How to get started for NON-US Investing? [COSTA RICA]

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Topic Author
TicoRock
Posts: 3
Joined: Wed Mar 01, 2023 11:50 pm

How to get started for NON-US Investing? [COSTA RICA]

Post by TicoRock »

I'm trying to get into investing some of my savings and would like some guidance on how to get started. Some important details to know:

I plan to invest for retirement purposes basically. I'm below 30 and would like to retire around the age of 60 so I'm looking for long term investment options, also I plan to make investments every 3 to 6 months, mostly to avoid fees unless there is a way to minimize fees and automate monthly investments.

I think it's better if I divide my questions per topic:

Broker selection
I've read from other Costa Rican users that they decided to use IBKR, mostly due to the variety of products that we can access; however, I have some questions related to this decision.

How does TradeStation Global compare to IBKR? I've heard IBKR has a deduction of around 10$ each month if I don't make any movement, that means 20 or 50$ lost according to my investment frequency.

What do Banks in Costa Rica offer and is it any good? I've heard BAC offers some sort of bonds but I'm not sure if I should try to diversify there.

Money Transfer
Kind of a direct question but: How do people move money to the broker? Not sure if I can send it directly from my bank account and what sort of deductions would that imply. I've also heard NON-US residents use an application called "wire", is this useful for people on Costa Rica?

Products to look for
From other posts I've seen recommendations to use:
VWRA(securities) and AGGU(bonds) for accumulative options
VWRD(securities) and AGGG(bonds) for distributing options.
All of which are ETFs, is there a reason why I haven't seen Index Funds recommended?

In other places I've seen this two as well:
CSPX and VUAA which seem to track S&P500. Is there any reason why I haven't seen those mentioned here? Or is it just preference between World and USA?

Taxes
In short how do taxes work when it comes to this sort of things.
I've seen the $60000 number being thrown around in tax topics but I'm not sure what that means.
In the same sense, once I decide to sell or try to liquidate some of the bonds are there any taxes when bringing the money to a Costa Rica bank account? This might be something to think about many years in the future but I want to get an idea.

I'm not sure if I need to provide more information, please let me know if that is the case.
Thanks in advance!
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bojackHorseman
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by bojackHorseman »

TicoRock wrote: Thu Mar 02, 2023 12:35 am I'm trying to get into investing some of my savings and would like some guidance on how to get started. Some important details to know:
I'm also from Costa Rica, regarding your questions, here's my take.

IBKR is by far the most used broker for non us investors here in America and Europe, though Europe has more options. Costa Rica does have a few options but IBKR seems far the best cost, platform and support wise. IBKR DOES NOT ask you for a monthly fee, there is a thread around this forum in which it's discussed that this doesn't happen anymore, I have an account with a few months without even having put up a cent and they neither have charged me anything or closed it, but will use it soon.

Banks in Costa Rica might offer some cash parking possibilities CD's and such, but for funds I would prefer to just sticking simple with some ETF's domiciled on Ireland. Even the funds in Costa Rica are dubious look at BCR SAFI doesn't seem too good, nevertheless I'm not very knowledgeable about Costa Rican funds.

About money transfers just use a Wire Transfer, BAC I think charges around $30 as the minimum or more depending on what you send and it enables you to do it on the computer as far as I asked. BCR seems to be better, they use a formula that I have around but the minimum is $15 and unless you are gonna wire a lot of money each time it might increase, but it seems to be the best commission yet. I've also though about different ways to wire money but haven't found any and wire transfer is a secure and supported way, other things like Wise are seen on this forum but haven't found clear ways to do it for us or if it's even worth it than just keeping a simple wire transfer, not everything will be free.

About the products that you look for, they seem good, I've also thought about those and will be part of my portfolio, I prefer accumulative, but it's just preference, specially for Ticos. You have to look what it's worth for you on were you are gonna diversify or if you want to tilt to different sectors.

