jordan does not have a FATCA IGA with the US).

Would keeping an eye out for any changes in all of that keep you awake at nights? It would me. If yes, better to use a non-US broker, perhaps with higher charges, but avoid all the uncertainty.

I noted recently that Interactive Brokers now has a separate UK division. Not sure of the detail on what they do, but the usual reason for something like that is to insulate oneself from the US. Perhaps you might call them and ask whether, if you use them, your account could be fully held in the UK rather than the US, giving you far fewer unwanted tax problems, and likely also less bureaucratic hassle. Worth a shot?
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

Tylenol Jones wrote:... Heck, even China and Russia keep pretty much everything they have in US
Really? Because even as I write this, China is busily setting up its own Asian Infrastructure Investment Bank as a direct challenge to US and World Bank dominance.

And despite sour grapes on the part of the US, many (in future, former?) US allies are signing on to it.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

edited
Last edited by Tylenol Jones on Sat Mar 21, 2015 2:18 pm, edited 1 time in total.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

This website has the most comprehensive list and comparison of int. brokers that I have managed to find:

http://the-international-investor.com/
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

amerk86 wrote:SaxoBank are insisting on charging me 0.12% annual custody fees. Which for a 36 year term investment until retirement age means a large loss for nothing in return.

I checked TD Direct Investing (Luxembourg) charges 0.05% per quarter, too.

Any recommendations? Does anyone think I should stick with the larger brokers instead of shop around for no-custody fees? I can make it a part of my rebalancing ritual - call Saxo Bank and negotiate the fees waived every 12 months!
Dear Amerk86,

I have been following your threads and Galedos on here in regards to US-NRA investors and tax free environments questions and I am in a similar situation (although my home tax country is Australia and I am a non-resident for tax purposes at the moment) and I must say I have learned a lot from the discussions although I am not as knowledgable as you two seem to be :)..thanks for the excellent threads and discussions. I am awaiting the outcome of the tax questions you pose in a few other threads as well about the Ireland based investments in ETFs.

For now I was wondering in terms of this thread if you have found the answer to your question and the best online brokerage to purchase the funds you have been discussing? It seems like ongoing custody and probably other fees can be a problem so I am interested in hearing what if any suitable broker to buy your Ireland Domiciled funds you may have found and details of that so I can start looking opening an account as well.

many thanks for the excellent threads again.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by galeno »

As long as you avoid USA domiciled ETFs and use Ireland-UK domiciled ETFs there should be no USA tax issues if you decide to use USA domiciled Interactive Brokers.

We used to use USA domiciled ETFs. So as a precaution to the draconian estate taxes the USA imposes on USA-NRA investors, our attorney and accountant advised us to form a Panamanian family corporation as a holding company for our financial assets in the USA. Our annual cost to maintain this structure is negligible. Less than 0.1% of port. We did this 15 years ago when we switched from the Bank of Bermuda to Schwab.

That said, if the only extra cost for you is the 0.12% custodial fee, I'd go with Saxobank because one never knows what can happen with the USA. They tax all USA persons on world wide income and still use English measurement units. Look at all the turmoil they have caused with FATCA. USA multi-national corporations hold their earnings outside the USA. Should not that tell us something?

You should compare commission and make sure there are no currency exchange or other sneaky or hidden costs. I find USA brokers to be more transparent vs non-USA brokers.

Could we, as Costa Ricans using a Panamanian corporation, use Saxobank? I've never even considered the possibility.


amerk86 wrote:
I am not too keen about InteractiveBrokers as it's US based, and that means probable surprise US tax issues. Correct me if I'm mistaken.
KISS & STC.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

TedSwippet wrote:There's a grey area between sensible caution and paranoia, and while you may have gone far, far into sensible caution I don't see paranoia here.
...
If you are supremely careful you could probably use a US based broker without overwhelming risks. Only buy non-US domiciled ETFs. Never keep more than $60k in uninvested cash in the account (and yes, this means you have to make sure not to die on rebalancing day!). Abide by all the W-8BEN and other US paperwork. And be very, very wary of FATCA, which applies 30% US withholding not just to dividends but to gross sale proceeds where the non-US receiving institution has not agreed to abide by US tax laws (for info, Jordan does not have a FATCA IGA with the US).

Would keeping an eye out for any changes in all of that keep you awake at nights? It would me. If yes, better to use a non-US broker, perhaps with higher charges, but avoid all the uncertainty.

