Corporate bonds charges

[tmkedmw]

What will happen if that guy got all 5 lots allocated but he can only pay for one lot?

Normally the brokerage/bank gets allocated a certain amt out of the total issue. This amt is then distributed to their clients, ie say their clients bid for $50mil in total and the brokerage only gets $3mil allocation, brokerage will split the $3mil amongst the clients who had placed their bids in a manner that they deemed fit. If one particular client doesn't want to take up his allocation in full, the broker can help to ask if other clients want to take that up.

However, it is very unlikely that a client gets full allocation unless the issue is undersubscribed.

It is also very true that you are invited in the morning and have to indicate your bid by afternoon.

 

[homer123]

I never leverage with my bond purchase but I believe you are allow to use margin to buy bond in IB. Go and check with them.

There is no withholding tax for US corporate bonds.

Possible to leverage ? If yes , can share the cost?

Also, how about withholding taxes ?

 

[BBCWatcher]

There is no withholding tax for US corporate bonds.

I'm finding quite a bit of information suggesting the opposite, unless the bond qualifies for something called the "portfolio interest" exemption, defined in IRS Publication 519. "It depends," in other words. It's too aggressive to make a blanket statement like that.

Please note that, even if tax is not properly withheld, any tax owed is still owed. If withholding did not properly occur then a late payment penalty and interest may apply. There are a few occasions when tax withholding and tax owed might not be the same numbers, and that can happen in both directions (too much or too little tax withheld). For example, a broker is not required to withhold U.S. estate tax from the distribution of a deceased non-resident alien's assets, but the estate tax is still legally owed, ordinarily within 9 months of the non-resident alien's death.

 

[homer123]

I'm finding quite a bit of information suggesting the opposite, unless the bond qualifies for something called the "portfolio interest" exemption, defined in IRS Publication 519. "It depends," in other words. It's too aggressive to make a blanket statement like that.

See my IB statement below.. no withholding tax on US Corporate bonds.. It has been that way since 10 years ago when I started using etrade to buy US bonds. I checked with my friend in HK who is using HSBC to buy US corporate bond, also no tax.. I have been doing research on withholding tax for many years with many non US investor who are also seeking a clarification on these topics...same conclusion.

 

[BBCWatcher]

Those bonds might very well qualify for the portfolio interest exemption. If so, that's fine -- your withholding (zero) is matching your tax obligation. Not all bonds qualify. Check IRS Publication 519 for the definition.

Again, to repeat, even if you are not subject to tax withholding you may still owe tax. Withholding is only an imperfect mechanism for tax payment. Your withholding might be more than, less than, or equal to your legal tax liability. You cannot simply say, "Oh, there's no withholding, therefore I owe no tax." It doesn't necessarily work that way. One common reason is that brokers sometimes make withholding mistakes.

 

[homer123]

Again, to repeat, even if you are not subject to tax withholding you may still owe tax. Withholding is only an imperfect mechanism for tax payment. Your withholding might be more than, less than, or equal to your legal tax liability. You cannot simply say, "Oh, there's no withholding, therefore I owe no tax." It doesn't necessarily work that way. One common reason is that brokers sometimes make withholding mistakes.

I can bet brokers are very carefully in US withholding taxes. There is no room in mistake here. Just like any banks in Spore who are concern whether their new customer is a US citizen or not . No financial institution want to mess with uncle sam when it comes to US taxes. As I told you I have used etrade and IB, they are not small broker ..ditto for my HK friend who is using HSBC to buy US corporate bonds. I have bought over 50 different US corporate bonds, there is no US withholding taxes ever. I would let everyone know if I ever buy a US corporate bond that is subject to withholding tax. As for now, I would rather believe in my own tax statement from my broker and banks

 

[sgdividends]

I can bet brokers are very carefully in US withholding taxes. There is no room in mistake here. Just like any banks in Spore who are concern whether their new customer is a US citizen or not . No financial institution want to mess with uncle sam when it comes to US taxes. As I told you I have used etrade and IB, they are not small broker ..ditto for my HK friend who is using HSBC to buy US corporate bonds. I have bought over 50 different US corporate bonds, there is no US withholding taxes ever. I would let everyone know if I ever buy a US corporate bond that is subject to withholding tax. As for now, I would rather believe in my own tax statement from my broker and banks

Good stuff thanks for sharing and also the print screen..I'm a very visual person and u made my day

 

[limpoop]

New bonds offer today, anyone buying? Should be around 3.80% final I think.

SEMBCORP INDUSTRIES PERP NC3 SGD AROUND 4.00%

 

[BBCWatcher]

I can bet brokers are very carefully in US withholding taxes.