Using SP500 is OK, but on my personal opinion it's obviously US Centered and even though they look OK many Bogleheads like to keep it extremely simple and diversified, fire and forget, but it's a matter if you want to keep maintaining more funds and centered some around a country like the US. Also remember that an ETF is as an oversimplification an index fund just transformed into a different product and sold by shares.

About taxes, the $60K thing is the US Estate Tax, Costa Rica doesn't have a treaty for anything so you will get the full "benefits", beware of having more than $60K either parked at your US based broker or any asset that's from the US (ETF's, index funds, etc) that's why we use Ireland DOMICILED funds, since Ireland has a tax treaty with the US. We also have the 30% Witholding Tax Rate on dividends from US Assets since we don't have a treaty.

Costa Rica doesn't have global tax, so for the moment foreign income is not taxed, I'm not a lawyer nor accountant but AFAIK as I've asked investment advisors and around here, it doesn't seem so.

I recommend that you take a deep dive on https://www.bogleheads.org/wiki/Outline ... _domiciles, it has answers for your questions and more guidance, it doesn't mention Costa Rica but it does provide a huge amount of wealth for Non US Investors and it is indeed a great guide.

If you have more questions a more knowledgeable person is @galeno he is from CR and could provide you with some feedback.
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galeno
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by galeno »

My wife are sophisticated retired Costa Rican non-USA investors since the mid-1980s. We use IBKR and hold a simple 2 fund simple port of 54% VWRD + 44% AGGG + 2% CASH.

I agree 100% with @bojackHorseman.
KISS & STC.
Topic Author
TicoRock
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Joined: Wed Mar 01, 2023 11:50 pm

Re: How to get started for NON-US Investing? [COSTA RICA]

Post by TicoRock »

Thank you both for the information. I'll look into the link provided and will try to get started on this.

One last thing I didn't really get was the Tax comment:
Beware of having more than $60K either parked at your US based broker or any asset that's from the US (ETF's, index funds, etc)

When you say parked at a US based broker, does that mean cash on the IBKR account? Or does that mean having 60K on one of the ETFs I mentioned?

I believe the ones I mentioned are Ireland Domiciled so if I use any of those I can disregard this tax?
I'm trying to see if this tax will imply some sort of "constant watch" on the account to make sure something doesn't get to 60k, which is fine, but I want to know what is that something.
TedSwippet
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by TedSwippet »

TicoRock wrote: Tue Mar 07, 2023 10:14 pm I'm trying to see if this tax will imply some sort of "constant watch" on the account to make sure something doesn't get to 60k, which is fine, but I want to know what is that something.
The something is 'US situs' assets. Predictably, the US's definition of 'US situs' is unintuitive and illogical. For non-US investors such as yourself though, it would typically include US stocks, US domiciled funds and ETFs, and a cash holding at a US broker, but exclude non-US stocks and non-US domiciled funds.

So in practice, if you hold only Ireland domiciled ETFs as planned, all you need to do is to make sure your cash balance at IBKR never exceeds $60,000.

Full details in the wiki (be sure to look at its footnotes and references):

Nonresident alien taxation - Bogleheads
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galeno
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by galeno »

FDIC US bank accounts and CDs do not count in the $60k limit.

Neither do directly owned US Treasuries (bills, notes, or bonds).

I do NOT know if directly owned US coprorate bonds are considered "US assets".
KISS & STC.
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bojackHorseman
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by bojackHorseman »

TicoRock wrote: Thu Mar 02, 2023 12:35 am Money Transfer
Kind of a direct question but: How do people move money to the broker? Not sure if I can send it directly from my bank account and what sort of deductions would that imply. I've also heard NON-US residents use an application called "wire", is this useful for people on Costa Rica?
An update on the money transfer for Costa Ricans, I just wire to IBKR and got a few surprises. I sent $524 dollars from my USD account in BCR to IBKR CitiBank account, got charged by BCR $23 dollares, ($8 dollars SWIFT fees, BCR is moneyAmount * 0.35%, but minimum is $15). A few hours later IBKR credited me $499, IBKR seems to not charge any fees for deposits, though intermediary banks could have their cut, making the final costs of everything $48 for just a deposit, quite a bummer. I'm still trying to see if it's indeed some intermediary fees, though what's weird to me it's that Citibank is an intermediary for BCR so why charge fees when the final destination was the same Citibank.

