Interactive Brokers

Sharkman · 21 February 2016

bellenuit said:
I use a company for trading US equities through IB and I have been asked to resubmit my tax information as required by the US government from time to time. Everything seemed OK until I was asked to enter the details on form W-8BWN-E in line 5 "Chapter 4 Status (FATCA status) (Must check one box only unless otherwise indicated). (See instructions for details and complete the certification below for the entity's applicable status)."

As far as I can tell from reading the instructions linked to from the form (I must admit I understand little of what is being asked, but in previous years this section didn't apply to my company), I should not need to tick any of the boxes as I am not a financial institution. However, when I submit the form it doesn't continue to the next part but returns to the form with the error "Required" listed against that section. I'm stuck and can't proceed beyond that point and can only Logout.

Has anyone encountered this issue recently (it's a new form, previously from memory it was W8BEN). If so how did you answer that section. I don't want to tick any box just to proceed as I don't know what the implications would be and might end up in more difficulty trying to subsequently correct if wrong.

yep i'm in the same boat. i have no idea what section 5 means as it looks like US specific tax terminology, and i'm not totally sure about section 14 either. these sections must not have been part of the form when i initially set up my corporate trust IB account as everything else was auto-populated.

i'm going to call the IB Sydney office this week and ask them for help, i remember they were quite helpful several years ago when i was initially setting up the account so hopefully they'll be able to say exactly what should be ticked for aussie entities.

Sharkman · 22 February 2016

Sharkman said:
yep i'm in the same boat. i have no idea what section 5 means as it looks like US specific tax terminology, and i'm not totally sure about section 14 either. these sections must not have been part of the form when i initially set up my corporate trust IB account as everything else was auto-populated.

i'm going to call the IB Sydney office this week and ask them for help, i remember they were quite helpful several years ago when i was initially setting up the account so hopefully they'll be able to say exactly what should be ticked for aussie entities.

not much luck there, IB said they are not permitted to offer tax related advice, but that my corporate trust is "probably" a passive NFFE. looks like i'll have to waste time doing some annoying research into what these terms all mean, not sure i really want to guess and risk getting it wrong

bellenuit · 23 February 2016

Sir Burr said:
This one... https://www.irs.gov/pub/irs-pdf/fw8bene.pdf

Yes I had the exact same question recently for my SMSF and my accountant replied:

We advise you to select 'Nonreporting IGA FFI' and you may confirm with Interactive Broker directly.

I just ticked that and forgot about it but received another request from IB on Friday to do the same for my company account. Will probably tick the same

Looking through the options I think Passive NFFE is probably the most appropriate in my case (I have a company not an SMSF). I completed the form while on the phone to IB support. The IB person didn't offer any suggestions himself, but when I suggested that Passive NFFE was probably the most likely, he said to try it and see if it works, which I did (see my final paragraph below).

Non-Financial Foreign Entities (NFFEs), An NFFE is any non-US entity that is not treated as a Financial Institution. An NFFE will either be an Active NFFE or a Passive NFFE.

....

Criteria for determining an Active NFFE
An Active NFFE is defined as any NFFE that meets ONE of the following criteria:

• Less than 50 per cent of the NFFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50 per cent of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income.

From my understanding almost all my company's gross income (thus more than 50%) is passive income (see below), so I do not meet this criterium. Additionally none of the remaining conditions (see http://www.sucdenfinancial.com/media/229884/w8-ben-e-definitions.pdf ) seem applicable either, so as I do not meet the criteria for an Active NFFE, I must be a Passive NFFE.

Share trading income, interest, dividends etc. seem to come under the definition of Passive Income. These are a few items (rest and exceptions at the above link).

Passive Income
The term “passive income” means the portion of gross income that consists
of-
1. Dividends, including substitute dividend amounts;
2. Interest;
3. Income equivalent to interest, including substitute interest and amounts received
from or with respect to a pool of insurance contracts if the amounts received depend
in whole or part upon the performance of the pool;
4. Rents and royalties, other than rents and royalties derived in the active conduct of
a trade or business conducted, at least in part, by employees of the NFFE;
5. Annuities;
6. The excess of gains over losses from the sale or exchange of property that gives
rise to passive income described in items 1 to 5;
7. The excess of gains over losses from transactions (including futures, forwards,
and similar transactions) in any commodities, but not including””
(i) Any commodity hedging transaction described in section 954(c)(5)(A) of the U.S.
Revenue Code, determined by treating the entity as a controlled foreign corporation;
or
(ii) Active business gains or losses from the sale of commodities, but only if
substantially all the foreign entity’s commodities are property described in paragraph
(1), (2), or (8) of section 1221(a) of the U.S. Revenue Code;
8. The excess of foreign currency gains over foreign currency losses;

After ticking the Passive NFFE box and selecting Continue, I was asked to complete a new section. I can't remember the text, but I ticked the first two boxes (a and b from memory). I was then able to successfully complete the form. When I eventually got to Account Management, there was a Pending Item. "Organisation Info Change" with the status "under review". So I assume that means my changes will be checked for final acceptance.

