Citizenship is not required to trade stocks, as there are no laws against non-citizens trading U.S. securities. However, stock brokers and online trading sites can put conditions on your access to the market and will require some basic information -- as well as money -- to open an account.
To trade stocks, you need to open an account with a broker. Most big brokerages now allow you to trade online, but require an application before they will set up the account. A brokerage may also restrict access: E*Trade, for example, does not allow non-U.S. citizens to open accounts online, but will allow a non-citizen to apply through the mail. A broker will also ask for a Social Security number, a taxpayer identification number, or a W-8BEN if your residence is outside of the U.S.
Social Security Number
Your Social Security number is a basic identifier for the Internal Revenue Service. The IRS requires individuals filing a tax return to have a Social Security number. The agency also requires stock brokerages to get the number from their account-holders. The brokerage needs the number to file required reports on your account activity to the IRS. You don't need to be a citizen to get a Social Security number, but you must be a legal resident. If you need to file with the IRS and don't qualify for a Social Security number, then you should apply to the IRS for a Taxpayer Identification Number and use that for reporting purposes.
Non-Resident and Resident Tax Rules
The IRS will take an interest in your capital gains and dividends, whether or not you are a citizen. The agency classifies you as a non-resident if you have not been in the country for more than 183 days over the past three years. If your only business in the U.S. is trading securities, then you pay no capital gains tax. Your dividends are subject to a 30 percent rate, which does not apply if the dividend is paid out by a foreign company, or by an investment for interest income or short-term (held for under a year) capital gains. If you are a resident, according to the IRS (not immigration) guidelines, then you pay taxes on interest, dividends and capital gains at the same rates as a U.S. citizen.
Foreign Trading Account
If you are a non-citizen living outside the U.S., you will need to provide some basic information and forms if you want to open a U.S. brokerage account. These will usually include a copy of your passport (for basic identification) and IRS Form W-8BEN. The W-8BEN registers your account for the purpose of any required tax withholding by the brokerage. Your account will be subject to 30 percent "back-up withholding" on any income if you don't supply the form. It's an IRS rule, and no brokerage is exempt. You can also furnish Form 1001 if you believe you are exempt from withholding, by IRS rules.
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