I noted recently that Interactive Brokers now has a separate UK division. Not sure of the detail on what they do, but the usual reason for something like that is to insulate oneself from the US. Perhaps you might call them and ask whether, if you use them, your account could be fully held in the UK rather than the US, giving you far fewer unwanted tax problems, and likely also less bureaucratic hassle. Worth a shot?
I do go overboard sometimes with sensible caution - I'm glad you don't think I'm being paranoid though :). Things began way simpler. I started with US based Vanguard funds, then started reading about the US not-too-friendly tax laws and estate taxes, and that's where it got me.

I would sleep better if I don't need to keep checking if the US passed a new law that has a negative impact on NRAs investments. I prefer if that's handled by iShares and Vanguard - and I am simply left out of it. Worth noting that Ireland/Luxembourg might decide one day to start changing their non-resident laws. I hope I'm making the right choice here: EU broker, Ireland-domiciled ETFs.

If I stick to that plan, FATCA should not be a problem for me, as I won't be dealing directly with the US. Right?

So far TD Direct Investing (Luxembourg) seems to be the best option - as Saxo Bank are being greedy with 0.12% annual custody fees.
TedSwippet wrote:Never keep more than $60k in uninvested cash in the account (and yes, this means you have to make sure not to die on rebalancing day!)
LOL. I love the way you phrased that :D :D :D :D
Last edited by banoffeeape86 on Sun Mar 22, 2015 11:58 am, edited 2 times in total.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

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Tylenol Jones wrote:This website has the most comprehensive list and comparison of int. brokers that I have managed to find:
http://the-international-investor.com/
Thanks. I contacted a few to make sure they accept Jordan residents.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

galeno wrote:As long as you avoid USA domiciled ETFs and use Ireland-UK domiciled ETFs there should be no USA tax issues if you decide to use USA domiciled Interactive Brokers.

We used to use USA domiciled ETFs. So as a precaution to the draconian estate taxes the USA imposes on USA-NRA investors, our attorney and accountant advised us to form a Panamanian family corporation as a holding company for our financial assets in the USA. Our annual cost to maintain this structure is negligible. Less than 0.1% of port. We did this 15 years ago when we switched from the Bank of Bermuda to Schwab.

That said, if the only extra cost for you is the 0.12% custodial fee, I'd go with Saxobank because one never knows what can happen with the USA. They tax all USA persons on world wide income and still use English measurement units. Look at all the turmoil they have caused with FATCA. USA multi-national corporations hold their earnings outside the USA. Should not that tell us something?

You should compare commission and make sure there are no currency exchange or other sneaky or hidden costs. I find USA brokers to be more transparent vs non-USA brokers.

Could we, as Costa Ricans using a Panamanian corporation, use Saxobank? I've never even considered the possibility.
First time I hear about "Panamanian family corporation as a holding company", do you have some reading material on that so I can educate myself?

I think SaxoBank (Denmark) can accept corporate accounts. TD Direct Investing (Luxembourg) does not though, but they do not charge custody fees. They removed it starting April.

Holding my assets outside the US with higher trading costs seems to be the simpler solution to me.
Last edited by banoffeeape86 on Sun Mar 22, 2015 11:52 am, edited 1 time in total.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

SurferD wrote:I have been following your threads and Galedos on here in regards to US-NRA investors and tax free environments questions and I am in a similar situation (although my home tax country is Australia and I am a non-resident for tax purposes at the moment) and I must say I have learned a lot from the discussions although I am not as knowledgable as you two seem to be :)..thanks for the excellent threads and discussions. I am awaiting the outcome of the tax questions you pose in a few other threads as well about the Ireland based investments in ETFs.

For now I was wondering in terms of this thread if you have found the answer to your question and the best online brokerage to purchase the funds you have been discussing? It seems like ongoing custody and probably other fees can be a problem so I am interested in hearing what if any suitable broker to buy your Ireland Domiciled funds you may have found and details of that so I can start looking opening an account as well.
Welcome to the conversation, SurferD.

Jordan does not impose taxes on out-of-country income, dividends or capital gains. I do not know how Australian tax laws work - so you will need to look into that. Also, it might be easier for you to search for Australia-based brokers with London Stock Exchange access.

Please see other thread regarding non-resident + non-tax treaty countries when it comes to Ireland-domiciled ETFs and Irish tax withholding (DWT).

Hope this helps.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by galeno »

There is no reading material. Before recent new taxes and reporting requirements, Costa Ricans used to put everything into corporations. E.g. our nuclear family used to have 11 separate corporations. One for each car; one for each separate property; one for each business entity: an expensive piece of jewelry might merit one; you get the idea. I believe we now have only 4 or 5.

In Central America, Panama has the most globalized, connected, open, and dynamic economy. Its banking system runs circles around ours. And their national currency is the USD. Its geography is unique also. No volcanoes. No earthquakes. No hurricanes. It's a 6 hour car ride from our home.

