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Risk of Ruin by taxation - check your destination country's tax rules for options

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A little cautionary tale to those who might at some point be considering to move to another country and continue trading options - be sure to check the tax rules for options trading before you make the move, even if the country is well regarded.


Last year I made the move to Germany and became officially resident, only to find out that the tax laws had been changed a couple of years earlier to make options trading ruinously expensive. When it came time this January to file my taxes here, I discovered that I'm facing a tax bill of some several hundred percent on my trading profits from 2022, which fortunately were only modest. If it had been a good year this could have been ruinous but even so the tax is bill is still going to hurt quite a lot.


My tax advisor here (Steuerberater in German) advised me to leave the country. Another possibility apparently is to consider setting up a limited liability company (GmbH) as a vehicle through which to trade, since these regressive tax laws only apply to individuals and not companies. There is a Steadyoptions thread where these tax laws were discussed here. Here is a link to the accountants KPMG on the subject.

Edited by equus

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    • By equus
      Does anyone know if the gains from our options trades are also subject to no U.S. capital gains tax, if you are a Non Resident Alien (like many of us are, I think)?
      If you fall under the non-resident alien category and the only business you have in the U.S. is in investments (stocks, mutual funds, commodities) within a U.S. dollar-denominated brokerage firm or other agent, you are subject to the following tax guidelines. In terms of capital gains, non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm. This does not mean, however, that you can trade tax free - you will likely need to pay capital gains tax in your country of origin. In terms of dividends, non-resident aliens face a dividend tax rate of 30% on dividends paid out by U.S. companies. However, they are excluded from this tax if the dividends are paid by foreign companies or are interest-related dividends or short-term capital gain dividends. This 30% rate can also be lower depending on the treaty between your home country and the U.S., so it is important that you contact your brokerage firm to verify the rate.
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