The US stock market has been canonized by films like “The Big Short”, “The Wolf of Wall Street”, and even just “Wall Street”. Aside from its long-running movie career, the American Stock market is one of the most sought-after investment destinations. Companies like Apple, Microsoft, and Tesla (despite the actions of its founder) remain highly prized stock options, drawing in crowds from all over the world. Many investors seek exposure to the stability and long-term performance offered by US-listed assets.
This then begs the question: Can foreigners invest in US stocks legally? And if so, what steps must they take to do so?
We are happy to report that non-US residents can participate in the US stock market, and with the right knowledge and tools, this is less complicated than one might think. We will walk you through the legal requirements, as well as the benefits and risks of investing, how to get started, and what to look out for, especially if you are investing from Saudi Arabia or the wider Gulf region.
You can start investing now from the Gamma Asset Investment Platform
Can Foreigners Invest in US Stocks? Key Rules and Regulations
Yes, foreigners can invest in US stocks, even those living in Saudi Arabia. There are no laws that prohibit foreigners from investing in US-listed companies like Apple, Tesla, or Google, but there are a few legalities and tax-related steps to deal with before you can get started. We will review the requirements to get you started.
Step 1: Open an account with an international broker. You will need to open an account with a broker that accepts international or non-US investors. Some popular choices include Interactive Brokers, Saxo Bank, and eToro, all of which support international investors. When you register, you will need to provide the following:
- A valid form of ID (Passport or national ID)
- Proof of current residential address
- Other documents required for KYC (Know Your Customer) and anti-money laundering checks.
All of which are standard for most financial institutions, and to meet legal requirements
Step 2: Complete Form W-8BEN. This is a tax document for the IRS, confirming you are a non-US citizen, and to help determine how your income will be taxed. It is a non-negotiable; most brokers will help guide you through this process. Filling in the form:
- Prevents automatic 30% backup withholding
- Allows you to benefit from tax treaties (if available)
- It is valid for 3 years, after which you’ll need to renew it.
Step 3: Understanding Tax Withholding Rules. If you are to invest abroad, it is only reasonable that you have an understanding of how the US taxes apply.
- Dividends: Usually taxed at 30% unless reduced by a tax treaty
- Capital gains: Not normally taxed for non-residents unless it is linked to business activity in the US.
- Other investments: This might include certain partnerships or options. Other investments may involve additional rules, but most brokers will take care of this for you.
In most cases, it is why you have a broker, to ensure you are compliant. Brokers will issue you with an annual tax document showing you exactly how much was withheld; you can use this in your home country when filing your taxes.
Summary
| Step | What you need |
| Account Setup | Use a broker that accepts international clients and provides KYC checks |
| Form W-8BEN | Confirms you are a non-US investor and helps avoid excess tax |
| WIthholding | 30% on dividends (may be reduced); capital gains are usually tax-free |
| Tax Reporting | Broker issues forms like 1042-S annually for your records |
Why Foreigners Choose US-based Stock: Benefits and Risks to Know
Many of us will be drawn to the glitz and glam of the US stock market, with its large, innovative companies with a penchant for growth. Getting access to this market feels like entering the big leagues, which industry giants like Apple, Amazon, and Microsoft, to name a few. We just need to be careful that we are investing in companies that work for our goals and are not just drawn to a name. We must always weigh the benefits with the risks before jumping in.
Why Invest in US Stocks as a Foreigner?
- Global brand exposure: Many of these US companies operate globally, which makes them fairly stable but also familiar to international investors.
- High liquidity: The US market offers a vast array of investment opportunities, most with easy entry and exit.
- Diversification: Taking your investments abroad is a great way to diversify, especially if all your other investments are in your home country or region. This helps to spread the risk should one market experience a downturn.
For Saudi investors, investing in \us dollars can act as a hedge during currency fluctuations, especially when compared to keeping all assets in riyals.
Risks to Keep in Mind
- Currency exchange: Since US stocks are in USD, movements in the exchange rate between the dollar and riyal can impact your returns.
- Dividend tax withholding: Income is reduced by the automatic withholding of tax on dividends paid to foreign investors. Unless there is a tax treaty in place.
- Limited shareholder rights: Foreign investors, despite being shareholders, will be denied voting rights and will not have the same level of perks that US citizens have.
- Market volatility: The US market behaves the same as any other; it can experience downturns, and like in other countries, some sectors carry more risk.
Understanding these factors can help us answer the question, “Can foreigners invest in US stocks wisely and safely?” Yes, but the investor needs to go in with clear expectations.
