Foreign ownership of U.S. assets has grown significantly over the past 20 years as a result of more globalized financial markets.
How much Foreign Investment is in the U.S. Stock Market?
As of July 2019, foreign ownership of U.S. stocks totaled $7.7 trillion, a record high. This significant amount of investment can be contributed to the technology boom that is influencing financial markets. U.S. tech companies like Apple, Google, and Amazon draw a lot of foreign investment.
Do Foreign Investors Pay U.S. Taxes?
The U.S. tax ramifications differ depending on the investors status as a U.S. resident versus a Non-Resident Alien (“NRA”). The U.S. tax implication for NRAs are significantly more beneficial.
Generally, U.S. residents fall under the category of U.S. tax residents and pay tax on their worldwide income. This category includes green card holders and most visa holders.
On the other hand, NRAs only pay tax on income that is considered “U.S. source income.” So, if you are a foreign investor in a U.S. company that pays you a dividend, you must pay a 30% U.S. tax on the dividend income. However, capital gains from the sale of U.S. stocks are not subject to any U.S. tax liability.