How to Invest in US Mutual Funds for Non-US Residents

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Mutual funds are security investments in which investors with similar objectives pool assets together to have larger market leverage. Mutual funds are managed by investment firms around the world. U.S. investors have thousands of U.S.-based mutual funds to choose from. Those who are not residents may still invest in U.S. mutual funds and maintain accounts while in the US or from their home country. Non-residents may invest through domestic brokerage firms that allow it.

Things You'll Need

  • Form W-8BEN
  • Form 1040 NR
  • Passport or other valid ID
  • Find a domestic brokerage account that allows non-residents to invest in U.S. stock. Large firms such as Charles Schwab and E*Trade offer these services online but may have special requirements. You may also contact a brokerage firm in your area.

  • Open the account with the required documentation including a Form W-8BEN, copy of photo identification and a letter describing the purpose of your stay in the United States, if applicable.

  • Fund the account. If you are conducting a wire transfer from an international source, factor in the exchange rate to make sure you have enough to purchase the mutual fund.

  • Choose the mutual fund and purchase it.

  • File a non-resident tax return, which is IRS Form 1040NR. Non-residents in the country for less than 183 days pay no tax on portfolio interest, capital gains or bank interest. There is an automatic 30% tax on dividends and on all other interest not deemed bank or portfolio interest. Consult a tax advisor regarding your specific investments.

Tips & Warnings

  • Non-residents are not qualified for the foreign tax credit and can not file Form 1116 with taxes.
  • If you are in the country for more than the 183 days, you may be considered a resident alien and responsible for capital gain taxes.

References

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