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Written by Cari Scribner on October 14, 2021
Category: 
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Can Foreigners Invest In The US Stock Market?

The bustling US stock market is one of the foundations of the world economy, with good reason.

The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly held companies happen. The United States has some of the world's largest stock exchanges, with total listed companies valued at $35.5 trillion as of June 2020.

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Can You Trade in the U.S. Stock Market if You’re a Non-Citizen?

With the sheer size and growth of the US stock market, many non-citizens wonder whether or not they can participate. US stocks and bonds are indeed regulated by US law.  However, as it turns out, you do not have to be a citizen to trade in the US stock market.

There are no specific laws prohibiting non-US citizens from investing in the US stock market.

In fact, many investment firms cater to international clients.

The Securities and Exchange Commission and our government actually encourage foreign investments in the equities and debt markets that fund US capital markets and the US economy. Why is this? It’s because non-US citizens and foreign investors bring in a lot of money to US markets!

It is also wise to diversify your portfolio with stocks from multiple different countries. This is known as global market exposure.

US investors love buying stock in foreign companies. A few examples of this are Alibaba, JD.com and Baidu.

However, there are some extra hoops that non-US citizens have to jump through to get US stocks in their portfolios. You can open an online trading account with some US brokers, even as a foreigner, but more documentation will be required.

Some of the extra paperwork will include proof of identity and visa information, and there will likely be other requirements as well.

Ok, so let's dive in and take a look at some of the top brokerages that provide excellent options for non-US citizens.


Firstrade: Top International Brokerage Pick!

Our top pick for an international brokerage is Firstrade. They offer commission-free trading, retirement accounts, and most importantly, international accounts for non-US investors. This brokerage participates with over a dozen foreign countries. If your country is listed below, you can invest in US markets with Firstrade!

You can read our full review of Firstrade here.

Trading Fees: $0
Account Minimums: $0
Tradable Securities: Stocks, ETFs, bonds, options
Top Features: low trading fees, no minimum deposit, margin accounts
Participating Countries:

  • China
  • Hong Kong
  • India
  • Israel
  • Japan
  • South Korea
  • Macau
  • Malaysia
  • Mexico
  • New Zealand
  • Saudi Arabia
  • Singapore
  • Taiwan
  • United Arab Emirates

TradeStation: 2nd International Brokerage Pick

TradeStation offers a variety of different international accounts for non-us investors. The TradeStation platform offers commission-free trading of stocks, bonds, ETFs, and mutual funds. There are no account minimums and investors can access a variety of international markets.

Residents of non-US Countries will need to provide documentation in your TradeStation application such as a passport, national ID card, driver's license, alien ID card, and proof of your address.

Here's our full review of TradeStation.

Trading Fees: $0
Account Minimum: $0, TradeStation Select $2000
Tradable Securities: stocks, bonds, mutual funds, ETFs, options, futures, cryptocurrency
Top Features: commission-free trades, platform trading tools, research data, education, crypto trading

Webull: 3rd International Brokerage Pick

For those international investors who are located in India or China, Webull is now offering services in your region. Webull is a commission-free stock, ETF, and options trading platform. Similar to Robinhood, but with more features and more of an advanced user interface. Webull really caters to advanced traders with its vast array of research and charting tools.

Trading Fees: $0
Account Minimum: $0
Tradable Securities: stocks, ETFs, options
Top Features: Commission-free trading and short selling, real-time market data, trading simulator, advanced mobile app

Webull also offers a free stock at sign-up if you fund your account with $100.

Check out our complete Webull review here.

Questrade: For Canadian Investors

For Canadian investors, Questrade is one of the most popular brokerages out there. With relatively low trading fees and an easy-to-use website, Questrade offers an attractive platform for investors.

Trading Fees: $.01/share with a minimum of $4.95 and a max of $9.95; buying ETFs is free, selling costs $0.01
Account Minimum: $1,000
Tradable Securities: US stocks, ETFs, options, Mutual Funds, EURUSD, CDs
Top Features: Questrade offers a great option as a brokerage with low fees for trading stocks and ETFs. There are a fair amount of research tools and great reviews for its customer service. For Canadian investors, Questrade offers a noteworthy service.