Yet they err sometimes.

 

[homer123]

Yet they err sometimes.

Yeah.. with one or two transaction maybe .. but not with every monthly statement over 10 years. Any mistake in taxes will be corrected immediately. Penalty is stiff when financial institution mess up with US tax.. every year we see banks paying hundred of million to billion $ fine for screwing taxes with uncle sam.

Bank Julius Baer Hit With $547M Criminal Tax Evasion Penalty, Two ...
www.forbes.com/.../bank-julius-baer-hit-with-547m-criminal-tax-evasion-penalty-two...
Feb 4, 2016 - Bank Julius Baer of Switzerland will pay a $547 million penalty as two bankers individually plead guilty. The bank itself is charged with helping

Deutsche Bank to pay $95 million to end US tax fraud case -
www.cnbc.com/2017/.../deutsche-bank-to-pay-95-million-to-end-us-tax-fraud-case.ht...
Jan 4, 2017 - The German bank hid tax liabilities from the Internal Revenue Service in ... to recoup more than $190 million in taxes, penalties and interest.

Credit Suisse pleads guilty to criminal charges in US tax evasion
https://www.theguardian.com › Business › Credit Suisse
May 19, 2014 - Bank is first in more than a decade to admit to a crime in US and will pay more than $2.5bn in penalties.

U.S. slaps $1.3B in penalties on Swiss banks - USA Today
https://www.usatoday.com/story/money/2016/01/27/...penalties...banks/79399262/
Jan 27, 2016 - Along with paying the penalties, 80 Swiss banks agreed to cooperate ... Other tax evaders should come forward, said Acting Assistant Attorney ..

 

[BBCWatcher]

Those incidents are not the same as incorrect withholding. The penalties for inadvertent incorrect withholding are much less severe. Moreover, your personal tax liability (or lack thereof) is an entirely separate issue from whether tax was withheld correctly or not. In at least one common situation I can think of (U.S. estate tax) the broker has no tax withholding requirement, but the tax is still owed if it's owed.

The U.S. isn't like other countries that operate on a tax withholding strictly equals tax owed/paid. This is a very important point to understand, and I'm glad I have the opportunity to explain it.

 

[homer123]

US Corporate bond pay interest, if you are a US citizen, you paid that interest as part of your US income tax... but as a foreigner you don't pay US income tax and you are not liable for that interest earned from bonds. I have bought different kind of US financial products (stock, preferred, etf, CEF, ETD,bond,reit, ADR, business trust etc) to check if I am subject to withholding tax and I am confident what dividends/interests are subject to WHT. Go to any UK or Canadian investment forum, both countries are the largest foreign investor of US corporate bonds.. there are many topics on withholding taxes for their US corporate bonds investment..WHT is the most important concern for any non-US investors as it reduce your earning by 30%!

 

[BBCWatcher]

And I don't disagree, assuming your U.S. corporate bonds qualify for the portfolio interest exception. Most do.

But whether the broker withholds tax or not is immaterial -- it proves nothing when it comes to U.S. taxation. At most it's a clue as to what your tax liability might be, but it can only be that, at best. That's the important point I'm making, and I'm glad I have the chance to remind people of that important point.

 

[homer123]

Show me one US bond that is subject to WHT...otherwise you are just beating around the bush with all those mumbo jumbo on US taxes.

And I don't disagree, assuming your U.S. corporate bonds qualify for the portfolio interest exception. Most do.

But whether the broker withholds tax or not is immaterial -- it proves nothing when it comes to U.S. taxation. At most it's a clue as to what your tax liability might be, but it can only be that, at best. That's the important point I'm making, and I'm glad I have the chance to remind people of that important point.

 

[BBCWatcher]

Show me one US bond that is subject to WHT...

That's a trick question.

For non-U.S. persons, every U.S. federal government bond is subject to tax withholding. So are all private activity U.S. state and local government (or "government," since they're private activity) bonds.

 

[air_pork]

New bonds offer today, anyone buying? Should be around 3.80% final I think.

SEMBCORP INDUSTRIES PERP NC3 SGD AROUND 4.00%

Can buy ma?

Sent from HUAWEI MHA-L29 using GAGT

 

[homer123]

Reality is that there is no WHT for US corporate bond interest payment to foreigner.. It is reflected in our monthly and annual broker and banks statement for every non-US resident. Again, the banks and brokers have no reason to err on their client taxes.

That's a trick question.

For non-U.S. persons, every U.S. federal government bond is subject to tax withholding. So are all private activity U.S. state and local government (or "government," since they're private activity) bonds.