
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, July 30, 1990                   TAG: 9007280013
SECTION: BUSINESS                    PAGE: A5   EDITION: METRO 
SOURCE: Mag Poff
DATELINE:                                 LENGTH: Medium

TRY THESE SOURCES IF INVESTING OVERSEAS

Q: I am interested in putting part of my savings in a bank account in Switzerland or Germany. I do not wish to go through an American investment company. Please tell me what reference source you'd recommend for getting names, addresses and ratings of financial soundness. Can you give me some idea of interest rates? Do these countries have some equivalent to F.D.I.C.? Which economy would you recommend for security in case of a serious global economic crisis? Am I correct in assuming that interest earned by that account would be liable to taxation by the government of that nation, but that the foreign tax credit provision on my U.S. 1040 means I wouldn't be hit with a double dose of taxes? Anything else I ought to know?

A: You can offset taxes paid to a foreign government by means of a credit on your 1040 tax return.

Tom Wong, who heads the international banking department at Dominion Bankshares, said you can even avoid that step if you invest in Canada. The new trade agreement between the United States and Canada eliminates that tax on each other's citizens.

He knows of no directory of foreign banks that is available to the public.

Dominion has a list of its own foreign correspondent banks. The German correspondents are Commerzbank, Deutsche Bank and Dresdner Bank of Frankfurt, HYPO Bank of Munich and National Bank of Essen. The Swiss are Credit Suisse, Swiss Bank Corp. and Union Bank of Switzerland, all of Zurich.

Wong said Switzerland and Germany are solid economically, but there are risks in investing overseas.

You can track the movement of interest rates yourself in a general way through the Wall Street Journal. It publishes the equivalent of prime in the United States for many countries overseas.

Prime is the rate charged borrowers, Wong said, and the amount paid to large depositors is generally about two points lower. Large deposits are at least $100,000 and more usually $1 million.

Recently, the Wall Street Journal quoted the prime in Switzerland at 10.88 percent and in Germany at 10.5 percent. So average depositors would earn about 8 percent, the same as they would in the United States.

Japan, no saver's haven, would pay depositors about 5 percent. Rates are higher in some countries where risks are much greater.

The problem for overseas investors, however, has nothing to do with the rates. Wong said the danger is in the currency exchange.

You pay a currency exchange commission going in and coming out. Currency swings, which are sometimes severe, could wipe out your interest earnings - or more. Conversely, a swing could give you a big gain. But it's a crap shoot.

A safe way for the average person to invest overseas, Wong said, is through a global mutual fund.

Most people would work through a bank or investment house, just as you must for most types of investments.

The Manhattan telephone yellow pages, however, list many overseas companies, ranging from Hongkong Bank to the United Bank of Kuwait, that do business in New York.

If you are determined to invest overseas you might look up the Union Bank of Switzerland, Swiss Bank Corp., Dresdner Bank or Deutsche Bank.

\ Cutting the 15

\ Q: In calculating an employee's SEP/IRA contribution, 15 percent of compensation may be deferred. Compensation is considered (1) amounts received for personal services; (2) earned income defined under Section 401(c)(2). Is "earned income" the gross compensation or compensation after expenses, business deductions, etc.?

A: The ceiling for a Simplified Employee Plan is 15 percent of net earnings, according to John Lauer, a certified public accountant with KPMG Peat Marwick in Roanoke.

He said Section 1402(a) of the tax code defines earned income as gross income less deductions attributable to the business.

The 15 percent applies after both the business expenses and the contribution. Lauer said this is a simultaneous equation that effectively sets the contribution ceiling at 13.0435 percent.

by CNB