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Old 13.08.2016, 16:22
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Withholding tax on ETF

Consider the three scenarios:
  1. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSSPX) with a Swiss broker. The ETF is domiciled in Ireland and traded on the Swiss Exchange.
  2. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSPX) with an Irish broker. The ETF is domiciled in Ireland and traded on the London Exchange.
  3. A Swiss domiciled investor buys iShares Core S&P 500 ETF (IVV) with an American broker. The ETF is domiciled in USA and traded on the New York Exchange.

Questions:
  1. In case of dividend payout, what will be the withholding tax in each case?
  2. What decides which country's tax has to be paid? Is it the domicile of the fund, the trading place, or the investor?
  3. In each case, is it possible to get a refund of the tax?
  4. Does it make a difference if you buy an accumulating or distributing ETF?
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Old 14.08.2016, 12:49
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Re: Withholding tax on ETF

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Consider the three scenarios:
  1. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSSPX) with a Swiss broker. The ETF is domiciled in Ireland and traded on the Swiss Exchange.
  2. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSPX) with an Irish broker. The ETF is domiciled in Ireland and traded on the London Exchange.
  3. A Swiss domiciled investor buys iShares Core S&P 500 ETF (IVV) with an American broker. The ETF is domiciled in USA and traded on the New York Exchange.

Questions:
  1. In case of dividend payout, what will be the withholding tax in each case?
  2. What decides which country's tax has to be paid? Is it the domicile of the fund, the trading place, or the investor?
  3. In each case, is it possible to get a refund of the tax?
  4. Does it make a difference if you buy an accumulating or distributing ETF?
1) depends on if you have signed a W8 BEN form or not
2) Domicile of fund
3) Yes in full in CH assuming your earnings are relatively high, if you only earn about 25k a year in ZH, you will only get about half back.
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Old 15.08.2016, 18:54
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Re: Withholding tax on ETF

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1) depends on if you have signed a W8 BEN form or not
2) Domicile of fund
3) Yes in full in CH assuming your earnings are relatively high, if you only earn about 25k a year in ZH, you will only get about half back.
@1: So this form lets you get the American tax back. Do they always give back everything? You just fill it out?

@2: So if I buy an Ireland-domiciled ETF, Ireland will put a withholding tax on my dividends? And not Switzerland? There will be no double taxation? And is there a way to get the tax back from Ireland?

@3: You mean earnings from the stock market or salary? Because who earns 25k from salary? And why only a half back?
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Old 15.08.2016, 19:18
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Re: Withholding tax on ETF

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@1: So this form lets you get the American tax back. Do they always give back everything? You just fill it out?

@2: So if I buy an Ireland-domiciled ETF, Ireland will put a withholding tax on my dividends? And not Switzerland? There will be no double taxation? And is there a way to get the tax back from Ireland?

@3: You mean earnings from the stock market or salary? Because who earns 25k from salary? And why only a half back?
1) no the form allows for reduced withholding tax of 15%. Put it on a tax return for refund.
2) Switzerland has no control on anything in Ireland, UNLESS it's HELD by a Swiss institution.
3) Total taxable income, you need to look at the exact salary range where full withholding tax is not refunded. Because thats what they choose to do.

In Malta I only get full withholding tax credit if my local tax rate averages 15% or more.
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Old 16.08.2016, 18:41
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Re: Withholding tax on ETF

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1) no the form allows for reduced withholding tax of 15%. Put it on a tax return for refund.
Like, on a Swiss tax return form? An American tax?

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2) Switzerland has no control on anything in Ireland, UNLESS it's HELD by a Swiss institution.
"Held" meaning the broker? So if you keep Irish ETF by a Swiss broker, then what happens?

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3) Total taxable income, you need to look at the exact salary range where full withholding tax is not refunded. Because thats what they choose to do.

In Malta I only get full withholding tax credit if my local tax rate averages 15% or more.
And now comes Malta to confuse me even more . What is your relation with Malta?

What I'm trying to find out is pretty straightforward: Earning in CHF in Switzerland, in which country and in which currency should I keep my ETF's to minimize taxes, costs and paperwork?
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Old 16.08.2016, 22:24
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Re: Withholding tax on ETF

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Like, on a Swiss tax return form? An American tax?



"Held" meaning the broker? So if you keep Irish ETF by a Swiss broker, then what happens?



And now comes Malta to confuse me even more . What is your relation with Malta?

