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I am a U.S. citizen, living in the United States. I am interested in buying shares of a company that is traded on the London Stock Exchange, but not in the US (including as an ADR). I've tried researching what the tax consequences would be, but all the articles I find are about US citizens buying/selling foreign stocks while living in different countries or non-US citizens buying/selling stocks while in the US.

My brokerage firm is Fidelity, and they allow international trading. The stock that I want to purchase is listed in Fidelity once international trading is approved so I would buy/sell the stock through my current brokerage account with Fidelity.

Question: Does anyone in this community have experience or knowledge with how the taxes in this situation would work? Would I have to pay regular capital gains tax just to the U.S. or both the U.S. and U.K.?

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  • To be clear, what matters is where the company is domiciled, not where the shares trade. Most things that trade on LSE (or only on LSE) are British, but they don't have to be. – dave_thompson_085 Feb 10 at 6:22
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I'm an American and I own a few stocks in foreign companies. Not the UK but one in Canada, one in Sweden, and one in Israel.

Every year the broker sends me a 1099 that says how much tax they paid to these countries in my name. I can then take a credit for these taxes from my US income taxes. I could look up what line on what form, but the tax software I use has a box to type it in and so I do and presumably they then put it in the right place on the forms.

So yes, you will pay foreign taxes. But then you get a credit for this on your US taxes so you end up paying the same as if it had been an American company.

Let me add that I have a total of about $3,000 in these foreign stocks. My foreign taxes on them each year have been like $2 or $3. I don't know if the rules change when you are talking serious money, like if you had a million dollars in some foreign stock.

They also ask if you have more than some percentage in any foreign company, I forget the number. My stock holdings are a tiny fraction of a percent of any company I have stock in -- I have a ways to go before I have a controlling interest in a billion dollar company :-) -- so I don't know what difference this makes.

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    That should be on the 1099-DIV form or section specifically, and is for dividends, which normally are taxed in the country of the company, and sometimes also in the country of the shareholder. The Q is about capital gains, which are normally taxed in the country of the (former)_shareholder_ (only). – dave_thompson_085 Feb 10 at 6:20

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