Tax efficiency for NRA's ?
 

I found the following, which may be useful to other NRA's, when looking for information on the 1040NR:

Part I of this article addressed the potential benefits of private placement variable annuities (PPVA) for wealthy non-resident alien taxpayers. Generally, tax treaties make all of this possible. As a result, annuities are not subject to U.S. income taxes and withholding taxes overriding the onerous taxation of IRC Sec 871(a) – a 30 percent withholding tax. PPVA contracts are institutionally priced providing for a cost structure that is between 25-75 bps per annum depending upon the size of the assets within the annuity. The point – the cost of the PPVA is far less than cost of taxation even at the preferential rates for interest and dividends under many treaties. For income that is taxed at ordinary rates such as Effectively Connected Income to a U.S. trade or business, there is no better tax structure than the PPVA.

This was from a gerrynowotny . com webpage (it seems my posts with a link are not published)

Re: Tax efficiency for NRA's ?
 

PPVAs are up there with whole life insurance when it comes to being terrible investments for most people. They might have some benefits for the seriously wealthy, but for 99% of people they are to be avoided.

PPVAs (and whole life insurance) offer US tax deferral, but at a high cost, and have you considered their taxable status with the tax authority where you reside?....ie for many people on here that is going to be HMRC.

There are plenty of tax deferred savings accounts in both the US and the UK that people should use first...

Re: Tax efficiency for NRA's ?
 

The article said that the cost of the PPVA was lower than that you would pay given tax treaties. Did you think that is not the case?

What are the US tax deferred accounts that you think are better?

Re: Tax efficiency for NRA's ?
 

Are we talking about UK residents here? You need to be specific about citizenship and residency.

99.9% of people will be best served by maxing out local tax deferred savings...ROTHs, 401k, SIPPs etc. US citizen expats should look at UK pension plans and US IRAs for tax deferral.

Re: Tax efficiency for NRA's ?
 

DVLAs are pretty rotten to the core. They are based on worthless counsel's opinions and result at the best in tax deferral in an inflexible structure. Even the IRS says you can own PFICs in a SIPP & forget PFIC reporting; but at least with a SIPP one has a treaty one can read.

Re: Tax efficiency for NRA's ?
 

That's irrelevant because it's (probably) taxed where you live. Looking at the treaty rate for the UK, the NRA rate is 0% anyway: https://www.irs.gov/individuals/inte...-treaty-tables

So completely pointless.

It might be useful if you live on The Bahamas or the Cayman Islands or somewhere else with no income tax and no tax treaty or a limited tax treaty.

This is what I always say about Canadian TFSAs (similar to an ISA), they're called "tax free" but they're only free from Canadian tax, so say you put the money into US equities, dividends are taxed at 15% by the US as non-resident alien tax. And you can't claim it as a foreign tax credit because there's no Canadian tax.

So if you held it outside a TFSA, you have to pay taxes on it, but you can claim a foreign tax credit for the NRA tax. Obviously you may well be in a higher tax band than 15% but it limits their usefulness.

Whereas with a pension, such as an RRSP or a SIPP, covered by the tax treaty, so no tax.