Can I Buy Stocks With an ITIN Number?

An Individual Taxpayer Identification Number (ITIN) is a nine-digit tax processing number issued by the Internal Revenue Service (IRS). It allows individuals who do not have, and are not eligible for, a Social Security Number (SSN) to comply with U.S. tax laws. The ITIN is solely for federal tax purposes and does not provide immigration status or work authorization.

Using an ITIN for Investment Accounts

Individuals holding an ITIN can generally open investment accounts and participate in the U.S. stock market. The ITIN functions as a tax identification number, crucial for reporting investment income to the IRS. This process is similar to how a Social Security Number operates for U.S. citizens and residents, enabling financial institutions to identify taxpayers and fulfill reporting obligations. The ITIN allows non-citizens or non-permanent residents without an SSN to access U.S. brokers and U.S.-listed financial instruments. Financial institutions, including brokerage firms, are mandated by law to obtain personal identification from account holders. This ensures compliance with regulations preventing tax evasion and other illicit financial activities.

Opening a Brokerage Account with an ITIN

Not all brokerage firms accept ITINs, so individuals seeking to open an account should research and confirm with specific brokers. Some major firms do accommodate ITIN holders. The process involves providing accurate documentation and information.

Brokerage firms typically require several documents from ITIN holders to open an account:
Proof of identity, such as a valid passport or a national identity card showing a photo, name, date of birth, and expiration date.
Proof of address, like a recent utility bill or bank statement displaying the applicant’s name and address.
The ITIN itself.

Form W-8BEN, “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals),” is used by non-U.S. investors. This form certifies an individual’s foreign status and is required by the brokerage firm for U.S. tax withholding compliance. Completing it involves providing personal details like name, country of residence, and the ITIN. It also allows individuals to claim tax treaty benefits, if applicable.

Tax Obligations for Non-U.S. Investors

Non-U.S. investors, typically classified as non-resident aliens for tax purposes, face specific U.S. tax obligations on income from U.S. stocks. Dividends from U.S. companies are generally subject to a 30% withholding tax, typically withheld by the brokerage firm before reaching the investor’s account.

Tax treaties between the U.S. and an investor’s country of residence can reduce this 30% withholding rate, sometimes to as low as 15% or even 0%. Form W-8BEN allows investors to certify foreign status and claim eligibility for these reduced rates under an applicable tax treaty. Without a properly completed W-8BEN, the full 30% withholding rate applies.

Non-resident aliens are generally exempt from U.S. capital gains tax on the sale of U.S. stocks, provided these gains are not effectively connected with a U.S. trade or business. An exception applies if an individual is present in the U.S. for 183 days or more during the tax year and their tax home has shifted to the U.S., in which case a 30% capital gains tax may be imposed. Understanding tax residency rules is important, and consulting with a tax professional can help clarify individual circumstances and ensure compliance with U.S. tax laws.