Stock Markets Exposed

Foreign corporation engaged in trading in the US stock market for the benefit of its clients, how is it taxed?

If an established company in a foreign country and which is fully owned by foreigners, is in the business of trading in the US stock market under its name using money provided to it by its clients, how would such a company be taxed (if it is at all taxed) in the US, considering that foreigners trading in the US stock market are not considered to be conducting business in the US. I couldn't find any decent online tax consultation firms to ask, so yahoo answers was my best bet :) Greatly appreciate your help.

Public Comments

1. I do know if you are generating dividend income or capital gains from holding these stocks, you would have to complete form 1042-S which is used to report U.S. generated income by a foreign person. Depending on your country, there may be a mandatory withholding requirement on the income at a stated tax rate. I would read those instructions and it should guide you in the right direction on reporting requirements.
2. Without a great deal of reseach I would guess that the foreign corporation is doing business in the US by purchasing stock on behalf of clients. They also may need a Securities Licinse.
3. As long as company is not registered in the US there are no US tax implications. Only tax implications in the country it is registered in, and the country/ies it's clients are citizens of/living in. They don't need to be registered in the US stock market to trade stocks in US companies. Just like our stock brokers don't need to be registered in other countries to trade stocks of companies outside the US.