IBKR just rolled out an easier way to transfer from Wise https://ibkr.info/article/4756, seems that Wise is supported in Costa Rica, so will try to find out more but if you do currency to currency transfer, it may be better than those $48 robbed all in fees.
pertheri
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by pertheri »

I have some friends in Latin America who are funding their IBKR through USDT which requires a couple of hops. I personally think it's too much work, but it might be worth it if you are transferring small sums.

1. Buy USDT, using Binance P2P for example.
2. Send it to Kraken.
3. Exchange USDT for EUR.
4. Withdraw the EUR to your Wise account using SEPA.
5. Send the EUR from Wise to IBKR using SEPA.
6. Exchange EUR for USD using IBKR forex market.
Last edited by pertheri on Mon May 01, 2023 9:57 am, edited 1 time in total.
Topic Author
TicoRock
Posts: 3
Joined: Wed Mar 01, 2023 11:50 pm

Re: How to get started for NON-US Investing? [COSTA RICA]

Post by TicoRock »

Thanks for all the answers so far!.

I'm about to open up the account and make a deposit but I have a curiosity. It seems there are many instances of IBKR like USA, UK, China based. Is there any important difference I should consider as a Costa Rican for that?

@bojackHorseman @galeno

Thanks in advance!
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bojackHorseman
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by bojackHorseman »

TicoRock wrote: Sun Apr 30, 2023 6:18 pm Thanks for all the answers so far!.

I'm about to open up the account and make a deposit but I have a curiosity. It seems there are many instances of IBKR like USA, UK, China based. Is there any important difference I should consider as a Costa Rican for that?

@bojackHorseman @galeno

Thanks in advance!
Sorry I wasn't checking the forum these days, I suggest to use the quote function so that the user does get a notification.

IBKR is mostly US based so cash on that account would technically be an US asset, liable to US Estate Tax. As far as IBKR entities, I don't know if there will be implications from said countries that your account may be in, I've seen that IBKR is almost all US, the fact that the domains have .eu or .uk doesn't mean anything since I can login on any of them and my account is US based, I would ask support chat for that, but I wouldn't worry too much as long as you play the Ireland game of buying ETF's from there or another country with similar conditions. Even if the broker was outside the US, buying US Assets will always have the tax disadvantage no matter where it is based.
Cartago
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by Cartago »

Have anybody used XTb broker, recommendation? I see a zero cost cash deposit from Banco Nacional de Costa Rica. Which caught my eye. Please advice on XTb
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happyisland
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by happyisland »

pertheri wrote: Mon Mar 20, 2023 2:55 pm I have some friends in Latin America who are funding their IBKR through USDT which requires a couple of hops. I personally think it's too much work, but it might be worth it if you are transferring small sums.

1. Buy USDT, using Binance P2P for example.
2. Send it to Kraken.
3. Exchange USDT for EUR.
4. Withdraw the EUR to your Wise account using SEPA.
5. Send the EUR from Wise to IBKR using SEPA.
6. Exchange EUR for USD using IBKR forex market.
This does NOT sound like a good idea to me. The forum has banned discussions of crypto, but the shakiness of Binance and Tether are often discussed in other places. I wouldn't touch either with a ten foot pole, even for just briefly moving money from one place to another.
pertheri
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Re: How to get started for NON-US Investing? [COSTA RICA]

Post by pertheri »

The discussion was not about investing in crypto :). I was just sharing a path that some people have used. Binance/USDT was just an example, there are many options out there.

If I were trying to invest somewhere between $100-$200/mo, I would follow this path and pay less than $10 vs using a wire which can start at $25.

If I were investing larger amounts then I'd go traditional.
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