The Global Tax Forum is tackling two big issues this week: Do you get any U.S. tax benefit when your company sends you on a short-term overseas rotation? And can a foreign student be a trader for U.S. tax purposes? Here's a quick preview: No, on both counts.
But before we get to the details, we'll give you a few reader suggestions in response to our request for historical exchange-rate sources. And we've also thrown in a small tip for holiday travelers.
Anything else you'd like us to address? Send your questions to
firstname.lastname@example.org. Please remember to include your full name and resident country. Don't forget, the Global Tax Forum appears every other Wednesday. (OK, it was supposed to run last week, but I was on vacation. So shoot me.)
Readers Chime In on Historical Exchange Rate Search
Last edition, reader
asked for historical exchange-rate sources. In true
form, our readers promptly responded with some great sites that let you find an exchange rate as far back as 20 years.
- Frank Magidson suggested the
Oanda site at
Klaus Baslau suggested an exchange-rate
site administered by a professor from the
University of British Columbia in Vancouver, Canada.
Paul Mesburis pointed us to the
Bank of Canada's
site for good info "specific to Canadian/U.S. foreign-exchange rates."
So take your pick, Walt! Thanks to all for the suggestions.
Is It Good That I'm Working Overseas?
My company has sent me to another country to work. By the time I get back, I will have been there 10 months out of the tax year. I was still paid out of the U.S. but lived in the U.K. for that time. Is there some tax advantage to not being in the U.S. during that much of the tax year? -- Karen Meek
Nope. There is no advantage to being overseas for U.S. tax purposes.
As long as you're a U.S. citizen, you'll be taxed on your worldwide income -- no matter where you live during the tax year. You will have to file a U.S. tax return and pay tax on all your income.
And if you try to give up your citizenship to avoid paying taxes, U.S. tax law will require you to pay tax on your income from U.S. sources for the next 10 years anyway. So forget that. (See a
previous column of mine for more details.)
Depending on the foreign country you're residing in, you may have tax requirements in that country.
"If you live in a country that is considered to be a major trading partner with the U.S. -- like the U.K. or France -- for less then six months, you'll probably get out of paying local tax thanks to the tax treaties the U.S. has with those countries," says Nick Morrow, foreign-tax specialist at
, a New York accounting firm. (See another previous
column for more on these tax treaties.)
But, since you've been in the U.K. for more than six months, check out the local tax laws. The U.K. may treat you as a resident, notes Morrow. Then you'll have to deal with the U.K.'s tax rules and filing requirements. Still, thanks to the treaties, you'll get a credit from the U.S. for anything you pay to the U.K. on U.S. income.
Foreign Student Wants to be a U.S. Trader
I read your article about Taxes for Traders, and I would like to ask a question about that. First of all, you should know that I am currently a foreign student on F-1 status, graduating this semester. After graduation, I will have 12 months of practical training, or 24 months if part time. Then, either I find a job, someone to marry or I have to leave. Second, I have been trading part-time (actually I should say full-time since I trade during the day and go to school at night) quite successfully for a year and a half now, and I am planning to continue trading after graduation as my full-time occupation. My question is the following: Will I be able to claim trader status under these circumstances? Or maybe such a status applies only to U.S. citizens and residents? -- Francesco Topino
First let's discuss your visa status, then we'll tackle your trading activities.
F-1 visas are given to foreign students, basically allowing them into the U.S. to attend one of our educational institutions. After school is over, foreign students have to leave the U.S. unless they are able to change their visa status -- i.e., they marry a U.S. citizen, or they get a job here and get a work visa, as you noted above.
For U.S. tax purposes, an F-1 visa holder is considered a nonresident alien for the entire length of stay. At a minimum, that means you will not pay tax on your capital gains or interest income, although you'll be subject to withholding tax on any dividends generated. (Please see a related
article for more on dividend withholdings.)
That's a good thing. Remember, foreigners without an F-1 visa who are here for more than six months most likely will be treated as U.S. residents. Then they'll owe U.S. tax on everything. (See this
previous Tax Forum for more on the residence tests.)
Now let's discuss your trading activities.
According to your F-1 visa, you're in the U.S. to be a student, not a trader. If you file a U.S. tax return declaring trader status, then you aren't complying with terms of your visa, Morrow notes.
Aside from that very major point, because you're a nonresident alien, your trading income won't be treated as income from a U.S. trade or business, according to
Section 864(b) of the tax code. Because that's a requirement for claiming trader status, you would not be able to file as a trader anyway. (Check out our Taxes for Traders series for more on the trader requirements.)
Please note that the above analysis is an interpretation of the current tax code. There are no definitive rules on whether foreigners can be considered traders for U.S. purposes.
Coming Home for the Holidays?
Hey, expatriates! Are you coming back to the U.S. for the holidays?
If you are, then take a moment in between all the festivities to check in with your tax adviser.
Make sure your adviser has a general idea of your current situation and all necessary information. It's just plain easier to round up your tax documents while you're here in the U.S.
TSC Global Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.