It's our area's window to the world and safe haven. It's where rich Nicaraguans went in the 1970s and 1980s. Rich Colombians ran there in 1990s and 2000s. Now you see rich Venezuelans there fleeing their country's problems. Rich Costa Ricans have always hedged part of their bets via Panamanian corporations.

For us, using a Panamanian family corporation has multiple benefits. It protects our retirement portfolio from USA inheritance taxes. It eliminates our own Costa Rican inheritance problems because our children simply inherit their shares. It gives us almost instant access to Panamanian residency and getting a Panamanian passport is easy.
amerk86 wrote:First time I hear about "Panamanian family corporation as a holding company", do you have some reading material on that so I can educate myself?

I think SaxoBank (Denmark) can accept corporate accounts. TD Direct Investing (Luxembourg) does not though, but they do not charge custody fees. They removed it starting April.

Holding my assets outside the US with higher trading costs seems to be the simpler solution to me. I just refuse to pay "custody fees" - unless absolutely necessary.
KISS & STC.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

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galeno wrote:There is no reading material. Before recent new taxes and reporting requirements, Costa Ricans used to put everything into corporations. E.g. our nuclear family used to have 11 separate corporations. One for each car; one for each separate property; one for each business entity: an expensive piece of jewelry might merit one; you get the idea. I believe we now have only 4 or 5.

In Central America, Panama has the most globalized, connected, open, and dynamic economy. Its banking system runs circles around ours. And their national currency is the USD. Its geography is unique also. No volcanoes. No earthquakes. No hurricanes. It's a 6 hour car ride from our home.

It's our area's window to the world and safe haven. It's where rich Nicaraguans went in the 1970s and 1980s. Rich Colombians ran there in 1990s and 2000s. Now you see rich Venezuelans there fleeing their country's problems. Rich Costa Ricans have always hedged part of their bets via Panamanian corporations.

For us, using a Panamanian family corporation has multiple benefits. It protects our retirement portfolio from USA inheritance taxes. It eliminates our own Costa Rican inheritance problems because our children simply inherit their shares. It gives us almost instant access to Panamanian residency and getting a Panamanian passport is easy.
Thanks for the explanation. I understand. I need to discuss this with the law firm I work with in Jordan. Maybe Dubai is the Middle East's Panama. I'll be looking into that next.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

galeno wrote:
surferD wrote:...(although my home tax country is Australia and I am a non-resident for tax purposes at the moment) ... I am awaiting the outcome of the tax questions you pose in a few other threads as well about the Ireland based investments in ETFs.
As long as you avoid USA domiciled ETFs and use Ireland-UK domiciled ETFs there should be no USA tax issues if you decide to use USA domiciled Interactive Brokers.
Not sure what "my home tax country is Australia and I am a non-resident for tax purposes at the moment" means, but... worth noting that Australia has both income/dividend and estate tax treaties with the US. An Australian resident investing in US domiciled ETFs would lose 15% to the US in dividend tax, and would get a pro-rata $5.25m or so of estate tax allowance. Nowhere near as appalling as the conditions applied to investors from non-treaty countries, then.

This is not to say that there aren't other good reasons for perhaps preferring to keep the US out of one's investments as much as possible. Or at minimum using US ETFs only where they offer a measurable benefit over Irish ones. Just that two of the more visible reasons, dividend tax withholding and the (man-eating) estate tax, are somewhat defused for Australian residents.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by MountainTop »

Not sure what country you are from. Couldn't find it in your posts.

Anyway... just a stab in the dark but since you were talking about Luxembourg.

Here are 3 brokers you perhaps can investigate.

1. https://www.degiro.eu/
2. https://www.interactivebrokers.co.uk/
3. Lynx Brokers (also available in many countries.)
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

[/quote]Welcome to the conversation, SurferD.

Jordan does not impose taxes on out-of-country income, dividends or capital gains. I do not know how Australian tax laws work - so you will need to look into that. Also, it might be easier for you to search for Australia-based brokers with London Stock Exchange access.

Please see other thread regarding non-resident + non-tax treaty countries when it comes to Ireland-domiciled ETFs and Irish tax withholding (DWT).

Hope this helps.[/quote]

Thanks Amerk86, I have been following you around in all areas of the forum :) as I think the conversation is very pertinent to me in terms of my situation looking to start investing soon the Bogglehead way.

