Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country?
Found a great article (with bibliography) that covers taxation on investment activity by non resident aliens - even covers the special 15% tax on dividends for Canadian residents. It's (dividend tax rate) generally 30% for other NRAs  (your 2nd question). And it confirmed my suspicion that there are no capital gains taxes for NRAs. (1st Q) Source: http://invest-faq.com/articles/tax-non-us-nat.html "The country from which you purchase stock cannot charge you tax on either income or capital gains. Taxation is based on residency, so even when you purchase foreign stock its the tax laws of Malaysia (as your country of residence) that matter. At the time of writing, Malaysia does not levy any capital gains tax and there is no income tax charged on dividends so you won't have to declare or pay any tax on your stocks regardless of where you buy them from. The only exception to this is Dividend Withholding Tax, which is a special tax taken by the government of the country you bought the stock from before it is paid to your account. You do not need to declare this tax as it his already been taken by the time you receive your dividend. The US withholding tax rate on dividends is 30%, although this can be reduced to 15% if there as a tax treaty in place between the US and your country of residence. Malaysia does have a double taxation agreement with the US (see here: http://www.mida.gov.my/env3/index.php?page=double-taxation-agreement) but it is flagged as a ""limited"" agreement.  You'd need to find the full text of the agreement to see whether a reduced rate of dividend withholding tax would be available in the Malaysia/US treaty. See my other answer for more details on withholding taxes and how to partially reclaim under a double tax treaty: What is the dividend tax rate for UK stock Note: Although the taxation rules of both countries are similar, I am a resident of Singapore not Malaysia so I can't speak from first hand experience, but current Malaysia tax rates are easy to find online. The rest of this information is common to any non-US/UK resident investor (as long as you're not a US person)." I believe that tax will be withheld (at 30%?) on dividends paid to non-residents.  You can claim it back if your country has a tax treaty with the USA, but you will need to file.  You probably also need to file a W-series withholding form (eg a W9-BEN). Interesting question.  I would like to hear a more definitive answer.
1) The easy way is to find a job and they will assign you an SSN.  2) Here's the hard way.  If you're Canadian, open a TD Boarderless account in the U.S.  Put a small investment into any investment that would generate some type of income, such as capital gain, dividends, interest and etc...  Then you will need to file a US tax return to declare your income if you receive U.S. tax slips (although you're likely below the min filing requirement) at year end.  To file a U.S. tax return, you may  need what's called an ITIN or individual tax id number.  With the ITIN, you can get credit from the US TD boarderless account (only).  Consider getting a prepaid US credit card with the TD account to futher build credit at that specific bank.  It's not much credit, but you do start with creating a history. "Some investment trusts have ""zero dividend preference shares"" which deliver all their gains as capital gains rather than income, even if the trust was investing in income yielding stocks. They've rather gone out of fashion after a scandal some years ago (~2000).  Good 2014 article on them here includes the quote  ""Because profits from zero dividend preference shares are taxed as   capital gains, they can be used tax efficiently if you are smart about   how you use your annual capital gains tax allowance.""" "I'd agree that this can seem a little unfair, but it's an unavoidable consequence of the necessary practicality of paying out dividends periodically (rather than continuously), and differential taxation of income and capital gains. To see more clearly what's going on here, consider buying stock in a company with extremely simple economics: it generates a certain, constant earnings stream equivalent to $10 per share per annum, and redistributes all of that profit as periodic dividends (let's say once annually). Assume there's no intrinsic growth, and that the firm's instrinsic value (which we'll say is $90 per share) is completely neutral to any other market factors. Under these economics, this stock price will show a ""sawtooth"" evolution, accruing from $90 to $100 over the course of a year, and resetting back down to $90 after each dividend payment. Now, if I am invested in this stock for some period of time, the fair outcome would be that I receive an appropriately time-weighted share of the $10 annual earnings per share, less my tax. If I am invested for an exact calendar year, this works as I'd expect: the stock price on any given day in the year will be the same as it was exactly one year earlier, so I'll realise zero capital gain, but I'll have collected a $10 taxed dividend along the way. On the other hand, what if I am invested for exactly half a year, spanning a dividend payment? I receive a dividend payment of $10 less tax, but I make a capital loss of -$5. Overall, pre-tax, I'm up $5 per share as expected. However, the respective tax treatment of the dividend payment (which is classed as income) and the capital gains is likely to be different. In particular, to benefit from the ""negative"" taxation of the capital loss I need to have some positive capital gain elsewhere to offset it - if I can't do that, I'm much worse off compared to half the full-year return. Further, even