Tax for UK Resident - Non-Domicile under Remittance Basis

[reckor]

Dear all,

First post here, hope you're all well and can help me with the below.

As per the title, I am an UK resident, non-domicile (first year in the UK) and under the remittance basis. Per my understanding, UK TAX doesn't apply to any CGT (Capital Gains) earned outside UK if I don't bring the gain into the UK.

In other words, if I have a broker account in the US and I trade ETFs/stocks there and make some money and don't remit those gains to the UK I won't pay any tax to anyone (US govt or UK govt or any other govt).

I was wondering if anyone else is in the same situation to confirm my understanding, please.

Thank you in advance.

 

[1nvest]

Dear all,

First post here, hope you're all well and can help me with the below.

As per the title, I am an UK resident, non-domicile (first year in the UK) and under the remittance basis. Per my understanding, UK TAX doesn't apply to any CGT (Capital Gains) earned outside UK if I don't bring the gain into the UK.

In other words, if I have a broker account in the US and I trade ETFs/stocks there and make some money and don't remit those gains to the UK I won't pay any tax to anyone (US govt or UK govt or any other govt).

I was wondering if anyone else is in the same situation to confirm my understanding, please.

Thank you in advance.

where you are a citizen of, will be where you need to declare your income to
you are right that you wont pay CGT to the UK. You are not right that you wont be liable to US or UK
it doesnt matter where your broker is based btw, it could ireland, turkey doesnt have anything to do with tax. if you are (assuming) a US citizen thats where you are liable to declare your income subject to their own CGT regulations

 

[reckor]

where you are a citizen of, will be where you need to declare your income to
you are right that you wont pay CGT to the UK. You are not right that you wont be liable to US or UK
it doesnt matter where your broker is based btw, it could ireland, turkey doesnt have anything to do with tax. if you are (assuming) a US citizen thats where you are liable to declare your income subject to their own CGT regulations

Thank you for taking the time to reply.

Although I understand your explanation it is still not clear about the citizenship.

Just to give a context, I'm not American and since I left my country I am not paying any further tax for incomes outside the country. I am considered as non resident.

If I open an account in the US, they will request the W8 form which will ask my tax id where I'm living now which is UK. They don't ask about my citizenship and from where I'm originally from.

I am a bit lost, sorry...

 

[1nvest]

Thank you for taking the time to reply.

Although I understand your explanation it is still not clear about the citizenship.

Just to give a context, I'm not American and since I left my country I am not paying any further tax for incomes outside the country. I am considered as non resident.

If I open an account in the US, they will request the W8 form which will ask my tax id where I'm living now which is UK. They don't ask about my citizenship and from where I'm originally from.

I am a bit lost, sorry...

Where are you a citizen of?
When did you become non resident there?
You are resident in UK for 1 year, have you been resident anywhere else since you became non resident from your citizenship, how long for?
Hard to give tax advice based on residency alone

 

[reckor]

Where are you a citizen of?
When did you become non resident there?
You are resident in UK for 1 year, have you been resident anywhere else since you became non resident from your citizenship, how long for?
Hard to give tax advice based on residency alone

1) Brazil
2) circa 4 years
3) Correct. I was resident in Russia for almost 4 years until mid of last year when I moved to the UK

Accordingly to PWC, I'm resident now in the UK but will be considered as non-domicile up to the next 5/6 years (if I stay here). I will also apply to the remittance basis to avoid paying tax on my incomes from abroad (and if I don't remit them to UK).

Hope this give the full context and thanks again.

 

[Mart0611]

Hi, I am in the same situation as you but i've been a resident, non-domicile for 5 years.
Your assumption is correct, i.e. as long as you don't remit the capital gains or interest income to the UK you will not have to pay taxes to either the UK or to any other jurisdiction. This is good for the first 7 years, after which you will be able to extend the non-dom privileges by paying a fee to HMRC - that's my understanding.

 

[reckor]

Hello, thanks for the note. Curious to know how the US TAX would "understand" my situation. Do you have any assets in the US? Have you provided your W8 with UK tax information?

 

[Mart0611]

I trade almost exclusively US stocks and options and the only fiscal implication is that there is a Non-Resident withholding tax at the source on dividends - your broker will manage that. The issues around taxation is always from the standpoint of where you reside - unless you are a US citizen, then you have to declare your global income even if you no longer reside in the US but that’s not your case. I have a broker account in the U.S. and since my account this labelled as Non-Resident I do not have to file in the US. I assume that you will be asked to file a W8 at some point but would wait for your broker to ask you to.

 

[reckor]

That's good to know, thanks for sharing. I do have US stocks and currently my W8 is from another country. I always paid the Tax from this country (13%) when receiving dividends or due to capital gains (selling stocks for instance). If I understood you correctly, once I update my W8 with UK details, then the only tax paid will be the WHT as non-resident. That's a 13% gain!
Btw, do you trade ETFs? I learned that being an UK resident I'm not allowed to trade US ETFs directly, and would need to go via UCICS

 

[Mart0611]

Yes but this only applies if you are a non-domicile AND file under the Remittance basis - so you only pay income on your UK earnings - I assume that if you are using PWC they have set you up as such. Let's be clear here, I am not a tax expert so you should check with your tax firm to have this confirmed, I am only referring to my personal situation.

I trade US ETFs, yes. My limited understanding of UCITS - I assume you meant UCITS - is that they are used for regulatory and tax harmonization reasons by EU residents but there are no restrictions to using ETFs instead, although there might be some disadvantages. But really not my area of expertise.

 

[reckor]

Yes, PwC will fill/submit my tax report as non-domicile and remittance basis. I understand you're not a tax expert, but it was very useful to have a "real" case.

Correct, I meant ETF UCITS. I thought the broker would "block" the offering of US ETFs if you're UK (EA) resident and offer only ETF UCITS.

 

[Farm Yard Forex]

I would always check with an accountant on the nuances of tax and regionality.

 

[Mart0611]

Yes, PwC will fill/submit my tax report as non-domicile and remittance basis. I understand you're not a tax expert, but it was very useful to have a "real" case.

Correct, I meant ETF UCITS. I thought the broker would "block" the offering of US ETFs if you're UK (EA) resident and offer only ETF UCITS.

My brokers are US based and they haven't blocked anything.

 

[reckor]

Thank you again, all clear.

 

[reckor]

I trade almost exclusively US stocks and options and the only fiscal implication is that there is a Non-Resident withholding tax at the source on dividends - your broker will manage that. The issues around taxation is always from the standpoint of where you reside - unless you are a US citizen, then you have to declare your global income even if you no longer reside in the US but that’s not your case. I have a broker account in the U.S. and since my account this labelled as Non-Resident I do not have to file in the US. I assume that you will be asked to file a W8 at some point but would wait for your broker to ask you to.

Hi again, quick question. How much do you pay as WHT on Dividends and/or Capital Gain? 30/15 or 0%?

 

[Mart0611]

This will be based on the country where you receive those dividends, in the US it's 30% but I also have Canadian stocks and it's 25% for those.

 

[reckor]

You're right, thanks. I just read the IRS rules for non US resident alien it's 30% for dividends from US companies whatever your status (non-domicile and on remittance-based tax system).
However, for capital gain it seems that the WHT is zero. Is it in line with what you pay as well?

 

[reckor]

This will be based on the country where you receive those dividends, in the US it's 30% but I also have Canadian stocks and it's 25% for those.

Mind helping with my last question, pls? Thanks a lot