Investing from outside of the US
Investing from outside of the US serves as introduction to the investment and taxation concerns of US and non-US citizens domiciled outside the US.
In most countries, the residency and domicile of the investor determines the applicable rules, but there are two notable exceptions to this: citizens of Eritrea and the US are taxed by their country independently of where they are domiciled.
In law, domicile is the status or attribution of being a lawful permanent resident in a particular jurisdiction. A person can remain domiciled in a jurisdiction even after they have left it, if they have maintained sufficient links with that jurisdiction or have not displayed an intention to leave permanently; that is, if that person has moved to a different state or country but has not yet decided to remain there indefinitely.
Most of the Bogleheads investment philosophy is universally applicable and hence the principles also apply if you live outside of the US assuming you take into account the local situation, rules and taxation. Please refer to the investing start-up kit for non-US investors for a first introduction.
The non-US domiciles section of the wiki concentrates on topics that apply to investors outside the US. Some of these topics will be entirely unfamiliar to US investors. Short topics are explained in this page itself. Larger topics are split out in separate pages.
There is a set of pages that guide the reader through the maze of investment choices, including choice of fund domicile and choice of currency.
Next to these generic pages, there are pages that give an overview of investing in specific countries. Some of these country pages contain sample portfolios or suggestions for exchange-traded funds (ETFs) or other investments for the specific country. While these can be taken to draft a first portfolio, it is good to post a question on the forum, as every country is different and the recommendation might change over time.
Taxation of your investments
Every country has its own tax legislation. Cross-border taxation may be determined by tax treaties between the countries. Depending on their situation, an individual investor can optimize their taxation. Sometimes countries allow investors to claim local tax credits for taxes paid in other countries, perhaps based on any applicable tax treaties.
Taxation as a US person living abroad
Investors who are US taxable persons (that is, US residents, US citizens or US green card holders) should start their journey with Taxation as a US person living abroad, as their situation is very specific.
Impact of US legislation on investors outside of the US (nonresident alien - NRA)
The US stock market is a large portion of the world equity market. This means that US legislation can have a large impact on investing from outside of the US. Nonresident alien taxation summarizes how a nonresident alien (NRA) is taxed when investing in US domiciled ETFs. Pay attention to US withholding taxes and US estate taxes.
Levels of taxation
Investors owning funds that hold securities are taxed at multiple levels.
- Level 1: Taxation by the home country of the security.
- Level 2: Taxation by the country where the fund is domiciled.
- Level 3: Taxation by the home country of the investor.
Kinds of taxation
Investors may face many different types of taxes on their investment, for example:
- tax on dividends received,
- tax on dividends accumulated inside a fund (and not received),
- tax on interest received,
- capital gains tax,
- wealth tax,
- transaction taxes (sometimes referred to as Tobin taxes),
- gift tax,
- inheritance tax, or estate tax,
- value-added tax,
- ... and so on.
They may also be subject to more than one overlapping tax regime. For example national taxes, local or regional taxes, city taxes, and foreign taxes levied by the country of source of income might all apply at the same time. Investors need to find an efficient way through this maze of taxes. This is often not straightforward.
Guidance and decision tables for non-US investors
- Nonresident alien investors and Ireland domiciled ETFs: This page describes why it is better for a nonresident alien with poor or no US tax treaty coverage to invest in Ireland domiciled exchange-traded funds (ETFs) instead of the popular US domiciled mutual funds discussed often by US-based investors.
- Non-US investor's guide to navigating US tax traps: US tax laws contain multiple traps for unwary non-US investors. This page contains a guide for non-US investors planning to use index tracker funds or ETFs, with the aim of helping these investors to avoid falling into US tax traps by navigating around, through, or between them.
- Nonresident alien's ETF domicile decision table: When selecting an index tracking fund, US nonresident alien investors have a broad choice between US domiciled ETFs and non-US domiciled ETFs. This page summarises the recommended ETF domicile that US nonresident aliens might use, based on their own country of residence and domicile. The goal is for investors to obtain the best tax result.
Investing start-up kit for non-US investors
This kit is designed to help you, a US nonresident alien investor, begin or improve your investing journey. Investing is a complex topic and can easily become overwhelming, but we are here to help! The start up kit will help you start your investing journey and navigate the steps.
Index funds and ETFs outside of the US
Index funds and ETFs were first created in the US and are now widely available outside of the US.
Depending on the domicile of the fund, it is subject to local legislation leading to local differences. Notable characteristics that are explained in the main article on index funds and ETFs outside of the US, are:
- Differences between accumulating (or capitalizing) and distributing ETF share classes
- Differences between base currency of the fund, trading currency of the fund, and currency of the underlying assets
- Securities lending
- Index tracking strategies: replication or synthetic
- Net total return and gross total return index
- Cost and expenses related to UCITS index funds and ETFs
For US citizens and green card holders, any funds or ETFs that are domiciled outside the US are subject to highly unfavourable US tax laws. Because of this, US taxable persons should generally hold only US domiciled funds and ETFs.
Safe withdrawal rates across the globe
There are several studies related to safe withdrawal rates across the globe:
- Wade Pfau: "Does International Diversification Improve Safe Withdrawal Rates?" and "Does The 4% Rule Work Around The World?".
- Portfolio charts: ""Withdrawal Rates FAQ" and "Your Home Country is Inseparable From Your Withdrawal Rate".
- The "Investing in the World" articles by Siamond on the Bogleheads blog, especially this table.
- "Accidental American § Taxation of non-residents". Wikipedia. https://en.wikipedia.org/wiki/Accidental_American#Taxation_of_non-residents. Retrieved March 17, 2019.
- "Market capitalization of listed domestic companies". The World Bank. https://data.worldbank.org/indicator/cm.mkt.lcap.cd. Retrieved March 19 2019.
- SPDR® ETFs Tax Reference Guide, 2013, by SPDR ETFs Europe, viewed June 19, 2015. This guide explains how distributing and accumulating (offshore) funds are taxed in Austria, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Switzerland. and in the UK in 2013. Reference: Bogleheads® forum post: , by forum member hafius500.