# German citizen moving to the US, what do I tell a stock broker regarding my tax residence?



## lzr (Dec 22, 2020)

I expect to move to the US for work in January 2021 on a non-immigrant O-1 visa. I am a German citizen, currently living in Germany and taxed in Germany. I expect to stay in the US until at least 2022. I would like to sign up with a US broker for my investments once I am there, but I am confused regarding what I should tell them about my tax situation.

What I understand at this point:

For the 2021 tax declaration, I will be considered a US resident for tax purposes, starting the day that I arrive in the US. This is assuming I do stay in the US through 2021.
But to be considered a US resident for tax purposes, I need to pass the substantial presence test, which will happen in July 2021.
So if I understand it correctly, I cannot declare myself a US tax resident until that point July 2021. After all, I could always change my mind and leave before July, never establishing substantial presence.
When signing up for a US broker, what tax residence should I list? Germany? If I see the above correctly, it cannot be the US until July.
As far as I understand it, Germany won't legally consider me a tax resident once I leave (I will let authorities know about me leaving), so they only care about my income sourced from Germany
If I get past that step, what do I do when they want me to fill out the form W-8 or W-9?
Or do I have it all wrong and does the US-Germany tax treaty make me a US tax resident from the start?
Ironically, the actual tax situation seems straightforward. No income while living in Germany, no Germany sourced income while living in the US, and ultimately I will be a US tax resident whenever I make any money. It is just the initial state before I pass the substantial presence test that seems ambiguous.


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## 255 (Sep 8, 2018)

Izr -- In order to work in the U.S., you'll need to apply for a U.S. Social Security Number (in certain circumstances, you could alternatively apply for an Individual Taxpayer Identification Number.) With your SSN or ITIN and a U.S. address, you'll be able to apply for a U.S. brokerage account. Your tax filings are a totally separate issue to obtaining a brokerage account. A W-9 filing, as a U.S. resident, will be part of your brokerage firm application forms. You'll be a U.S. resident for all practical purposes from day one of your arrival. A U.S. brokerage is required to take a "snap-shot" of your current situation as part of their "know your customer" rules. They will not be delving into tax treaties and they will take a new "snap-short" of your situation annually. If you subsequently return to Germany, and want to keep your account (if they will let you,) you'll need to notify your brokerage of your changed situation and if they are doing business with non-U.S. residents, they'll require you to submit a new W-8. Cheers, 255


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## Nononymous (Jul 12, 2011)

If you really only plan to spend a year or two in the US, two things to consider:

You may have difficulty keeping those US investments once you leave and become non-resident. Perhaps discuss these plans with the broker before signing on.

If you return to Germany, there will be tax implications if you keep US investments. Unless of course you are planning to do an Uli Hoeneß, but we know how that ended for him.


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## lzr (Dec 22, 2020)

Thanks, 255, I think your response makes a lot of sense.



Nononymous said:


> If you really only plan to spend a year or two in the US, two things to consider:
> 
> You may have difficulty keeping those US investments once you leave and become non-resident. Perhaps discuss these plans with the broker before signing on.
> 
> If you return to Germany, there will be tax implications if you keep US investments. Unless of course you are planning to do an Uli Hoeneß, but we know how that ended for him.


Thank you. Can you elaborate on the issues keeping the assets and taxes? So far, it seemed acceptable to me. I will have to change brokers and transfer the holdings to one that operates in the EU (just like I will have to change brokers now). All the holdings should be transferable except for the US ETFs that I cannot trade in the EU. But those all have EU equivalents. Tax wise, the US-Germany tax treaty says that realized profits are only taxable in the country where I am at the time of sale, so nothing terrible there. Maybe I missed something...


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## Nononymous (Jul 12, 2011)

lzr said:


> Thank you. Can you elaborate on the issues keeping the assets and taxes? So far, it seemed acceptable to me. I will have to change brokers and transfer the holdings to one that operates in the EU (just like I will have to change brokers now). All the holdings should be transferable except for the US ETFs that I cannot trade in the EU. But those all have EU equivalents. Tax wise, the US-Germany tax treaty says that realized profits are only taxable in the country where I am at the time of sale, so nothing terrible there. Maybe I missed something...


This is getting beyond my level of expertise. I assumed you were might attempt to keep the US investement in the US after returning to Germany. If you can simply transfer them without realizing a gain, that presumably solves the problem. I assume that the US would want you to pay capital gains tax before you leave, however.


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## JustLurking (Mar 25, 2015)

lzr said:


> I expect to move to the US for work in January 2021 on a non-immigrant O-1 visa. I am a German citizen, currently living in Germany and taxed in Germany. I expect to stay in the US until at least 2022. I would like to sign up with a US broker for my investments once I am there, ...


Just one added note, for consideration. The US offers tax-deferred accounts aimed at saving for retirement (IRA, 401k, and so on). And the usual advice for US investors is to use these accounts to the maximum, to mitigate US income taxes.

However, if you only plan to stay temporarily in the US, I'd recommend thinking very carefully about whether or not you should participate in these types of account. You cannot move them out of the US intact (most EU countries allow pensions to be transferred between them, but US pensions are entirely immobile), leaving you with the choice of either retaining these accounts over potentially decades, or taking early withdrawal and facing penalties for doing so that may well more than destroy any earlier tax and other advantages from using them.

Whether or not you should use an IRA or 401k depends on several factors. Your marginal federal and state tax rates, the size of any employer match, the amount of time you expect to spend in the US, the penalty for early withdrawal if you do not keep these US accounts on leaving the US, how any future residence country will treat the accounts if you do keep them, your exposure to US estate taxes (start at $60k for nonresident aliens in countries without a US estate tax treaty), and your general tolerance for US political risk emanating from a congress that is always ready to tax people who have no vote or voice in the US.


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## lzr (Dec 22, 2020)

Nononymous said:


> This is getting beyond my level of expertise. I assumed you were might attempt to keep the US investement in the US after returning to Germany. If you can simply transfer them without realizing a gain, that presumably solves the problem. I assume that the US would want you to pay capital gains tax before you leave, however.


Yes, transfer without selling should be no problem at all. I expect to get professional help for my taxes in both countries regardless though. Nothing I want to deal with.


JustLurking said:


> Just one added note, for consideration. The US offers tax-deferred accounts aimed at saving for retirement (IRA, 401k, and so on). And the usual advice for US investors is to use these accounts to the maximum, to mitigate US income taxes.
> 
> However, if you only plan to stay temporarily in the US, I'd recommend thinking very carefully about whether or not you should participate in these types of account. You cannot move them out of the US intact (most EU countries allow pensions to be transferred between them, but US pensions are entirely immobile), leaving you with the choice of either retaining these accounts over potentially decades, or taking early withdrawal and facing penalties for doing so that may well more than destroy any earlier tax and other advantages from using them.
> 
> Whether or not you should use an IRA or 401k depends on several factors. Your marginal federal and state tax rates, the size of any employer match, the amount of time you expect to spend in the US, the penalty for early withdrawal if you do not keep these US accounts on leaving the US, how any future residence country will treat the accounts if you do keep them, your exposure to US estate taxes (start at $60k for nonresident aliens in countries without a US estate tax treaty), and your general tolerance for US political risk emanating from a congress that is always ready to tax people who have no vote or voice in the US.


I get a generous employer match for the 401k, so I will most likely contribute to max that out. I am aware this will be inaccessible money for a long time, so I won't go beyond what I get matched and keep the rest in regular accounts. Thanks for pointing out potential tax implications, I will investigate this.


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