Investing in the US: What a Non-Resident Pays

Someone who invests in US shares from abroad tends to be surprised twice. The first, when they see that 30% of their dividends disappears before reaching the account. The second, when they discover that on the gain from selling those same shares they, as a rule, pay nothing to the United States. Both surprises are correct — and understanding why separates the informed investor from the one in the dark.

But there is a third thing, less discussed and more dangerous: there is a line that, if you cross it, flips the whole picture. You stop being the foreign investor of limited exposure and become someone the US treats as a taxpayer on worldwide income — with obligations that reach even your accounts back home. That line is crossed with no visa, no green card, simply by spending too much time on US soil.

This article explains what a non-resident actually pays when investing in the US, when they must file, and where the line that changes everything sits.

The starting point: you are a non-resident alien

For US tax, someone who lives abroad and invests in the US is a non-resident alien (NRA). Their US-source income splits into two categories, and the treatment of each is what matters.

Passive income (FDAP): dividends, interest, royalties. Taxed at a flat 30% on the gross amount, with no deduction of expenses, withheld at source by the broker. Countries with an income-tax treaty with the US usually have that rate reduced (to 15% on dividends, typically). Many countries have no income-tax treaty with the US. For them, there is no reduction: 30% on dividends is the rule and it stays.

Capital gains. Here is the favourable surprise. The gain on selling US shares and other securities, for an NRA present fewer than 183 days in the year, is generally not taxed by the US. The logic: the gain is attributed to the seller — to their tax residence — not to the country that issued the security. You owe no US tax on the gain from selling an Apple share.

There are two exceptions we cover separately: real estate in the US follows its own rules (FIRPTA and estate tax), covered in US property via an LLC; and having a company operating in the US shifts the income into another category, with implications we discuss in A US company and the balance sheet.

The role of the W-8BEN and the 1042-S

Two documents organise this relationship.

The W-8BEN is the form by which you certify to the broker that you are a non-resident alien. It is what secures the correct treatment and prevents undue withholding. An NRA files the W-8BEN, never the W-9 (that is for US persons). For someone from a country with no treaty, the W-8BEN certifies NRA status, but there is no reduced rate to claim: it does not bring down the 30% on dividends.

The 1042-S is the statement the broker issues reporting the income paid and the tax withheld — the non-resident’s equivalent of an income statement.

Do I have to file? Form 1040-NR

Not every foreign investor must file a US return.

As a rule, if your only US income is passive (dividends, interest) and the tax was correctly withheld at source, you do not need to file Form 1040-NR. The withholding closes the obligation.

The 1040-NR becomes necessary when there is effectively connected income (a US trade or business), when you need to claim a refund (for instance, after a property sale with FIRPTA withholding above the tax due), or when there is a treaty position to declare — which, without a treaty, rarely applies.

The US calendar follows the calendar year. The 1040-NR deadline is, as a rule, in April, extended to June for the NRA who received no wages subject to withholding, with an extension available to October.

The line that changes everything: the Substantial Presence Test

Now the most important point — and the one least mentioned in broker conversations.

You cease to be an NRA and become a US tax resident (taxed like a citizen, on worldwide income) if you meet the green-card test or the Substantial Presence Test (SPT). And the SPT is met by physical presence alone, with no special visa, no citizenship.

The SPT count considers your days on US soil over three years: all days in the current year, plus 1/3 of the prior year’s, plus 1/6 of the second prior year’s. If the sum reaches 183 days (and there are at least 31 in the current year), you are, for US tax, a resident that year.

What that means in practice is dramatic:

Your worldwide income becomes taxable in the US — not only the US-source portion. Your income at home, the profits of your structure, all of it enters.
Obligations to report foreign accounts arise: the FBAR (report of financial accounts outside the US) and Form 8938 (FATCA) now reach your home-country accounts.
The capital gain, previously exempt, becomes taxable under resident rules.

Someone who spends long stretches in Miami, adding up days year after year, can cross that line without realising it — and discover, too late, that the US now wants to know (and tax) their global wealth. It is the same day-counting logic that runs through tax residence, here with an even broader effect.

The other side: your country is still watching

Investing in the US does not switch off your home obligations. While you are a tax resident there, the returns on your US investments enter your local taxation; your position abroad may require reporting foreign assets; and your country receives data on your accounts through the automatic exchange of information.

And when relocation enters the picture, it all connects with the exit from tax residence: ceasing to be a resident of your country changes this side; crossing the SPT changes the other. The two calendars must be read together.

Frequently asked questions

Why is 30% of my US dividends withheld?

Because dividends are passive income (FDAP), taxed at 30% at source for non-residents. Treaty countries have a reduction; many countries do not.

Do I pay US tax on the gain from selling my shares?

As a rule, no, if you are present fewer than 183 days in the US in the year. Gains on securities are generally not taxed to a non-resident — the main exception is real estate (FIRPTA).

Must I file a US return (1040-NR)?

Generally, no, if your only US income is passive and already correctly withheld. The 1040-NR is required for US activity, a refund to claim, or a treaty position.

What is the Substantial Presence Test and why should I care?

It is the physical-presence test that, if met (183 days over the three-year count), makes you a US tax resident — with worldwide taxation and obligations like FBAR and FATCA. It is crossed simply by spending too much time in the US.

How to verify for yourself

Withholding on non-resident income and capital gains — the IRS page for international taxpayers and Publication 515.
Tax residence and the Substantial Presence Test — Publication 519 at the IRS.

If any figure or rule differs from the official source when you read it, the official source prevails.

Where to start

Investing in the US has a clear logic once you grasp the essentials: 30% on dividends, capital gains on shares generally free, and a line of physical presence that, crossed, changes the whole game. The costly error almost always comes from applying to yourself a rule that was the resident’s — or from ignoring that you have become one.

The right question is not “what does it yield.” It is “how is this investment taxed on both sides, and how many days in Miami am I from switching regime?” The answer depends on your calendar, your structure and what still ties you to home.

That is what our work in tax planning and tax residency is about: reading the two calendars together, before one surprises you.

One conversation is enough to know which side of the lines you are on.

Informational content. It does not constitute legal, tax, accounting or investment advice, nor an opinion on US law. The rules cited were verified against the official IRS sources indicated in July 2026 and may change. The day count and each case’s classification require individual analysis, with advisers in the United States and in your country.