I will have a look at the info in the link you sent and soon I will post up my investment position and ask for the advice of the community as well as I have only recently joined and been lurking for a while but need to get into gear and start making some changes, so thanks again for the time and fruitful posts

regards
SurferD
Last edited by SurferD on Mon Mar 23, 2015 12:08 am, edited 1 time in total.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

MountainTop wrote:Not sure what country you are from. Couldn't find it in your posts.

Anyway... just a stab in the dark but since you were talking about Luxembourg.

Here are 3 brokers you perhaps can investigate.

1. https://www.degiro.eu/
2. https://www.interactivebrokers.co.uk/
3. Lynx Brokers (also available in many countries.)
Thanks for the links Mountaitop, I will have a look at them. I am from Australia but live in the UAE at present and thus I only pay tax on what I earn on investments within Australia and they are all in the normal managed fund broker controlled area with high ERs as you would expect. Anything outside of that all other earnings are tax free (as a non-resident for tax purposes) so it is important to me to keep tax t a minimum and make hay while the sun shines and maximise what I have before I return to Australia one day (or not) thus my interest in offshore low tax ETF funds and brokers

SurferD
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

Not sure what "my home tax country is Australia and I am a non-resident for tax purposes at the moment" means, but... worth noting that Australia has both income/dividend and estate tax treaties with the US. An Australian resident investing in US domiciled ETFs would lose 15% to the US in dividend tax, and would get a pro-rata $5.25m or so of estate tax allowance. Nowhere near as appalling as the conditions applied to investors from non-treaty countries, then.

Thanks TedSwippet, sorry for the vague post. It means I am Australian but am a "non-resident" for tax purposes"and only have to pay tax on my investments in Australia (where I have some managed funds at present). I am situated outside of Australia in the UAE so no tax is payable on earnings, investments etc I currently earn outside of Australia. Thus I am interested in how to maximise my investment planning and gains before I return one day to Oz and again become eligible for the normal tax in Australia (once I become a "tax-resident" again) :) all confusing I know but thats the tax office for you..

Thanks for the insight into the tax-treaty situation with Australia. I was not aware of this and it does differ somewhat to what Amerk86 and Galeno are talking about but is still similar in some respects. I am eligible for 32% straight taxation in any Australian based investments currently (as a non-resident) but can limit taxation for investments outside of Australia (until I return one day) by using similar investment vehicles as Amerk86 and Galeno are discussing I believe if I invest via Ireland based Funds.

Im a newby here so just starting to grasp the complexities of all this from the investments strategies using ETFs and now to the international tax situation so a steep learning curve but am reading and learning a lot, so thanks to all for your valuable comments.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

SurferD wrote:... I am Australian but am a "non-resident" for tax purposes"and only have to pay tax on my investments in Australia (where I have some managed funds at present). I am situated outside of Australia in the UAE so no tax is payable on earnings, investments etc I currently earn outside of Australia. Thus I am interested in how to maximise my investment planning and gains before I return one day to Oz and again become eligible for the normal tax in Australia (once I become a "tax-resident" again)...
Got it, thanks. Yes, investing is hard if you have an international career. Even vanilla holdings that cross borders can become a nightmare. Cross-border pensions require you to become a lawyer to parse tax treaties, and a soothsayer to predict which bits of the treaty the US congress or some other treaty party will renege on.

As a non-resident Australian you may want to avoid Australian holdings, but only because as a UAE resident you have more lightly taxed alternatives with the same assets. Exclude US domiciled ETFs because for you they are less tax efficient -- both dividend and estate taxes -- than Irish domiciled ETFs. So right now you're in a similar position to Galeno and Amerk86.

The picture changes if/when you move back to Australia. US domiciled ETFs are a smaller issue because you can use the US/Australia income/dividend and estate tax treaties (with the risk that the US won't honour its end of the bargain -- the US is much more interesting in signing treaties than abiding by them!). No idea on Australian rules for 'offshore' holdings, but watch for any punitive tax regime (such as this, apparently ditched in 2010; don't know the current rules).

On moving, you may need to uproot your portfolio and resettle it into something efficient for where you will live. This doesn't mean changing the asset allocation, but it means changing the investment vehicles you are using to implement it. Pensions are a huge nightmare because you usually cannot take them with you. I don't think you have that problem in the UAE, though.
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

I'm not sure what the implications are, but upon further investigation of Saxo Bank, I found an interesting thread stating that they hold everything at Citibank. The same thread points out that most of better known international brokers use Citibank as custodian:

http://www.internationalman.com/im-foru ... read/2478/

So, while going with international brokers does probably help with IRS issues, ultimately all your invested money seems to be in the US banking system no matter what you do. And Citibank is not really a shining star of the US banking system...
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banoffeeape86
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