Opening a Foreign Brokerage Account

To trade US stocks, the easiest thing to do is to open a brokerage account with a US broker.

However, brokerage firms have different procedures for non-citizens based on their residency status, and non-citizens will have to produce more documents to comply with their internal rules.

On top of that, not all brokerages participate with international investors. 

International investors in the US stock market typically choose to go through a brokerage firm to manage their investments. Using a reputable broker ensures that investments will comply with applicable laws, and a US-based broker who is familiar with international investments can help people navigate the somewhat complicated topic.

If you are a non-resident of the US looking to invest and you are choosing a brokerage firm, make sure that they work with international investors. Do the homework. Take the time to check that they work with your specific country of residence because some brokerage firms only serve certain areas.

Also, some brokers require additional documentation from international investors, including proof of identity, visa information, and tax documents.

W-8BEN Tax Form For Foreign Investors

The W-8BEN is a common tax form required for foreign investors. Many international investors choose to work with a web-based brokerage account. This allows them to access their accounts from anywhere at any time, without worrying about finding a branch location.

Many web-based brokerage firms specifically cater to international investors.

Form W-8BEN expires after three years from the day you signed it. Your broker should always notify you to renew it before it expires. If yours has expired, your account will be subject to the normal taxation for a foreigner, even if you’re from a tax-exempt country.

If you can't find a broker you like in the US, then some foreign financial institutions will allow you to open brokerage accounts that will give you access to US stock exchanges.

Some foreign financial institutions and big brokerage firms have access to the US stock market either by partnering with US financial firms like Merrill Lynch or through global depository receipts. So, be sure to check with the financial institutions in your home country to determine the ones that offer these services.

Patriot Act (2001) - New Restrictions and Regulations

One of the goals of the Patriot Act passed after the 9/11 terrorist attacks, is to prohibit organizations and individuals linked to terrorism from financing their illegal operations through American markets.

The US government has gone to great lengths to ensure that certain organizations that have been linked to terrorist activities, along with their members or suspected members, are not able to finance their operations through American capital markets in any way.

This means that brokerage firms are required to verify customer identities and report any suspicious account activity to the government. These regulations don’t have an effect on the vast majority of individual international investors.

It's safe to say that if you are not involved in any illegal activities or any activities that the US government and its organizations may find offensive, you should be well within your rights to own stock in US-based companies.

However, you should always make sure to work with a reputable international broker. This will ensure that you are complying with the wide array of new and updated regulations that govern US stocks.

Also, make sure to plan for some additional obstacles you might need to overcome first before you can begin investing.

Tax Implications For Foreign Investors

Non-US citizens trading US stocks potentially have to deal with elaborate taxation issues. In general, nonresident aliens pay a 30% tax on investment income. The tax will typically be withheld at the source by the brokerage firm involved.

If you qualify as a non-resident foreign national of the US, you are not subject to capital gains tax.

This means that your brokerage firm will not withhold that tax from earnings on international investments. However, most countries require that residents pay capital gains tax on money earned in foreign markets. You may have to report the income and capital gains at home.

Earned dividends are taxed as income for non-resident foreign nationals. Non-resident foreign nationals are subject to a flat 30 percent tax rate on their income. Earned dividends, which come directly from the US companies you invest in, are considered income.

There are some situations in which you may be subject to a lower rate. This is depending on any treaties, your home country has with the US, and if the dividends are interest-related.

Navigating international taxation is a reason it may be better to work with an international broker. A reputable broker will make sure you know all the US tax implications of your investments.

Not being a US citizen shouldn't stop you from investing in US stocks. Just be aware that there are some extra hurdles you might need to overcome to do it!

Deciding On A Brokerage as a Foreign Investor

For example, if you are a UK citizen, you can open a brokerage account with Saxo Bank or Barclays to trade in the US stock market. As another example, if you’re in Malaysia, you can use CIMB Bank to invest in the US stock market.

There may be brokerage firms or other financial institutions that offer similar services in every country, so do your research.

Although some US-based brokers don’t allow foreign clients to open a trading account with them, a few do offer online services to clients in specific countries.

