There are no citizenship restrictions on trading in the U.S. stock market. The stock market is open to anyone who wishes to participate, with certain limitations such as age and those with potential insider trading information. For non-citizens, the person’s status as a resident or a non-resident alien will affect taxes, but not whether or not the person is allowed to buy stock.
A non-resident alien is a person who has not lived in the United States for more than a total of 183 days during the three years prior to and including the tax reporting period. She must also have not had a green card at any time during the tax year being reported. For tax purposes, she must also have not been engaged in any other business or trade besides the buying and selling of securities in the United States during that period.
A resident alien is a citizen of a country other than the United States who has met one of two conditions for the calendar year for which he is filing taxes. The first condition is if he is a “lawful, permanent resident of the United States” for any amount of time. This usually means that he holds a green card, showing that he is an immigrant to the U.S. The second condition is if he has maintained a “substantial presence” in the United States during the period. This means that he has both lived in the U.S for at least 31 days of the year and that he has resided in the U.S. for a total of 183 days, including the current year.
Taxes on dividends or the sale of stocks for resident and non-resident aliens is treated differently. Non-resident income is subject to many rules and regulations having to do not only with the amounts of income but also the exact source of that income. Typically, non-resident aliens do not pay capital gains tax in the United States, but are subject to a 30 percent dividend tax. Resident aliens are required to pay the same taxes as U.S. citizens.
A non-citizen is able to buy stocks in the same manner as are U.S. citizens. One option is that he opens an international brokerage account, and then works with that broker, placing orders to buy and sell stock through a person at the brokerage. He may also open a brokerage account with an online broker in his country of residence and then handle his trading over the computer. A third option is for the trader to set up an individual account with each business whose stock he would like to trade, and work directly with each company. This method has many limitations, and the investor needs to find businesses willing to work directly with foreign investors.
- IRS.gov: How Income of Aliens Is Taxed
- IRS.gov: Foreign Persons
- Library of Economics and Liberty; Foreign Investment in the United States; Mack Ott
- Daniel Wiseman; E*Trade Customer Service; Jersey City, NJ