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Old 10.01.2015, 02:16
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Taxes on US ETFs

Hello!
I thought of opening a brokerage account in the US because of the very low commissions and fees (I thought of going with TD Ameritrade which offers a good number of commission-free ETFs).

Basically my approach would be to buy and hold on a regular basis one or maybe a couple of ETFs like for example the Vanguard Total World Stock Index Fund ETF (VT - US9220427424).

Now my doubts are about CH taxes. I don't understand if what I described could be a problem, or at least disadvantageous from a tax point of view.
I read that this US ETFs are tax intransparent. What does that mean? Is that a problem?
I am sorry I cannot ask a precise question, but I don't fully understand the argument and I couldn't really find informations or explanations.

Maybe anyone with a similar situation or a better knowledge could be so kind and explain to me how this works or where to read about it?

Thank you!
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Old 10.01.2015, 02:31
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Re: Taxes on US ETFs

Excuse my ignorance.

What is an ETF?
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Old 10.01.2015, 11:46
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Re: Taxes on US ETFs

it means exchange-traded fund. it is a fund traded like a stock in the stock exchanges, managed passively, that aims to duplicate an index.
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Old 10.01.2015, 16:39
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Re: Taxes on US ETFs

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Hello!
I thought of opening a brokerage account in the US because of the very low commissions and fees (I thought of going with TD Ameritrade which offers a good number of commission-free ETFs).

Basically my approach would be to buy and hold on a regular basis one or maybe a couple of ETFs like for example the Vanguard Total World Stock Index Fund ETF (VT - US9220427424).

Now my doubts are about CH taxes. I don't understand if what I described could be a problem, or at least disadvantageous from a tax point of view.
I read that this US ETFs are tax intransparent. What does that mean? Is that a problem?
I am sorry I cannot ask a precise question, but I don't fully understand the argument and I couldn't really find informations or explanations.

Maybe anyone with a similar situation or a better knowledge could be so kind and explain to me how this works or where to read about it?

Thank you!
Unless there are any dividends payable, I don't think there will be any Swiss tax liability whatsoever.
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Old 10.01.2015, 17:02
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Thanks for taking part to the thread.
Actually there would be dividends. They are distributing etf...

And I am quite sure you would need to declare everything anyway as Vermögen (wealth) as you declare all your belongings like back accounts etc..

Last edited by 3Wishes; 10.01.2015 at 18:25. Reason: merging successive posts
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Old 10.01.2015, 18:24
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Re: Taxes on US ETFs

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And I am quite sure you would need to declare everything anyway as Vermögen (wealth) as you declare all your belongings like back accounts etc..
Yes you can do that if you want , TDA may withhold 15% tax on dividends, however you will get a form that shows takes deducted, this tax can be reclaimed as cash then you will pay the actual tax payable. In Zurich you can deduce 1/3% to manage your wealth which exceeds any wealth tax payable for the first 5 million or so IIRC.
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Old 10.01.2015, 21:54
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Re: Taxes on US ETFs

Thanks for the answer.. I'm slowly trying to put all pieces together... Do you know what intransparent fond means and how that would affect your gains?
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Old 11.01.2015, 00:28
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Re: Taxes on US ETFs

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Thanks for the answer.. I'm slowly trying to put all pieces together... Do you know what intransparent fond means and how that would affect your gains?
It has no relevance to a Swiss taxpayer, gains are not taxable. It's relative is to US taxpayers.
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Old 20.01.2015, 19:37
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Re: Taxes on US ETFs

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Yes you can do that if you want , TDA may withhold 15% tax on dividends, however you will get a form that shows takes deducted, this tax can be reclaimed as cash then you will pay the actual tax payable.
Hi again.
sorry can you explain again please?
because of the tax treaty benefits between us and switzerland, ameritrade will withhold 15% tax on dividends.

is this 15% lost or can i get that back somehow?
if so, it is not clear to me how and by whom. i mean is it ameritrade who has to pay it back?
sorry if it sounds dumb
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Old 20.01.2015, 19:40
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Re: Taxes on US ETFs

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Hi again.
sorry can you explain again please?
because of the tax treaty benefits between us and switzerland, ameritrade will withhold 15% tax on dividends.

is this 15% lost or can i get that back somehow?
if so, it is not clear to me how and by whom. i mean is it ameritrade who has to pay it back?
sorry if it sounds dumb
15% US withholding tax will be deducted.

