Hi, I live in Uruguay, South America, my country has no taxation agreements with USA, is there any way I can avoid or at least reduce paying the 30 % withholding tax rate on my capital gains derived from intraday forex trading? I trade OTC spot forex with a FCM (off exchange).

Thanks in advance!!

Carlos

Good news, generally, non resident aliens who do not spend more than 183 days in the US, do not owe US taxes on capital gains and that should apply to forex ordinary income with IRC 988.

Non residents are subject to withholding on dividends and interest and tax treaties with the US can reduce those withholding rates.

Learn the details of these rules on the GreenTrader Tax Center page for Non Resident Traders at http://www.greencompany.com/Educatio...Resident.shtml

We cover non resident traders in full in my book The Tax Guide for Traders. http://www.greencompany.com/Traders/Guides.shtml

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Hi,

thanks for your answer! I will order your book! By the way, as I understood after filling the W8-BEN form, my fx broker (a FCM offering OTC spot forex) will withhold 30 % of my earned interest but will not withhold anything on my capital gains?

What I mean is if for example if I earned 10,000 dollars; 2,000 due to earned interests and 8,000 due to "buying cheaper and selling higher", provided that my country has no taxation agreements with the US, I will be taxed 30 % on the 2,000 and I will not be taxed anything on the 8,000 USD, is that right?

Sorry about my poor "Tax terminology", in tax terms "capital gains" refers to what I meant by "buying cheaper and selling higher" (I mean trading results derived from changes in currency quotes, instead of those derived from earned interests) ?

Thank you so much!!!

Correct, as earlier stated, for non-resident aliens, interest and dividend income items are subject to US federal tax withholding at 30% tax rates unless a tax treaty overrides that rate with a lower withholding tax rate.

Thanks for giving a good example of how interest income can arise in forex transactions.

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Thank you so much for your answer!!

Your welcome.

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Would it not be easier to open an account with fxcm UK? That way I believe you wouldn't have to worry about interest costs.

Sorry, don't know the answere here about US vs UK services offered by FXCM, please ask your rep directly.

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Hello, I would like to ask the same question, but for a US citizen
who does not currently reside in the US.
yours,
Claude Philippe Medard

US citizens are taxed on worldwide income, because they remain legal residents of the US. Only non-residents get the benefits described above.

Most US residents abroad give up state resident domicle and are not statutory residents either, so they save state taxes.

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Hello, as US alien who lives outside US (like Mr Suarez in south America), should i declare to IRS my taxable income (interest earned in a fx position) at the end of the US fiscal year? or the withholding, made by FXCM for example, is enough to comply the US tax regulation.

Withholding is enough but if you are entitled to a refund due to a lower tax treaty rate, then file a return to claim the refund.

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I have a net loss in spot trading for the last financial year. I have filed for extension. Which form should I use? I do not qualify for a 'Trader Status'.

forex trading losses by default are reported on line 21 - Other Income or Loss - of Form 1040. There is no limitation on the losses as there are for capital losses on Schedule D. See our Forex Tax page for more information. http://www.greencompany.com/Educatio...Currency.shtml

Sorry I did not see this post earlier.

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