Sir Burr · 23 February 2016

bellenuit said:
Looking through the options I think Passive NFFE is probably the most appropriate in my case (I have a company not an SMSF).

Yes I have both and tried doing the company last night but hit a snag.

I chose for the SMSF Part 1 - 5. Nonreporting IGA FFI and at Part XII - 26 I picked "Exempt Beneficial Owner - Retirement Plan" but with the company, not sure which to pick.

I've eSuper for SMSF (who said the non-reporting) but asked company accountant today who also said non-reporting is correct and to choose "sponsored closely held investment vehicle" for Part XII - 26.

Stuffed if I know!

Sir Burr · 23 February 2016

Sir Burr said:
Stuffed if I know!

Been reading as I haven't submitted mine yet.

Passive NFFE does seem more related to companies and the follow up questions make more sense (than the ones in the non-reporting).

Looks like this answers for both company and SMSF
http://www.macquarie.com.au/dafiles...latforms/wrap-tax/docs/w8ben-guide-entity.pdf

bellenuit · 23 February 2016

Sir Burr said:
Been reading as I haven't submitted mine yet.

Passive NFFE does seem more related to companies and the follow up questions make more sense (than the ones in the non-reporting).

Looks like this answers for both company and SMSF
http://www.macquarie.com.au/dafiles...latforms/wrap-tax/docs/w8ben-guide-entity.pdf

In retrospect I am wondering if for companies that trade rather than invest, the correct category might be Active NFFE rather than Passive NFFE. I had assumed that this item in the definition of passive income: 6. The excess of gains over losses from the sale or exchange of property that gives rise to passive income described in items 1 to 5; related to the sale of shares, but the use of the term "gains over losses" might imply gains/losses that are of a capital nature rather than income from trading. The word "passive" connotes to me that one is not actively involved in the derivation of the income (i.e. they are just investments), whereas a trader is actively involved. The Macquarie guide suggested Passive NFFE for companies in the example given, but as this seems to apply to companies that are invested in some type of Wrap Account, it might imply that Macquarie is the "active" income maker and the company (the beneficial owner) is just a passive investor.

I won't change my selection of Passive NFFE for the time being as I don't think it will have any effect regarding withholding. But when asked to do it again in a few years I might look further into it. For those of you who haven't yet filled out this form, perhaps you could temporarily check "active NFFE" and post here the additional questions that are asked in that case.

Sharkman · 23 February 2016

bellenuit said:
In retrospect I am wondering if for companies that trade rather than invest, the correct category might be Active NFFE rather than Passive NFFE. I had assumed that this item in the definition of passive income: 6. The excess of gains over losses from the sale or exchange of property that gives rise to passive income described in items 1 to 5; related to the sale of shares, but the use of the term "gains over losses" might imply gains/losses that are of a capital nature rather than income from trading. The word "passive" connotes to me that one is not actively involved in the derivation of the income (i.e. they are just investments), whereas a trader is actively involved. The Macquarie guide suggested Passive NFFE for companies in the example given, but as this seems to apply to companies that are invested in some type of Wrap Account, it might imply that Macquarie is the "active" income maker and the company (the beneficial owner) is just a passive investor.

I won't change my selection of Passive NFFE for the time being as I don't think it will have any effect regarding withholding. But when asked to do it again in a few years I might look further into it. For those of you who haven't yet filled out this form, perhaps you could temporarily check "active NFFE" and post here the additional questions that are asked in that case.

thanks for posting those definitions. by the sounds of it my account actually IS an active NFFE - about half my trust's income comes from collecting option premiums with the other half from dividends, but most of those dividends are from dividend stripping tactics where i either dump the stock within a few days of meeting the 45 day rule or sell covered calls over it and let it get called away on the next option expiry day.

just going to run it by my accountants first before i fill in anything, in case there are tax consequences based on what we fill in, but it looks like i will probably end up having to select active NFFE anyway.

phenrikand · 8 April 2016

Hi, I'm new to using Interactive Brokers in Australia. Are tax forms available in AUD? Or are the only things given statements in USD?

I'm mostly worried about the FX Income Worksheet, is this one also only available in USD? It must be a huge under taking to do a AUD FX Income worksheet from scratch?

I'm using USD as a base currency, but IB support indicated to be it doesn't matter - everything will still be USD even if I change to AUD as base currency - is this correct?

I hope one of you can shed some light on this! Thanks!

hamli · 23 April 2016

Interactive brokers is so "user unfriendly".