if I can offset against a gain elsewhere the effective taxation rates are likely to be different - but note that this could work for or against me (if my capital gains rate is greater than my income tax rate I'd actually benefit). And if I'm invested for half a year, but not spanning a dividend, I make $5 of pure capital gains, and realise a different effective taxation rate again. In an ideal world I'd agree that the effective taxation rate wouldn't depend on the exact timing of my transactions like this, but in reality it's unavoidable in the interests of practicality. And so long as the rules are clear, I wouldn't say it's unfair per se, it just adds a bit of complexity." I think that author does a disservice by writing such seemingly sensible articles without actually knowing how things work. If I didn’t know better, I would think this guy was teaching me something. It’s a shame he did not do research before he started writing.  Let’s say you buy a classic car. You take super good care of it, all original, mint condition. You paid cash for it out of your savings. This is a balance sheet transaction that has nothing to do with income. You traded your cash asset for a classic car asset.  Now let’s say this car is so rare and you keep it in such good condition that it gains value every year. Maybe it was worth $15k when you bought it, but this year it’s already worth $17k. Great job on making a great purchase! But is that $2k gain counted as income to you? No, it is not. The value of that asset on your balance sheet went up, but you did not make anything off of that increase in value because you have not sold it.  If you had to pay taxes on the increase in value every year, those taxes would essentially force you to sell that car to pay the taxes just because you took care of it. Additionally, in the long term, no one would want to own anything, so this would destroy the value of everyone’s stuff, but I digress.  In this example, amazon stock is the car. The author is seeing the increase in stock value adding to the balance sheets of the investors who bought the stock and confusing that with income.  Back to our example, let’s say your car increased in value $2k a year for two years and you decide to sell it for $19k - now we are about to realize some income! Since you bought it for $15k and sold for $19k, you earned an income of the difference, or $4k.   Your income wasn’t $19k, because you originally put $15k in cash into the car. That cash was already saved from income you made in the past, and it is not counted again as income in this sale.  Because you did not work for this new car sale income, but it was derived from asset growth, the income is called capital gains. You invested your capital ($15k) into the asset (car), and that asset appreciated. When you sold it, you received capital (money) back in exchange for that asset. The capital you received is more than what you invested, which is to say you gained $4k of capital by investing in and then selling your  asset (car).  Because you held the car for two years, you qualify for lower long term capital gains tax rate on that $4k. Had you sold it after year 1, you would’ve paid your regular normal income tax rate on those capital gains. Either way, you owe the tax when you sell the asset, not when it appreciates.  I’m sure you realize this already, but if we change the car to amazon stock in my story, this is exactly how it works with investors.  The author gets several things wrong   1 - amazon profits are not passed through to shareholders for income tax purposes. If amazon paid dividends, those dividends would be taxed at payout at the long term capital gains rate, and they would be paid out of cash amazon has left after it already paid corporate taxes on profits.   Amazon has decided they can add more value to investors by using cash to grow instead of paying dividends. When the investors sell the stock, they will owe capital gains on the growth of that stock. If amazon is correct that using cash to grow, then investors will effectively pay more when they sell the stock than they would pay today if dividends were paid.  2 - asset appreciation is not income. Those investors will realize the income when they sell the stock, and they will pay the tax then.   3 - he is missing the point entirely on why amazon runs a low profit or how business strategy translates into financials. Low prices are not a function of low profitability. Low profitability could be an adverse result of low pricing, but being low profit in order to be low price is a ridiculous and failing strategy. Amazon’s low pricing is a function of their unparalleled buying power, unparalleled consumer and product data, amazing logistics prowess, clever loyalty programs like amazon prime, and many other brilliant things they’ve done. Their low profitability is a function of their investment in things like amazon fresh, amazon Alexa, drone delivery, automated convenience stores, building out cloud computing infrastructure, and many other R&amp;D projects, $4 billion in original content spending for amazon prime video, and all kinds of expenditures years ahead of when they become profitable. By the time consumers want it, amazon already built it three years ago - this is the power of amazon. Sometimes multi billion dollar experiments fail, and all that money was for nothing. Sometimes they lose money for a few years and then become the infrastructure that runs a third of the internet. Amazon does not let fear of failure stop them, they invest in growth with their cash. This is how Bezos thinks - how do we build the future, not how can I avoid tax    I do need to make a disclaimer here - there could be special tax treatment