LooPtruy

Hello All

Am new in the country and want to continue investing in funds or stocks which may be in non USD currencies.

I know it is a pain to handle FBAR/PFIC etc, so decided to sell all my investments in other currencies before moving to the US.

I have an account with TD Ameritrade and with Vanguard and neither of them allow me to operate with funds or stocks if they are not in USD.

As an example, I would like for example to buy Santander in the IBEX 35 or DB in the DAX 40, both in EUR or GBP Tesco in the FTSE. I also would like for example to buy Pictet Swiss Market Tracker in CHF.

Any ideas on how to do this from the US, being a US Tax resident?

Michael

Any foreign stocks sold in the US are ADRs (American Depository Receipts) monitored by the SEC to follow regulations. Sometimes even with ADR's, dividends may taxed at the source which may be ok since taxes paid could be used to offsets taxes owed to the IRS for that dividend but since qualified dividends are given favored tax treatment, if that dividend is qualified (almost all US stocks are qualified but not all foreign stock are), you may end up having more foreign tax credits than needed. even when I've purchased ADR's or ETF's investing in foreign, I see tax implications and non qualified dividends that I don't understand but never on US stocks (except dividends on non traditional (trust) preferred shares). For example, there are two ADRs for Royal Dutch Shell (RDS.A and RDS.B) and one is taxed at the source and the other isn't and if you buy the wrong one for an IRA account, it is lost income. A brokerage may incorrectly report qualified dividends in the history but in the year end statement, it will be reported correctly (usually).

When purchasing stocks on a foreign exchange, it is much more common that the dividends are not qualified.

US brokers must report things like qualified and non qualified dividends to the federal government and it can be difficult to determine that on many stocks and a brokerage would have to report it as non qualified if it doesn't know. Some don't want to put up with the problems but others do but normally at a higher commission, exchange rate fees that do not occur with ADR's, and some other issues.

It appears you picked the only major discount broker that currently doesn't want to work with foreign exchanges.

The following is a list of brokers that offer that service. They may not all offer that service on all foreign exchanges.

http://www.wall-street.com/web-direc...nal-investing/

I gave up trying to purchase ADRs or foreign ETFs since I don't know what is happening. I still have a couple of foreign ETFs but haven't purchased any recently.

LooPtruy

Thanks Michael, great answer.

It seems indeed I picked up the only broker who indeed dos not offer foreign stock markets trading!

I will check the different option listed in your link. Etrade seems to offer some international markets,
Canada (CAD)

FRANCE (EUR)

GERMANY (EUR)

Hong Kong (HKO)

Japan (JPY)

UK (GBP)

but not all (Spain, Italy, Switzerland).

Do you have any particular preferences? I am not an active trader, right the opposite, I would normally buy a stock or index funds/ETF and let it be there "for a long long time".

Furthermore, and this is even more important, when it comes to the famous FBAR, PFIC, etc. If I understood you correctly, if I invest with a US broker on say Tesco in the FTSE, the broker will take care of providing me with all the information required to present to the IRS next year? Or am I getting this wrong?

Thanks so much!

Michael

My understanding is that FBAR or FATCA reporting is not required for assets held at a US brokerage unless you physically hold foreign stock certificates (not held at the financial institution and not ADRs) that total more than a certain amount, then FATCA reporting may be required.

You should get a 1099 (required) and possibly a year end statement containing everything you need. However I'd keep a physical copy of the conformation statements for the purchase and sale of any security since the brokerage may not keep track of the gain or loss on the sale of equities. When you sell a security, just stable the sell confirmation to the buy confirmation and put it in a folder to use for your tax return. You should be able to go back many years to get the confirmations but if you switch brokerages, the confirmation statements are lost. The 1099 should have everything needed except the gain or loss on sales of equities.

I'd probably stick with the big discount brokerages (Schwab, Scottrade, or E-Trade) if they offer the services you want. All except E-Trade has local branches. I use TD Ameritrade but I don't purchase foreign securities.