Rather than keeping things simple, such as:

Buy @ $1
Sell @ $1

They created some bull crap like:

Buy @ $1 = sell @ -$1
Sell @ $1 = buy @ -$1

Like what is the point of it? When I do a combo trade its never consistent, it sometimes comes up as Sell @ $1 and sometimes as buy @ -$1 and it confuses the **** out of me sometimes.

Just having a rant, because this is the 2 mistake I've made in 2 years, because of this and each mistake has cost me a grand -> rather than closing a position, I end up doubling up on a position at a very disadvantaged price and having to close it out a few seconds later for a 1k loss. This **** is just stupid.

Interactive brokers, get your crap together you are way behind TOS. The moment FX rates become a bit more reasonable, I'm out. FED UP.

joeno · 3 May 2016

Hey guys I've been using IB for a few years. Recently tried to deposit some $ and noticed I only have the option of using BPAY and another choice I can't remember. The wire transfer option seems to have disappeared.

Anyone know the problem? I have $3k stuck in limbo because IB is expecting me to add a notification when that option isn't available!

Sir Burr · 9 May 2016

Hi, I'm trading a EOD system (buy/sell at the open) through TWS and having a cash account can't place sell trades and then buy trades to replace those sold if capital is fully used.

I can place buys as soon as the sells are sold at ~10am ie: there is no T+3 or whatever.

Anyone know if it's possible through TWS to delay the "transmit" to say 10:10am please?

kefa · 10 May 2016

Sir Burr said:
Anyone know if it's possible through TWS to delay the "transmit" to say 10:10am please?

You can use "Good After Time" orders. However the only issue is that immediately after the opening auction the liquidity is very thin and spreads are wide.

freebird54 · 10 May 2016

joeno said:
Hey guys I've been using IB for a few years. Recently tried to deposit some $ and noticed I only have the option of using BPAY and another choice I can't remember. The wire transfer option seems to have disappeared.

Anyone know the problem? I have $3k stuck in limbo because IB is expecting me to add a notification when that option isn't available!

I took profits out today and used wire as usual

hawamahal · 11 May 2016

Question to people who are using IB Margin using a trust or company account.

What is the best way to set it up i.e. open a company and a family trust and the company acts as a trustee.

Any help is most appreciated. I am fed up of waiting for the so called "temporary suspension" of margin trading for Australian residents.

DaveDaGr8 · 11 May 2016

I am pretty sure a corporate trustee is THE only way to do it with IB, although i don't really understand why.

I had to jump through hurdles with IB. If you think setting up a trust and company is tricky, wait till you hit IB's paperwork. Even once it's all done, you STILL have to apply for a special circumstance to get margin, ie it's not automatic.

Good luck, it'll be worth it in the end

hamli · 11 May 2016

It wasn't difficult to set up, but takes a lot of waiting (government agencies were the longest wait, IB was relatively fast).

Depends on your financial situation. The two structures below will work:

Trust with company as trustee; OR
Company

One of the implications of doing either is that IB will consider you as a "professional" trader by default and you will get hit with the larger data fees (this is particularly evident if you also trade futures contract). Note that the margin rules do no apply to futures, so a way around it might be to have two IB accounts: one under individual for futures trading and one under company/trust for equity trading to significantly save on data fees.

Having said that, if you are comfortable in keeping money in USD, ThinkorSwim (TOS) is also a valid consideration. You will still need one of the legal structures above. Trading costs will be more expensive than IB, but cheaper than most other brokers, and you can negotiate reasonably lower rates than the standard. Platform is a lot more friendly to use. And you can have data fees waived, if you are an active trader I believe.

Good luck. I think it will be worth your time to try to get access to IB or TOS. I think in brokerage alone, I've already saved greater than $5K for the volume I trade YTD.

hawamahal · 16 May 2016

Thanks for the replies. Highly appreciated.

Sir Burr · 16 May 2016

kefa said:
You can use "Good After Time" orders. However the only issue is that immediately after the opening auction the liquidity is very thin and spreads are wide.

Thanks kefa, I just checked and can't transmit the GAT order as available cash does not cover the order (ie: I can't transmit until a stock is sold).

I "think" there are conditions that you can create. For example I may be able to create a condition "after selling stock A, buy stock B" but again not sure if TWS will accept this order either.

Any idea please, someone else come across this?
Might just have to be watching the screen when stock A is sold.

Gringotts Bank · 27 May 2016

Amazing new developments for their platforms. They really work hard with their updates.

joeno · 1 June 2016

Hi guys I've been buying some US stocks lately. Noticed there is a $2USD FOREX fee for each buy (in addition to commissions).

I tried to convert AUD to USD in bulk to avoid this repeated cost. However when I try to buy the USD in the FOREX section it says Australian law no longer allows this???

Can someone let me know if this is the case? Or perhaps I haven't followed the right steps. This additional fee is really annoying for small ST trades.

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