Tylenol Jones wrote:I'm not sure what the implications are, but upon further investigation of Saxo Bank, I found an interesting thread stating that they hold everything at Citibank. The same thread points out that most of better known international brokers use Citibank as custodian:

http://www.internationalman.com/im-foru ... read/2478/

So, while going with international brokers does probably help with IRS issues, ultimately all your invested money seems to be in the US banking system no matter what you do. And Citibank is not really a shining star of the US banking system...
Thanks for sharing. I am not sure if US estate taxes would apply in that case, as my custodian is Saxo Bank (Denmark estate taxes) and their's is Citibank. Maybe that's a question for Saxo Bank directly.
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galeno
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by galeno »

The only important thing I know about "the custodian" is that it should be a different institution vs "the broker".
KISS & STC.
SurferD
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

TedSwippet wrote: As a non-resident Australian you may want to avoid Australian holdings, but only because as a UAE resident you have more lightly taxed alternatives with the same assets. Exclude US domiciled ETFs because for you they are less tax efficient -- both dividend and estate taxes -- than Irish domiciled ETFs. So right now you're in a similar position to Galeno and Amerk86.
The picture changes if/when you move back to Australia. US domiciled ETFs are a smaller issue because you can use the US/Australia income/dividend and estate tax treaties (with the risk that the US won't honour its end of the bargain -- the US is much more interesting in signing treaties than abiding by them!). No idea on Australian rules for 'offshore' holdings, but watch for any punitive tax regime (such as this, apparently ditched in 2010; don't know the current rules).
On moving, you may need to uproot your portfolio and resettle it into something efficient for where you will live. This doesn't mean changing the asset allocation, but it means changing the investment vehicles you are using to implement it. Pensions are a huge nightmare because you usually cannot take them with you. I don't think you have that problem in the UAE, though.
Thanks TedSwippet, for the insights. At the moment justs getting my head around all this is making it spin never mind the actual portfolio :)

Anyway I am also starting to compile my current situation to post up and see what the community can advise. Unfortunately I have been the victim of an advisor and still in Australia who has me in 18 mutual funds! I shudder to think what he is making from this although the portfolio has increased in value over the 8+ years I have had them I am sure it would be double or more by now without the leeches attached. I wouldn't even know where to start calculating how much the cost effect has been but will try look up all the ERs and also add that to my posting later on the portfolio comment thread,

I have quite a considerable sum in the bank earning very little interest so I need to now get that working for me and I'm not keen to throw it into the leech infested pool with the rest of my investments. This is too why I am keen to reduce all and any costs in the EFT environment as I also feel the various brokerages also add in a bit of blood sucking here and there :)

Thanks again for the insights and confirmation on what I thought in regards to my situation and similarities to Amerk86 and Galado,
regards
SurferD
Tylenol Jones
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

I just discovered a good webinar on IB website explaining US tax issues for NRAs:

https://www.interactivebrokers.com/en/? ... binars.php

March 23, 2015 Nancy Nelson, CPA, Tax Director, Interactive Brokers U.S. Taxes and Reporting for Non-U.S. Clients
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banoffeeape86
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

Tylenol Jones wrote:I just discovered a good webinar on IB website explaining US tax issues for NRAs:

https://www.interactivebrokers.com/en/? ... binars.php
March 23, 2015 Nancy Nelson, CPA, Tax Director, Interactive Brokers U.S. Taxes and Reporting for Non-U.S. Clients
Thanks for sharing. I watched it and in summary US tax laws are not in favor of non-residents or even US residents.
The withholding portion was as we discussed: 30% non-treaty, 15% treaty (or 10% for some countries). ETFs that have international equities will pay international withholding, then US withholding on top of that.
US estate tax laws apply even if you are a non-resident but own US ETFs.
They mentioned that if you do not submit an updated W8-BEN form (required every 3 years or when an update is requested), you lose your tax treaty rate and it reverts to 30%. You need to file a tax return form on your own to get that money back.
If you buy assets as a company/trust, you have to file an 11 page oh-so-complex tax report.

What that webinar did is reinforce what we've been discussing: non-US broker, non-US ETFs. Just stay away from anything US-domiciled unless you have an awesome tax attorney or you love filing tax reports/returns and keeping up to date with the constantly changing laws.
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banoffeeape86
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

Reply from Interactive Brokers UK about opening an account as a Jordan-resident and about estate taxes:
Unfortunately there is no way you will be able to open an IB UK account. The account you will be eligible for is an IB LLC, which is US based. That said, you will not be subject to the US estate tax. Only US citizens with a social security number are subject to such taxes.

