In the process of moving from the US back home to the Philippines, I had to make certain arrangements with regard to my financial assets in the US. I maintained taxable equity accounts with Wealthfront and Robinhood, both of which do not cater to non-resident aliens. While I was a “resident alien for tax purposes” while I was living in the US, I am now properly classified as a non-resident alien after returning to the Philippines.
Many such brokerages in the US do not cater to non-resident aliens and even US citizens living abroad because there are a lot of regulations to comply with (FATCA, among others). Fortunately, the bigger online brokers like Charles Schwab, TD Ameritrade, and Interactive Brokers do make their services available to non-resident aliens.
There are pros and cons with each broker. For example, Interactive Brokers requires a minimum balance of $100,000 to avoid a $10 monthly fee if your trades don’t generate $10 commissions in a month. Interactive Brokers does make available certain non-US domiciled ETFs that are more tax-advantageous for residents of countries like the Philippines whose tax treaty with the US requires the broker to withhold 25% of dividends for US domiciled equities/funds.
I’ve decided to open account with Charles Schwab International and transfer my assets there. They have a minimum opening balance requirement of $25,000. I’m not quite sure what happens if the balance falls below $25,000.
Schwab requires a copy of your passport and proof of billing to open an account. An IRS Form W-8BEN is also required to properly establish your status as a non-resident alien and claim tax treaty benefits. Without a form W-8BEN all capital gains, dividends, and interest income will have a withholding tax rate of 30%. The US-Philippines tax treaty reduces the rate to 25% for dividends and 15% for interest income. No tax will be withheld from capital gains as long as you submit a proper form W-8BEN.
I transferred funds from my US bank account using ACH transfer. If I was transferring from the Philippines, I would have to use wire transfer.
One of the nice features of the Schwab account is that you can avail of their Visa debit/ATM card that allows you to withdraw from most ATMs. Any ATM fee will be refunded by Schwab every month. Schwab sent my ATM card by Fedex International Priority. I also requested checks for my account. I’ll explore if I can use these checks to deposit to a local US dollar account. Schwab sent the checkbook by postal mail. I had to go to the local post office and pay PHP 112 “postal handling fee” to claim the package.
Schwab recently reduced their trading commissions to $0 for stocks. That means buying and selling US equities and ETFs now costs nothing.
Key requirements for opening a Schwab One International Account
- Minimum opening deposit: $25,000
- Documentary requirements:
- Passport
- Proof of Billing
- IRS Form W-8BEN
- Used to claim Philippines Tax Treaty Benefits: 25% withholding for dividends, 15% withholding for interest
- Deposit money:
- Wire transfer
- ACH transfer from US bank account
- Withdraw money:
- ACH transfer from US bank account
- ATM/Debit card (ATM fees refunded)
for the charles schwab atm card, can you use that on philippine atm like bdo & bpi and the atm fee is waived by charles schwab? And when you said that equity trading has 0% commission , does that mean there are totally no other fees involved? simply put, 100 shares * $200= $20000. That is what is deducted from your account? how does charles schwab make money? thanks
Hi, I haven’t actually tried using it on a BPI and BDO ATM, since I have access to a fee-free HSBC ATM. As much as possible, I don’t want BPI and BDO to get any of their expensive ATM fees even if Schwab would give me a refund for the fees. I read somewhere of someone using a Schwab card in a BDO ATM, but for some reason, Schwab did not automatically detect the ATM fee to refund. In this case I think you can contact Schwab customer service and they’ll manually process the refund for you.
As for the commissions, Schwab itself no longer charges any commissions for stock trading. Buying 100 shares @ $200 each will deduct exactly $20,000 from your account. When you sell, however, there are small regulatory fees that brokers pass on to their customers. Currently, this is $20.70 for every $1,000,000 in sales for the SEC fee. So if you now sell your 100 shares @ $210 for gross proceeds of $21,000, Schwab will pass on the SEC fee of $0.43 to your account so you will net $20,999.57.
Schwab makes money from interest earned in their clients uninvested cash. They also make money from payment for order flow. See https://finance.yahoo.com/news/charles-schwab-cutting-brokerage-fees-190948237.html
Hi, thanks for this article. So informative! Is it ATM fee free for Schwab ATM in all HSBC ATMs in the Philippines? Have you encountered any difficulty liquidating assets thru Schwab? What if one passes before being able to liquidate the assets and close the account — how can your successors claim your assets? And how will they be taxed (ph & us)?
Hi,
I think local HSBC ATMs are, in general, fee-free, not just for Schwab cards. Other local bank ATMs will charge a fee, and Schwab should refund that fee back to your account.
I’ve encountered no issue with selling/liquidating stocks in my account. You can initiate a wire transfer from your account online, though I haven’t personally have had to perform such a transfer.
In case of death, I’m pretty sure Schwab has a process to transfer the account to the beneficiary (https://www.schwab.com/life-events/losing-a-loved-one). Note that the U.S. has an estate tax for non-resident aliens with no estate tax treaty. The first $60,000 of U.S.-situated assets in the account will not be subject to estate tax but the rest will be taxed according to a graduated tax table. (https://ambitiouspawn.com/how-to-pay-lower-us-taxes-on-us-investments-as-a-non-resident-alien-from-the-philippines/). Other brokers, like Interactive Brokers, will allow you to invest in non-U.S. situated assets such as Irish-domiciled ETFs that are not subject to the U.S. estate tax. (https://ambitiouspawn.com/best-international-broker-for-philippine-residents-charles-schwab-vs-interactive-brokers/). The Philippines has an estate tax of 6%.
-AP
Hi. I am planning to open a Schwab account. Wondering if I can get your referral code so we can earn the reward. Thanks vm
Hi. I assume you’re asking about this referral program https://www.schwab.com/public/schwab/nn/refer-client.html. Unfortunately, I think this is not available to international accounts. The terms and conditions say it “is available to U.S. residents only” and am I unable to generate any referral code from my international account.
hello there! thank you for the post. I opened an account in Ameritrade. I filled in the documents, there is only a postal address to sent it back, is this rhe case? dont they have an email address? Thank you
Thanks for an informative write-up. Just some clarification, does the Charles Schwab Brokerage Account essentially act as some sort of a bank account? I mean what happens after transferring $25K? Does it appear as an available money which can be spent buying stocks OR spent/withdrawn via their debit/atm card? Thanks!
It’s just like any other brokerage account, but with debit card access. The $25k you transfer will just appear as a cash position in your account. You can then use the cash to buy stocks. You can access the available cash using the debit card. The cash balance will also earn a tiny amount of interest per month. While it has bank account-like features, it’s still technically a brokerage account. While it’s not an FDIC-insured bank account, a Schwab brokerage account is insured by SIPC.
Hi! Thanks for the insightful post. Somehow, there are very few resources online on Philippine residents using Charles Schwab, glad to have stumbled on your site. I know this is from two years back but appreciate it nonetheless.
2 questions though:
a) I just finished applying for the One International account online, gave them the same stuff (passport, utility bill, and w8-ben) and immediately after, found myself logged in to my account already. Just wondering, do they actually email you informing you that your account is pending review, or is already active? Compared to IBKR and TD which both took days to be reviewed, logging in to my account seemed quite instant, and am not so sure if this means my account is already active or not.
b) My main reason opening an account with Charles Schwab is the convenience of having both debit cards and check access to my account. Did you have to request for the debit card and checks separately after opening the account? As ambiguous as my account status is at the moment, I was able to dig around while being logged on to my account, and saw that am currently not able to request for debit cards access.
Anyway, appreciate any feedback. Thanks again and keep safe!