How to Invest in US Stocks: A Step-by-Step Guide for Non-US Residents
Investing in the US as a foreigner is not a daunting or challenging as one might think. The steps are the same no matter what your, non-US nationality is. It is important that you choose the right platforms and complete the necessary paperwork to start investing. We have included a clear breakdown of the steps and actions one would need to take to begin investing.
| Step | Action | Details to know |
|
Select platforms that accept international investors | Options include Interactive Brokers, Saxo Bank, and eToro. Look for low fees, access to US markets, and strong customer support |
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Submit the required documents | Typically includes a passport or national ID and proof of address. Brokers may also ask for extra information to meet KYC rules. |
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Declare your non-US status for tax purposes | This IRS form helps reduce dividend tax withholding and is usually completed during the sign-up process. It is valid for 3 years. |
|
Deposit money in USD | You would need to convert your local currency to USD. Be careful of the currency conversion fees and exchange rate fluctuations. Some brokers offer multi-currency support. |
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Buy US Stocks, ETFs, or other assets | Begin with familiar companies, build a diversified portfolio, and invest gradually. Consider long-term goals and risk tolerance. |
A decent setup will allow foreigners to invest in US stocks smoothly and with full legal compliance.
Can Foreigners Invest in US Stocks Without Complex Tax Issues?
Tax is, quite rightly, a major concern for many international investors. Especially when one considers the complexities of the US tax system. Luckily, there is a specific set of tax rules for foreign shareholders. This is what you can expect.
Dividend Withholding Tax
When you earn dividends on US stocks, the IRS applies a 30% withholding tax on those earnings. Should your country have a tax treaty with the US, this rate might be reduced. Saudi Arabia does not currently have a tax treaty, so the full 30% is applicable. The listed countries that do have this treaty in place can be found on the IRS website. The tax will be deducted automatically by your broker, so you do not need to file anything with the IRS personally, unless u have other US income.
Capital Gains Tax
Capital gains are not usually applicable to foreign investors unless the gains are tied to a U.S.-based business or partnership. This makes the US market especially attractive for foreign long-term growth investors.
Form W-8BEN Again
As we have mentioned, by filling out the Form W-8BEN, you are confirming that you are not a US citizen or resident, which helps make sure that you are taxed correctly on dividends. If you do not complete this step, your broker might withhold tax at a high rate or restrict access to US markets.
Tax Documents You’ll Receive
Your broker will issue you a Form 1042-S annually, which will reflect the amount of US income you earned and the tax that was withheld. You may need this if you plan on claiming foreign tax credit in your home country.
With the proper paperwork in place, foreigners can invest in US stocks with relative ease, ensuring you have a decent broker would be paramount.
More topics can be read on the Gamma blog
Getting Started with Confidence: Top Stock Picks and Gamma Assets
Once you have set up all your accounts, filed the forms, and have an understanding of the basics, you are ready to get investing. The US market is huge, so many investors begin with well-known companies that offer a little stability and consistent performance.
Popular Picks for Foreign Investors
These are some of the commonly held US stocks by foreign investors.
| Apple (AAPL) | A global tech leader with a strong brand and steady growth. |
| Microsoft (MSFT) | Known for its cloud services and enterprise software |
| Johnson & Johnson (JNJ) | A solid healthcare pick with reliable dividends |
| Coca-Cola (KO) | A global consumer brand with a long dividend history |
| Alphabet (GOOGL) | The parent company of Google, strong in digital advertising and AI |
When you are starting, it is a wise decision to stick to companies you know and understand. Once you have a better feel of the foreign market, you can branch out.
How Gamma Asseta Can Support Your Investment Journey
If you are new to investing, Gamma Assets can be a wonderful tool to get you on the right track. With tools and great support, the whole process is approachable for new and seasoned investors. While Gamma Assets operates primarily in the real estate market, it would be a great choice to diversify your portfolio.
So can foreigners invest in US stock, well, yes. It is very accessible to foreign investors if you have done your homework and completed the steps and paperwork required.
FAQ
What are the legal requirements for Saudi residents to invest in the US stock market?
Saudi residents need to have a valid ID, proof of address, and must complete a W-8BEN form when registering with a broker that accepts international clients.
Which platforms or brokers facilitate US stock investments for individuals in Saudi Arabia?
Popular options include Interactive Brokers, Saxo Bank, and eToro. Some local banks also offer international trading through partnered platforms.
Are there any currency exchange considerations when investing in US stocks from Saudi Arabia?
Yes, you will need to convert SAR to USD, which may involve exchange fees. Fluctuations in the exchange rate can also affect your returns.