With an IB LLC account you will still be subject to your local/domestic taxes. The only US taxes you will need to consider will be US taxes on dividends on US products. For more information on your own tax structure with an account, I would have to recommend you reach out to a local tax advisor.

Interactive Brokers does not get involved in reporting or taxation of Non-US persons. As such, we simply do not have any information prepared, or documentation regarding this subject. We only report taxation for customers who are legal residents of Canada, and United States - no others.

We can confirm that it (unfortunately) happens each week, that a customer around the world, in many different countries and small territories, suddenly passes away.

Here is our procedure:
We would ask that your next of Kin or your wife to forward a copy of your Death Certificate. We would also request any other documents or court orders that would describe to whom the assets should be distributed, the appointed individual.

At that time, we would work with the appointed individual to open an Estate account in your name. The assets would be transferred to the Estate account, and the appointed individual would be given login access to the Estate account. Said individual can either trade out of the positions if he/she feels comfortable, or call our Trade Desk for assistance. After settlement of the trades, the individual can log back in and withdraw funds to your bank account in your name or your Estate's bank account.
My suspicion is that somewhere between the court orders and transferring the assets to an Estate account the 45%-55% cut happens.
TedSwippet
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

amerk86 wrote:My suspicion is that somewhere between the court orders and transferring the assets to an Estate account the 45%-55% cut happens.
Not that seamless. I have lived this process, so I can describe how things go.

When a US broker learns of the death of an account holder, they may 'freeze' the account until the IRS gives them the all-clear to transfer it to an estate account. The IRS does this when they are satisfied that any estate taxes and other liabilities are (or will be) paid. To get there the account holder's survivors (spouse, friends, executors) have to file form 906na with the IRS. And form 906a is where you calculate the US estate tax due on holdings. It has to be paid to the IRS within 9 months of death of the account holder.

The IRS can take 6 to 9 months to process a completed form 906na. The obvious end-run here is to move funds before the US broker knows of the death of the account holder. In a joint account, where the spouse also has the online passwords and other access, this might be quite easy. Other cases will be more tricky -- if not married and with no close relations, who do you trust with full access to your broker? Of course, this bends the rules on US estate taxes for NRAs. But those rules are so draconian, so asinine, so biased, and so easily circumvented that this doesn't seem like a large moral problem.

The reply from IB is confusing. The statement that 'only US citizens with a social security number are subject to such (estate) taxes' is clearly wrong. What they probably mean is that IB won't get involved in that for non-US citizens, somewhat confirmed in their third paragraph. By paragraphs four and five they're more or less stating that even though they are a US broker, if you are not a US citizen they would not concern themselves with US estate taxes and won't freeze the account if you die while holding it. In which case you could probably avoid the form 906na nonsense I went through with a broker who did freeze an NRA account (circumstances were quite different to yours -- the decedent in this case was a former US resident with a US SSN).

So... an IB LLC account may be okay for you even if you die on rebalance day. May be okay. Assuming the US doesn't tighten the screws on brokers offering accounts to non-US persons. Certainty in this process is very elusive, isn't it?
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banoffeeape86
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

So many forms! :oops:

Looking into Trusts next. What started as a simple 2 fund investment plan is starting to sound like the 'Perpetual traveler' 5 flag concept.

Is it too much to ask that no one holds me (or my family after me) by the balls?!
Tylenol Jones
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Tylenol Jones »

Please share what you figure out about trusts.

Thanks Ted for describing the process with IRS. While it sounds long, I'd say it's probably more efficient than going through the same process in most European countries.
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galeno
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by galeno »

Welcome to our world "kid" LOL. We are also looking at trusts. We eventually want to transfer our IBC shares to a trust. This means we will have two walls between us and our financial assets: the IBC and the trust.

The IBC protects us from the USA nonsense. The trust should hopefully protect us from potential Costa Rican and Panamanian nonsense. So far we are looking at St Kitts / Nevis. Why there? One Costa Rican friend already did this.

Why St Kitts / Nevis? It's a UK Commonwealth independent country close to home and it's cheaper than other UK Commonwealth countries in the Caribbean (close to home).

So yes. It's crazy. We live in CR as citizens. Our broker is in the USA. Our IBC is in Panama. And it looks like our trust will be in the UK Commonwealth country of St Kitts / Nevis.

And yes. It is too much to ask that no one hold you by the balls. You need to push the hand away. What happened to your idea of an IBC from Dubai? I thought that was a great idea.
amerk86 wrote:So many forms! :oops:

Looking into Trusts next. What started as a simple 2 fund investment plan is starting to sound like the 'Perpetual traveler' 5 flag concept.

