Patrick - read your blog which is most interesting and I have a few questions - hopefully your responses will clear my thinking/understanding
1) You have taken funds offshore to a USA broker company and have bought your instruments out of these funds. Where are the instruments being held and in whose name are they in. If in your name with the USA broker then surely the funds are designated as a USA investment and as such you could run foul of the USA tax officials?
2) If the funds are in a nominees/own name sitting in Ireland who is holding these instruments for you USA broker or an agent broker in Ireland, and would they still be considered outside the USA tax laws or inside for tax purposes and don't you run the same risks if held within you broker account in USA
3) Could you not have established a broker account in Ireland and held the instruments with them directly without the risk of the USA leg being subject to some form of funds confiscation
4) Are you paying fees in USA and Ireland?
Maybe once you have settled all the bits and bobs of going the route you chose is to write a blog setting out how you decided on this path its benefits and pitfalls and if you did it again (maybe you will) whether you would tackle it differently
Hi Graham, I had similar concerns, so I checked and rechecked everything:
1) The funds are in my name in the US broker. When you register, you sign up according to your tax status. As someone living outside the US, and not a citizen, you're classed as a non resident alien. This means that you are tax exempt for everything except US held funds/shares. VWRD trades on the London stock exchange, but is domiciled in Ireland, so I need to follow the Irish tax laws. This means I pay Irish dividend tax or 15%. This cancels out the South African divvie tax, so I don't need to worry about those. As the tax is taken at source, all the divvies that end up in my brokerage account are mine. For estate tax, it depends who you leave things to. The best is children, where you pay nothing on the first €332,084.
2) The funds are listed with my broker directly on the LSE in my name. Interactive has offices there, and in a number of other countries, so they deal with the various exchanges as local. As for the USA, they don't even see the amounts as listed on the LSE. The only risk I face, is selling more than $60k worth of shares, and then dying before I have time to reallocate it. As I can happily live for a year on less than a third of that, I don't think it's a risk I'll encounter again in future, after the funds are initially allocated.
3) For a non resident alien, the cheapest international brokerage account is with interactive brokers. They do have a London based offering, but it's only available for residents of the UK. I did try, but was referred to the US office, which is where all their internationals are sent to. I did consider a broker based in Luxembourg, but the costs were just too high for my liking.
4) I pay fees only on the LSE, they work out to 0.08% per trade with a minimum fee of 1 Pound. That's really cheap! If you like I'll dig up one of my trade statements to show you.
Nothing I know so far suggests I haven't made the best choice. It would be different for someone with under $100k invested with IB, as then there is a $10 (less any trading fees paid) a month charge. As for me, there are no account fees, no custody fees and no taxes to calculate. It's really simple.
Here's the boglehead writeup on them:
https://www.bogleheads.org/wiki/Interactive_Brokers
