Do Not Open an Account with an Overseas Broker; Do Not Use Sub-Brokerage

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1. If you are in Taiwan, once your assets grow, 00662 can be pledged for borrowing and capital use. Sub-brokerage cannot be used this way.

2. If you buy QQQ through a broker's sub-brokerage service, under the 2024 Alternative Minimum Tax rules, overseas income has a total exemption of NT$7,500,000 and a 20% tax rate. 00662 is not subject to capital gains tax.

When the money is small, tax is not a problem. When the money is large, tax becomes a major problem.

Investing in 00662 is not only about saving trading fees and commissions. Switching back to 00662 is mainly for convenience.

Taiwan's 00662 can be traded during Taiwan market hours. With sub-brokerage, you have to wait until the US market opens. Your execution price is also worse, because it goes through an overseas broker as well. Both the domestic and overseas brokers take a spread, so your price is effectively peeled twice without you noticing.

You also bear the exchange-rate loss between US dollars and Taiwan dollars. Sub-brokerage has many disadvantages and no real advantage. It also cannot be pledged. Securities-backed lending is the strongest financial tool; if you have the strongest tool and refuse to use it, why choose something with many drawbacks instead?

We Previously Discussed an Article About a Taxpayer Who Made NT$48 Million in US Stocks, Almost Gave It Back the Next Year, and Still Received Nearly NT$15 Million in Back Taxes and Penalties

So everyone should stop using sub-brokerage for stock investing and should not open overseas brokerage accounts.

We also firmly advise against opening accounts with US overseas brokers. Investing through US brokers creates not only Alternative Minimum Tax issues, but also estate tax issues. For non-US persons, US estate tax on US assets is 40%. If you pass away, it is very difficult for family members to cross the ocean and claim the estate in the United States. Many people eventually give up US estates because the process is difficult: many documents, lawyers, certifications, and total costs may exceed the assets.

Below is a recent news item:

National Taxation Bureau: Trading Gains and Losses Must Be Offset Within the Same Year

• Tax article: A taxpayer made NT$48 million from US stocks last year, almost gave it back the next year, and still received nearly NT$15 million in back taxes and penalties.

• Wang Ming-yuan, a pseudonym, traded US stocks through a domestic broker. In 2020 he made more than NT$48.08 million, based on the broker's statement.

The National Taxation Bureau of the Northern Area said he had not reported basic income, so it assessed more than NT$8.276 million in Alternative Minimum Tax and more than NT$6.62 million in penalties.

• The tax calculation: [(NT$48.08 million + comprehensive income net amount 0) - NT$6.7 million exemption] x 20% = NT$8.276 million basic tax.

• Wang's case was finalized later because he applied for review.

• He showed the tax bureau his 2021 brokerage statement, which showed losses of more than NT$40 million.

• He requested cross-year offsetting of gains and losses. With the NT$6.7 million exemption, he argued that his Alternative Minimum Tax should be only NT$276,000. The review was rejected.

National Taxation Bureau: trading gains and losses may only offset each other within the same year.

Taiwan Investors Really Should Not Use Sub-Brokerage; Performance May Not Be Better, and Tax Risk and Trouble Are Real

• Wang's review was rejected. Tax officials told him that overseas property transaction gains and losses may only offset each other within the same year, not across years.

• James's recommendation: do not switch to sub-brokerage. 00662 has also performed better than QQQ, so why create trouble for yourself?

• Taiwan investors really should not use sub-brokerage. Performance is not necessarily better, and there is tax risk and administrative trouble.