Is it too much to ask that no one holds me (or my family after me) by the balls?!
KISS & STC.
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banoffeeape86
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by banoffeeape86 »

galeno wrote:Welcome to our world "kid" LOL.
LOL. Don't laugh, but the first time I heard about the 183-day rule, then you become a resident for tax purposes was 4 months ago. I thought I misunderstood the post I was reading. I took me 2 weeks to wrap my head around it!
galeno wrote:And yes. It is too much to ask that no one hold you by the balls. You need to push the hand away. What happened to your idea of an IBC from Dubai? I thought that was a great idea.
I am trying. It's just way too many hands reaching for them :P

I contacted a law firm back that might be able to help, they still haven't gotten back to me. So, no new information about Dubai. Please share more information about how the Trust your Costa Rican friend setup works. That might be helpful in directing my questions to the law firm.

Tylenol Jones, I will definitely share my findings here. I am also trying to compile what we found out about tax withholding and Irish-domiciled ETFs so far into a Bogleheads Wiki article.
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galeno
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by galeno »

It's impossible to describe how a trust works because they are made specifically for the way the grantor wants the assets to be handled with regard to the trustees. It also has to follow the rules and laws of the country where you make the trust.

A better way to look at it is to formulate what you want your trust to do and then find the best country that will allow you to do what you want for a decent price.

We still haven't figured out what or where for our trust. But we're not in a rush because our immediate concern was to protect against the USA's nasty inheritance laws against USA-NRAs. The IBC does that very well. So for us, the trust is not an urgency.

The trust would be to protect us from drastic changes in Costa Rican or Panamanian laws.

We live in the battleground of the USA's schizophrenia called the "global war on drugs". Venezuela has become the "command and control headquarters" for Colombia's global cocaine enterprise. Venezuela is making everybody, including the empire, very nervous.

In Central America there are only three stable countries worth living in today: poor Nicaragua (hot as Hades), Costa Rica, and Panama (hot as Hades). All three are becoming more violent. I feel Costa Rica becoming more unstable. I'm looking at Matagalpa (cool oasis), Nicaragua and David, Panama (cool oasis) as possible escape routes if Costa Rica goes crazy.

Nicaragua and Panama have armies and effective police forces. Costa Rica has no army. Our regular police are a joke.
KISS & STC.
Mambo_Diablo
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by Mambo_Diablo »

amerk86 wrote:
So far TD Direct Investing (Luxembourg) seems to be the best option - as Saxo Bank are being greedy with 0.12% annual custody fees.
Another option worth considering is KeyTrade Bank Luxembourg. Similar commissions as TD direct but no account holding charges.

So far I'm trying to choose between IB, TD direct, OneTRadex (Cayman Islands), KeyTrade and my own bank (which has no account fees but higher commissions and same risk of some crazy law being passed which makes access for my wife difficult in case of death). If anyone has experience or info regarding service at KeyTrade please share!


Correct me if I'm wrong anyone, the main issue with a US based international broker such as IB (assuming I only invest in Irish domiciled ETFs and tax exempt bonds), seems to be in the event of death and henceforth the estate tax? If so this does seem a rather specific and extreme position to take given that joint account and multi person single accounts are available at IB. Surely also, as time progresses the US will recogise that making things easier for NRAs to invest in the US is beneficial? Is there really a risk that a law change could end up draining thousands from the investments of a NRA who invests in EU domiciled ETFs?? From what I can tell, IB does seem to offer a lot of benefits. They have dropped their pricing recently, and they are truely global.
SurferD
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by SurferD »

Mambo_Diablo wrote:
amerk86 wrote:
So far TD Direct Investing (Luxembourg) seems to be the best option - as Saxo Bank are being greedy with 0.12% annual custody fees.
Another option worth considering is KeyTrade Bank Luxembourg. Similar commissions as TD direct but no account holding charges.

So far I'm trying to choose between IB, TD direct, OneTRadex (Cayman Islands), KeyTrade and my own bank (which has no account fees but higher commissions and same risk of some crazy law being passed which makes access for my wife difficult in case of death). If anyone has experience or info regarding service at KeyTrade please share!