Some of the US brokers that serve international clients online include Firstrade, MBTrading, Zecco, TradeStation, TD Ameritrade, Sogotrade, and Just2Trade. Each of these has a list of countries they accept clients from. Before you choose any of them on the list, find out if it supports your own country of residence.

There are some brokers with an international presence. This means that they have offices in different parts of the world, even though they are headquartered in the US. The two brokers in this group are Charles Schwab and InteractiveBrokers. They have offices in the UK, some European countries, Hong Kong, Singapore, and Japan.

Best Brokerages For Non-US Investors

You will have to do research on individual brokerages based on your home country. Some of the options listed below may allow you to invest in US stocks as a non-US investor.

TradeStation

The TradeStation platform offers international accounts to a variety of different foreign citizens. You can access multiple markets across the world using the TradeStation Global service.

Depending on which country you live in, TradeStation will require documentation such as a passport, driver's license, bank statement, or additional information to verify your identity.

TradeStation offers commission-free trading for stocks, bonds, mutual funds, and ETFs.

Trading Fees: $0
Account Minimum: $0, TradeStation Select $2000
Tradable Securities: stocks, bonds, mutual funds, ETFs, options, futures, cryptocurrency
Top Features: commission-free trades, platform trading tools, research data, education, crypto trading

Interactive Brokers

This brokerage supports a multitude of different currencies, and it allows you to place trades and make withdrawals and deposits in different currencies.

The minimum to open an account with them is $0 and the fee for trading is $0.005 per share.

This brokerage supports dozens of different countries. You can view a full list here.

The documentation required to open a brokerage account is different for each country.

eToro

This brokerage specializes in CFDs which are available in many different countries. They do not specifically list which countries are supported, however here is a list of the countries that are not supported.

One word of caution is that the primary product offered on eToro is a CFD. This is a complex financial instrument that comes with a high risk of losing money. You should not invest with this brokerage unless you understand the risk involved.

They also offer cryptocurrency and forex trading on this site. However, with a CFD you actually do not own the underlying asset. You are simply investing in a derivative, which is something that derives a price from the value of the underlying asset.

While the CFD is based on the price of the underlying stock/cryptocurrency, you do not own the actual asset itself.

Saxo Bank

This brokerage has numerous different entities based on which region it is serving. The fees and services they offer vary based on what country you are in. This is a popular platform for forex trading as well.

They support 19 different currencies on the platform.

This brokerage gives you access to over 35,000 different financial instruments based on numerous different assets. They work with over 300 different financial intermediaries, and this allows them to offer investment services in over 120 different countries.

One common complaint about Saxo Bank is that they do have high minimum deposits required in most cases. They offer a variety of different investment vehicles including stocks, ETFs, forex, bonds, options, futures, CFDs, and cryptocurrencies.

Fidelity

This brokerage has international accounts for numerous different regions worldwide. According to their site, this includes support for:

  • Austria
  • Canada
  • France
  • Germany
  • Hong Kong
  • Japan
  • Netherlands
  • Spain
  • Sweden
  • Switzerland
  • Taiwan
  • United Kingdom

The products, fees, and services vary based on what region you are in. Each of these regions has a separate Fidelity site. They have over 40,000 employees in 8 other countries outside of the US.

You may find that they support your home country and offer the product you are looking for!

DEGIRO

This is a UK-based stockbroker with more than 400,000 customers in 18 different countries. The fees and commissions vary based on what country you are in, but overall many have said the fees through these brokerages are less than others out there.

DEGIRO offers stocks, bonds, ETFs, options, futures, and cryptocurrencies. They do not offer forex trading, which is a popular investment vehicle among non-us investors.

According to their website, DEGIRO offers investment services for the following regions:

  • Czech Republic
  • Denmark
  • Germany
  • Spain
  • Greece
  • France
  • Ireland
  • Italy
  • Netherlands
  • Norway
  • Hungary
  • Austria
  • Poland
  • Portugal
  • Finland
  • Sweden
  • Switzerland
  • United Kingdom

The fees and commissions vary based on what country you are in, but overall many have said the fees through these brokerages are less than others out there. Read more about this on AskTraders in-depth guide on Degiro fees.

 

Article written by Cari Scribner

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