Investors in Hong Kong, Singapore and across Asia hold more US stock than ever — Apple, Nvidia, US index funds. The United States mostly welcomes that money, and rewards it with a generous rule: no US tax on your capital gains. But two US taxes catch foreign investors off guard, and the second one is the kind that quietly destroys family wealth. If you are not a US person and you hold a meaningful amount of US shares, this is the article to read before you need it.
The good news first: no US capital gains tax
A non-resident alien (NRA) — someone who is neither a US citizen nor a US tax resident — generally pays no US tax on capital gains from selling US stocks. Buy Nvidia at 100, sell at 300, and the US takes nothing on the gain (your home country may tax it, but the US does not, unless you spend 183+ days a year in the US). This is exactly why US markets are so attractive to overseas investors.
The first bite: 30% withholding on dividends
US-source dividends are a different story. They are withheld at 30% at source, unless a tax treaty reduces the rate:
| Investor’s country | US dividend withholding |
|---|---|
| Canada | 15% (US–Canada treaty) |
| United Kingdom | 15% (treaty) |
| Hong Kong | 30% — no US tax treaty |
| Singapore | 30% — no US tax treaty |
So a Hong Kong or Singapore investor loses 30 cents of every US dividend dollar before it ever arrives. It is an annoyance rather than a catastrophe — and for growth-focused portfolios that pay little dividend, it is minor. (One common mitigation is holding US exposure through Irish-domiciled funds, where the fund itself is taxed at 15%; more on fund domicile below.)
The real danger: US estate tax of up to 40%
Here is the one almost nobody plans for. When a non-US person dies owning US-situs assets, the United States imposes estate tax on those assets — and an NRA receives an exemption of only US$60,000, against a rate scale that climbs to 40%. (A US citizen, by contrast, gets an exemption of around US$13.99 million in 2025. The gap is not a typo.)
Two facts make this brutal:
- US shares are “US-situs” no matter where you live or where your broker sits. Stock in a US company is US-situated property even if you are in Hong Kong, your account is with a Singapore or Swiss bank, and you have never set foot in America. US-domiciled ETFs and funds (VOO, SPY and the like) are caught too — even a “boring index fund” is US-situs.
- Only US$60,000 is exempt. Everything above that is exposed.
Worked example: a US$1,000,000 US stock portfolio
Take a Hong Kong resident (no estate-tax treaty) who dies holding US$1,000,000 of US shares:
| US-situs stock at death | Approximate US estate tax | Effective rate |
|---|---|---|
| US$60,000 | US$0 | 0% |
| US$500,000 | ~US$143,000 | ~29% |
| US$1,000,000 | ~US$333,000 | ~33% |
| US$3,000,000 | ~US$1,133,000 | ~38% |
That roughly US$333,000 bill on a US$1m portfolio is due within nine months of death, in US dollars, and a Form 706-NA must be filed. In practice, the US broker often freezes the account until the estate tax is cleared — so the family cannot even access the money to pay the tax without a scramble.
We have seen this play out in the worst way: people who died unexpectedly young — in their 40s, with no warning — whose US portfolios were cut by nearly 40% before anything reached their spouse and children. Death does not schedule itself, and the US estate tax does not care that it was sudden.
Why Hong Kong and Singapore investors are especially exposed
This is where your home country matters enormously. Some countries have a US estate tax treaty that replaces the tiny $60,000 exemption with a far larger one:
- Canada — the US–Canada treaty gives Canadian residents a pro-rated share of the full US exemption (around US$13.99 million in 2025), scaled to the US portion of their worldwide estate, plus a marital credit for transfers to a spouse. In plain terms: a Canadian whose worldwide estate is below that threshold generally owes little or no US estate tax on their US shares. For the great majority of Canadian investors, US estate tax is simply not a problem — the treaty takes it off the table.
- Japan — the US–Japan estate tax treaty provides a similar pro-rated credit.
- Hong Kong and Singapore — there is no US estate tax treaty at all. Their investors are stuck with the bare US$60,000 exemption and the full exposure above it.
That contrast is the whole game. A Canadian and a Hong Konger can hold the identical US$1,000,000 US portfolio, die on the same day, and the Canadian’s family may owe nothing while the Hong Konger’s family faces a bill north of US$300,000. For anyone in Hong Kong or Singapore with a substantial US portfolio, this is not a theoretical risk — it is the default outcome.
One more nuance worth knowing: cash in a US bank account is generally not US-situs for estate tax (bank deposits are specifically exempt), but the moment that cash is invested into US shares or US-domiciled funds, it becomes exposed.
How to plan around it
There is no single right answer — it depends on the size of the portfolio and your wider circumstances — but the main tools are:
- Hold the US stocks through a non-US holding company. Shares of a foreign company are not US-situs, so at death you own foreign-company shares, which fall outside US estate tax. This is the classic fix for substantial portfolios. The trade-off is real: you must set up and maintain a genuine company — annual filings, local accounting and compliance, and cost — and keep it from being a mere paper shell. The company also still suffers the 30% dividend withholding. It suits larger holdings where the compliance burden is worth the protection.
- Use non-US-domiciled funds. An Irish-domiciled ETF that holds US stocks is not US-situs for estate tax, and Ireland’s US treaty cuts the fund-level dividend withholding to 15%. For many ordinary investors this is a far simpler route than running a company.
- Gift during life. US stock is an intangible, and NRAs are not subject to US gift tax on gifts of intangibles (unlike US real estate). Lifetime gifting of US shares can therefore move value out of your estate free of US gift tax — powerful, but irreversible, so plan it carefully.
- Life insurance sized to cover the eventual estate tax, so the family has liquidity and never has to fire-sell the portfolio.
- Keep direct US-situs holdings modest if the amounts do not justify a structure.
Common questions
Do non-US investors pay US tax on capital gains from US stocks? Generally no. A non-resident alien pays no US tax on capital gains from selling US shares, unless they spend 183 or more days a year in the US. Your home country may still tax the gain.
Do Canadians pay US estate tax on US stocks? Usually little or none. The US–Canada tax treaty gives Canadian residents a pro-rated share of the full US estate tax exemption (~US$13.99 million in 2025), so a Canadian whose worldwide estate is below that level typically owes no US estate tax on their US portfolio. Hong Kong and Singapore residents have no such treaty and are exposed above just US$60,000.
How much US estate tax would a Hong Kong or Singapore investor owe on a US$1 million US stock portfolio? Roughly US$330,000, due within nine months of death and payable in US dollars, because only US$60,000 is exempt and rates reach 40%.
Are US ETFs like VOO or SPY subject to US estate tax for foreigners? Yes. US-domiciled funds and ETFs are US-situs assets, so they are caught just like individual US shares. Non-US-domiciled (e.g. Irish-domiciled) funds holding US stocks are generally not US-situs for estate tax.
Is cash in a US brokerage or bank account taxed the same way? US bank deposits are generally not US-situs for estate tax, but once that cash is invested in US shares or US-domiciled funds it becomes exposed.
The bottom line
For a non-US investor, US markets offer a genuine gift — tax-free capital gains. The 30% dividend haircut is a manageable cost. But the US estate tax is the real threat, and it is invisible until the worst possible moment. If you hold a substantial amount of US stocks and you are not a US person — especially in Hong Kong or Singapore, where no treaty softens the blow — get the structure right while you are well. It is one of the highest-value pieces of planning a cross-border investor can do, and it only works if it is done in advance.