Correct me if I'm wrong anyone, the main issue with a US based international broker such as IB (assuming I only invest in Irish domiciled ETFs and tax exempt bonds), seems to be in the event of death and henceforth the estate tax? If so this does seem a rather specific and extreme position to take given that joint account and multi person single accounts are available at IB. Surely also, as time progresses the US will recognise that making things easier for NRAs to invest in the US is beneficial? Is there really a risk that a law change could end up draining thousands from the investments of a NRA who invests in EU domiciled ETFs?? From what I can tell, IB does seem to offer a lot of benefits. They have dropped their pricing recently, and they are truly global.
Hi Mambo, Im pretty much in the same boat as you and looking for a good brokerage without the added costs and all the hidden catches :)

I contacted KeyTrade and asked them a few questions and they replied (after a reminder email) as below which may be of help, but I need to look into them more to see if they may be the option now that I hear IB is actually US based and could cause tax and estate tax problems something which I want to avoid at all costs.

These are the questions I asked and the answers:

Q1.Can an offshore investor not in the UK open an account with key trade and what is required to do so?

Answer: As a non-Belgium resident it is possible to open a bank account with Keytrade Bank. In order to open a bank account with Keytrade Bank you can fill in the form online by following the link below, print and send it to our office by post: https://www.keytradebank.be/secure/p/op ... en?lang=en Or you can complete the document "Banking Relationship Application Form" given in the link below, print and send it to our office by post:
https://www.keytradebank.be/files/docum ... scr_en.pdf
**Please note that in order to finalize your request it is required for new clients to provide a copy both sides of their identity card and a proof of residence (like a recent utility bill) when sending the application form by post.

Q2. If I wish to trade in US $ and the fund listed above is in US $ can I transfer US $ to my trading account with keytrade and make the purchase using US $?
Answer: It is possible to wire funds in USD from another Bank to Keytrade Bank and use your USD to buy funds without having to execute a currency exchange. Keytrade Bank won't charge you a fee to receive USD on your trading account, but it's possible that the other bank will charge you a fee to wire a foreign currency within the EUROzone.

Q3. Is it possible to purchase Irish Domiciled ETFs like the FTSE All-World UCITS ETF (VWRD)
Answer: Yes, you can buy/hold/sell Irish Domiciled ETF's through Keytrade Bank's trading platform, I couldn't find an ETF under symbol VWRD in our database, please provide an ISINcode in order to investigate the possibility to invest/trade in a certain ETF as for example VWRD. For example, I found an Irish ETF given below: VWRL VANGUARD FTSE AW IE00B3RBWM25 Euronext Amsterdam

and although I never asked about tax they said: Regarding your taxes; As non-Belgium resident, you can not benefit the tax exemption of 1900 EUR on your received interests from your saving accounts. The taxation on your interests will be applied by the fisc in your country of residence. You will receive your interests on the saving account with no tax withheld by Keytrade Bank. However Keytrade Bank will/has to communicate those interests to your fisc in your country of residence. Also, you are supposed to communicate your received interests in your tax declaration. - This was not really relevant to me as I live in the UAE and they have no tax agency so I need to clarify they don't mean they will be reporting to the Australian tax authorities as I am a non resident for tax purposes (outside of Australia) so have no tax obligations for earnings ex-Australia) so will need to investigate more and see exactly what reporting they do.

I hope this helps

If you have any other info on KeyTrade or have found out any relevant facts do share,
SurferD
neobavesten
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by neobavesten »

Keytrade Bank may seem like a good choice but be very careful. Although there are no custody fees and account opening and closing is free, transaction fees seem to be rather high.

Brussels (Euronext/Equiduct)
Per order and per block from 0 to € 2.500 € 7,50
Per order and per block from € 2.500,01 to € 5.000 € 14,95
Per order and per block from € 5.000,01 to € 50.000 € 24,95

For us who want to trade on LSE
London (SETS, AIM) Per order and per block from 0 to £ 50.000 £ 29,95 (+ 0,50% "stamp duty" for each buy order)

Details can be found on:
https://www.keytradebank.be/files/docum ... 501_en.pdf

I think this can be solid choice who those who do not plan to make frequent trades. It may be good choice for traders with very simple portfolios, who decided to set and forget about their assets. If you are after more complex portfolios and plan frequent trades I doubt Keytrade is the best choice.

Hope this helps.
TedSwippet
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

neobavesten wrote:...For us who want to trade on LSE
London (SETS, AIM) Per order and per block from 0 to £ 50.000 £ 29,95 (+ 0,50% "stamp duty" for each buy order)
Worth noting that 0.5% stamp duty generally applied to UK shares does not apply to ETF purchases.
TedSwippet
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Re: EU/Int'l - Saxo Bank alternatives without custody fees

Post by TedSwippet »

Mambo_Diablo wrote:...Surely also, as time progresses the US will recogise that making things easier for NRAs to invest in the US is beneficial?
Honestly, I don't think it will. Over the nearly 20 years I've been watching this, US tax law for NRAs has consistently worsened. I can't see any prospect of an immediate reversal.
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