If you fill in a tax return, you will get most / all of the 15% back, then pay tax normally on the income. The proportion of the 15% you get back in cash depends on your taxable income. The tax office will pay you the money.
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Old 20.01.2015, 21:12
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Re: Taxes on US ETFs

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If you fill in a tax return
is it the DA-1 form you are referring to?
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Old 20.01.2015, 21:32
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Re: Taxes on US ETFs

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is it the DA-1 form you are referring to?
Yes
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Old 20.01.2015, 21:55
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Re: Taxes on US ETFs

thank you very much for your help!! it's much clearer now.

do you have any experience with ETFs in particular?
it looks to me that the DA-1 form is for stocks but not ETFs.. can it be?
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Old 28.05.2015, 19:12
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Re: Taxes on US ETFs

Going through the same myself, and wondered if you ever decided for vanguard etfs (distributing dividends) or went instead for some accumulating etf due to tax reasons?

it seems the tax implication is somewhat minor, and i may well be at an advantage considering how much lower the fees for vanguard etfs are. (I plan to use Schwab, also for smaller broker fees; still need to find a cheap foreign exchange to make sure I won't be losing there as well)

the other issue I'd love to hear from you is regarding foreign exchange risk. In my case I believe that, as I will be buying entire market indexes the risk is small. Right now I plan to buy 50% US, 50% rest of the world, all at Vanguard.

(Anyhow I don't yet know in which currency/country I plan to retire on ... )
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Old 05.03.2016, 15:13
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Re: Taxes on US ETFs

Did you find any good cheap foreign exchange? I am also looking into opening an account at Schwab's or TD Ameritrade and trying to wrap my head around the tax-form thing. No idea in which currency I am going to retire
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Old 05.03.2016, 15:19
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Re: Taxes on US ETFs

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Did you find any good cheap foreign exchange? I am also looking into opening an account at Schwab's or TD Ameritrade and trying to wrap my head around the tax-form thing. No idea in which currency I am going to retire
I sent CHF directly to Schwab & they converted. The rate was pretty good.
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Old 05.03.2016, 15:25
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Re: Taxes on US ETFs

Thanks FMF. With your post in another thread you've also triggered my interest in fundsmith.

The good angel sitting on my left shoulder is telling me "don't get into an already overvalued mutual fund - you did this mistake way too often"
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Old 05.03.2016, 15:26
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Re: Taxes on US ETFs

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Did you find any good cheap foreign exchange? I am also looking into opening an account at Schwab's or TD Ameritrade and trying to wrap my head around the tax-form thing. No idea in which currency I am going to retire
At the moment I use currencyfair to transfer to TD Ameritrade. clear and convenient rates, very small fee for transfer (4$) but since they changed bank accounts last time i wired some money i incurred in intermediary fees for 27.50$. before it was 0!

But probably still convenient. Even though I am searching for a possible alternative

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Old 05.03.2016, 15:29
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Re: Taxes on US ETFs

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Thanks FMF. With your post in another thread you've also triggered my interest in fundsmith.

The good angel sitting on my left shoulder is telling me "don't get into an already overvalued mutual fund - you did this mistake way too often"
The stocks they hold are valued less than average FTSE 100 / S&P 500 company, so it's not overvalued relative to the market. If interest rates stay low for 5 / 10 / 15 years then todays valuations will look low.
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Old 05.03.2016, 19:22
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Re: Taxes on US ETFs

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Hello!
I thought of opening a brokerage account in the US because of the very low commissions and fees (I thought of going with TD Ameritrade which offers a good number of commission-free ETFs).

Basically my approach would be to buy and hold on a regular basis one or maybe a couple of ETFs like for example the Vanguard Total World Stock Index Fund ETF (VT - US9220427424).

Now my doubts are about CH taxes. I don't understand if what I described could be a problem, or at least disadvantageous from a tax point of view.
I read that this US ETFs are tax intransparent. What does that mean? Is that a problem?
I am sorry I cannot ask a precise question, but I don't fully understand the argument and I couldn't really find informations or explanations.

Maybe anyone with a similar situation or a better knowledge could be so kind and explain to me how this works or where to read about it?

Thank you!
I see this issue isn't a new one but tax transparent means that the fund does not pay any taxes - all tax liability is only born by the beneficial owners of the fund (i.e., you), thereby increasing the tax efficiency of the whole enterprise. Tax transparent is usually a good thing when it comes to funds.
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