Overseas Stock Trading
Funderstone provides overseas stock trading services, connecting major markets around the world, including: China Connect, the United States, Canada, the United Kingdom, France, Germany, South Korea, Thailand, etc. Investors can grasp more global investment opportunities and diversify portfolio and currency risks.
Risks and Disclaimers Relating to Holding, Sale or Transfer (with consideration) of US Public Trade Partnerships Securities or their derivatives (hereafter referred to as "US PTP"
US Inland Revenue Service (“US IRS”) has announced to implement new provision s1446(a) and (f) of IRC Section effective from 1 January 2023 (settlement date, Sunday). It will have significant impact on the interest of Non-US Resident (“Foreign Persons”) investors who hold, sell or transfer (with consideration) of US PTP. Unless exceptions apply, they shall be subject to the following withholding taxes:-
1) Sale or transfer (with consideration) – Subject to a 10% withholding tax on GROSS sale transaction amount. It will be put under “ForeignExp” item on daily statement. This item includes other expenses or costs.
2) Certain Distribution (e.g. coupon, dividend or interest) – An additional 10% withholding tax if the distribution is classified as Excess of Cumulative Net Income (“ECNI”). Actually, the Section 1446(a) has been implemented, the tax rates are 37% (individual) or 21% (corporate and institutional customers). Since our accounts with US stock broker(s)/custodian(s) commingle assets of individuals, companies and institutional customers, they have applied 37% across-the-board.
What are PTP securities?
· US or non-US partnerships that are traded on securities markets or readily tradable on secondary market.
· Commonly referred to as Master Limited Partnerships (or MLPs).
· Though typically invests in natural resources (e.g. oil and gas) and real estate, but indeed includes widespread segments (e.g. currency / derivative-made /commodities-related ETFs).
Potential risks to customers include but not limit to:
· US PTP taxable product list (for your reference only) is non-exhaustive and may change at any time without prior notice. US IRS tax codes are mainly principle-driven, any securities falling into the principles are regarded but there are exceptions. Moreover, any announcements, orders, rules or updates of US IRS or Department of the Treasury, qualified notices of US PTP themselves, corporate actions that alter issuer’s securities classification and etc will change the universe and taxable income. However, neither an authoritative nor industry-adopted list is available. We primarily rely on information provided by our major US stock broker(s)/custodian(s), with additional external sources. The update may not be active or regular. Therefore, its accuracy, correctness, completeness or timeliness of the list are not verified or guaranteed.
· Reclassification, change or update of US PTPs, taxable income and/or exception after a transaction or settlement–If a securities or its income is subsequently classified as US PTP or taxable respectively, new/additional withholding tax amount is deducted from your account, customer has to settle in full and immediately. On the contrary, the adjustment is credited to your account. Several amendments are possible. Extra charges and costs (if any, e.g. interest, bank charges or operational costs) will completely fall on your shoulders. For financial intermediary customers, while you may act as an agent on behalf of your underlying clients, you are still liable to pay us any withholding tax in full and immediately.
· Tax on GROSS sale proceed or consideration – For example, 1 share is bought at $100, then sold at $130, the gain is reduced by $13 tax to $17 from $30. On the contrary, if it is sold at $90, the loss would exacerbate by $9 tax to $19 from $10.
· Funderstone Securities Holdings Limited and its subsidiaries (“Funderstone Group”) (hereinafter referred to as “The Group”) are not the specialist of US IRS’s tax codes. Please seek for independent advice from your US tax expert. Moreover, the Group is not liable to any loss or liabilities arising from the use of the information and/or holding, transacting or transfer of US PTPs. The Group will not notify any changes in the relevant laws and regulations on US PTP, but customers should pay attention to their own investment positions, the development of laws and regulations and understand their impact on their own rights. The Group reserves the rights to claim the withholding tax from you to satisfy IRS withholding requirements.
· The Group relies tax information, classifications/reclassification, items, amounts, adjustments and etc completely on our US stock brokers/custodians. We or these parties will not provide any explanation or tax service.
· To fully understand the impact and implication on your interest and liability, please be suggested to read thoroughly US IRS webpages, follow closely announcement and qualified notice of related US PTP issuers, announcement and updates by US IRS and US Department of The Treasury. US IRS web pages relating to US PTP
This brief statement cannot disclose all risks. You should therefore study carefully the Terms and Conditions for Trading Account on our website.