of classic cars that makes my example not work. Also classic cars may not appreciate in value. I don’t know anything about classic cars, I just picked a politically neutral thing to put in my story and made some assumptions to illustrate how capital gains work. My story is definitely how stocks work, and probably cars, but I just want to point out that I don’t know shit about car collecting. "Do I have to pay the stock investment income tax if I bought some   stocks in 2016, it made some profits but I didn't sell them at the end   of 2016? You pay capital gains taxes only when you sell the stocks. When you sell the stock within a year you will pay the short term capital gains rate which is the same rate as your ordinary income. If the stock pays dividends, however, you will have to pay taxes in the year that the dividend was paid out to you. I bought some stocks in 2011, sold them in 2012 and made some gains.   Which year of do I pay the tax for the gains I made? You would pay in 2012, likely at the short term gain rate. I bought some stocks, sold them and made some gains, then use the   money plus the gains to buy some other stocks before the end of the   same year. Do I have to pay the tax for the gains I made in that year? Yes. There is a specific exception called the ""Wash Sale Rule"", but that would only apply if you lost money on the original sale and bought a substantially similar or same stock within 30 days. Do I get taxed more for the money I made from buying and selling   stocks, even if the gains is only in hundreds? More than what? You pay taxes based on the profit you make from the investment. If you held it less than a year it is the same tax rate as your regular income. If you held it longer you pay a lower tax rate which is usually lower than your regular tax rate." Any large stockbroker will offer trading in US securities. As a foreign national you will be required to register with the US tax authorities (IRS) by completing and filing a W-8BEN form and pay US withholding taxes on any dividend income you receive.  US dividends are paid net of withholding taxes, so you do not need to file a US tax return.  Capital gains are not subject to US taxes.  Also, each year you are holding US securities, you will receive a form from the IRS which you are required to complete and return. You will also be required to complete and file forms for each of the exchanges you wish to received market price data from. Trading will be restricted to US trading hours, which I believe is 6 hours ahead of Denmark for the New York markets.  You will simply submit an order to the desired market using your broker's online trading software or your broker's telephone dealing service. You can expect to pay significantly higher commissions for trading US securities when compared to domestic securities. You will also face potentially large foreign exchange fees when exchaning your funds from EUR to USD. All in all, you will probably be better off using your local market to trade US index or sector ETFs. All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset. I assume US as mhoran_psprep edited, although I'm not sure IRS necessarily means US. (It definitely used to also include Britain's Inland Revenue, but they changed.)  (US) Stockbrokers do not normally withhold on either dividends/interest/distributions or realized capital gains, especially since gains might be reduced or eliminated by later losses. (They can be required to apply backup withholding to dividends and interest; don't ask how I know :-) You are normally required to pay most of your tax during the year, defined as within 10% or $1000 whichever is more, by withholding and/or estimated payments. Thus if the tax on your income including your recent gain will exceed your withholding by 10% and $1000, you should either adjust your withholding or make an estimated payment or some combination, although even if you have a job the last week of December is too late for you to adjust withholding significantly, or even to make a timely estimated payment if 'earlier in the year' means in an earlier quarter as defined for tax (Jan-Mar, Apr-May, June-Aug, Sept-Dec). See https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes and for details its link to Publication 505. But a 'safe harbor' may apply since you say this is your first time to have capital gains. If you did not owe any income tax for last year (and were a citizen or resident), or (except very high earners) if you did owe tax and your withholding plus estimated payments this year is enough to pay last year's tax, you are exempt from the Form 2210 penalty and you have until the filing deadline (normally April 15 but this year April 18 due to weekend and holiday) to pay. The latter is likely if your job and therefore payroll income and withholding this year was the same or nearly the same as last year and there was no other big change other than the new capital gain. Also note that gains on investments held more than one year are classified as long-term and taxed at lower rates, which reduces the tax you will owe (all else equal) and thus the payments you need to make. But your wording 'bought and sold ... earlier this year' suggests your holding was not long-term, and short-term gains are taxed as 'ordinary' income. Added: if the state you live in has a state income tax similar considerations apply but to smaller amounts. TTBOMK all states tax capital gains (and other investment income, other than interest on exempt bonds), and don't necessarily give the lower rates for long-term gains. And all states I have lived in have 'must have withholding or estimated payments' rules generally similar to the Federal ones, though not identical.