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I read that the estate tax for non-residents on their US assets can go up to 40% with the first $60000 tax exempt. Suppose, as a non-resident, I have a brokerage account holding US stocks with the Indian arm of a US broker. Will this account be subject to US estate tax laws or Indian estate tax laws for my beneficiary after I die?

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irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns

Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.

U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held the certificates abroad or registered the certificates in the name of a nominee.

So the answer is that my account will be subject to US estate tax laws.

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You will be subject to the laws of whichever country you are a tax resident of. Simply owning US stocks does not make you a tax resident of the United States. Normally, in order to be a tax resident of the United States, you have to live and work in the United States to be a tax resident here. The IRS has published guidelines to help determine US tax residency status.

Stocks in U.S. companies are considered "US-situated assets" no matter whether they are held by a foreign or domestic broker and are therefore subject to US estate taxes according to current law.

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  • I know I am a non-resident. For non-residents the US estate tax of ~40% applies after an exemption of $60000 unless there is an estate tax treaty - and there is none between India and the USA. irs.gov/individuals/international-taxpayers/… Jun 16 '20 at 10:31
  • If you think I am mistaken, please do point out the mistake and I will either modify or delete my answer. Jun 16 '20 at 10:37
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    @user2371765 You are right. I had no idea such a ridiculous law was in place. Obviously there would be difficulties enforcing such a law. Apparently the IRS does consider the estates of foreign persons taxable if they have US stocks in them. Jun 16 '20 at 15:06
  • It's extremely disappointing. Even India does not have estate tax. We have a saying which when literally translated into English means "Eating butter off a corpse's forehead". This is what the USA is doing through this law, and just because the person is non-resident. The IRS will surely find a way to get its pound of flesh because the broker is US-based. The IRS does not have any claim over non-US assets. Jun 16 '20 at 15:46

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