What I'm trying to find out is pretty straightforward: Earning in CHF in Switzerland, in which country and in which currency should I keep my ETF's to minimize taxes, costs and paperwork?
Yes a Swiss tax return

Held means the broker, a Swiss broker will withhold 30% for US withholding tax

I am now tax resident in Malta, where I am only liable to tax on income EARNEN or REMITTED to Malta, not world wide income or world wide capital gains although all gains can be remitted to Malta free of tax. The sun shines 300 days a year, the national language includes English, 13 amp plugs on the wall & the concept of shared washing machines does not exist.. When the snow falls I ski in Verbier & Chamonix for the winter.
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Old 16.08.2016, 22:50
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Re: Withholding tax on ETF

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The sun shines 300 days a year, the national language includes English, 13 amp plugs on the wall & the concept of shared washing machines does not exist.. When the snow falls I ski in Verbier & Chamonix for the winter.
That's a cool retirement spot. I will add it to my shortlist. The concept of shared washing machines is something I can't get over. Where I come from it is also unheard of, even though it's a far poorer country that Switzerland. I'm so used to it that I had to find an apartment that has a washing machine. And it always makes me laugh when I hear "I can't come today, because it's my laundry day on the schedule".

So getting back to the topic, what simple low-cost buy and hold arrangement would you recommend to a Swiss earner?
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Old 17.08.2016, 06:59
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Re: Withholding tax on ETF

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That's a cool retirement spot. I will add it to my shortlist. The concept of shared washing machines is something I can't get over. Where I come from it is also unheard of, even though it's a far poorer country that Switzerland. I'm so used to it that I had to find an apartment that has a washing machine. And it always makes me laugh when I hear "I can't come today, because it's my laundry day on the schedule".



So getting back to the topic, what simple low-cost buy and hold arrangement would you recommend to a Swiss earner?


Charles Schwab or any low cost US broker
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Old 30.12.2016, 14:57
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Re: Withholding tax on ETF

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Consider the three scenarios:
  1. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSSPX) with a Swiss broker. The ETF is domiciled in Ireland and traded on the Swiss Exchange.
  2. A Swiss domiciled investor buys iShares Core S&P 500 UCITS ETF (CSPX) with an Irish broker. The ETF is domiciled in Ireland and traded on the London Exchange.
  3. A Swiss domiciled investor buys iShares Core S&P 500 ETF (IVV) with an American broker. The ETF is domiciled in USA and traded on the New York Exchange.

Questions:
  1. In case of dividend payout, what will be the withholding tax in each case?
  2. What decides which country's tax has to be paid? Is it the domicile of the fund, the trading place, or the investor?
  3. In each case, is it possible to get a refund of the tax?
  4. Does it make a difference if you buy an accumulating or distributing ETF?
Be aware there is a 1% stamp duty on Irish share trades v 0.5% for UK v 0% for US. It makes Irish domiciled funds look worse value than UK assuming you don't want to hold US assets.
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Old 30.12.2016, 15:31
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Re: Withholding tax on ETF

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Be aware there is a 1% stamp duty on Irish share trades v 0.5% for UK v 0% for US. It makes Irish domiciled funds look worse value than UK assuming you don't want to hold US assets.
Stamp duty is not levied on ETF trades directly, rather the ETF ask price will reflect the stamp duty cost associated with buying the components of the ETF which attract the stamp duty fee.

So in this sense Irish domiciled ETFs make no difference in that sense.

I'd have to check further but the major domicile centres of most European ETFs are: Ireland, Luxembourg, Switzerland, France and Germany. It would be interesting to see a comparison table to see how these domicile countries compare in terms of tax efficiency but my guess is that they are all fairly similar.
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Old 30.12.2016, 15:46
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Re: Withholding tax on ETF

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Stamp duty is not levied on ETF trades directly, rather the ETF ask price will reflect the stamp duty cost associated with buying the components of the ETF which attract the stamp duty fee.

So in this sense Irish domiciled ETFs make no difference in that sense.

I'd have to check further but the major domicile centres of most European ETFs are: Ireland, Luxembourg, Switzerland, France and Germany. It would be interesting to see a comparison table to see how these domicile countries compare in terms of tax efficiency but my guess is that they are all fairly similar.
An EFT is traded on the open market, not bought & sold by the fund manager once a day so I am not convinced your correct.

EDIT, Irish EFT's are exempt from stamp duty when traded on the LSE.
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Old 30.12.2016, 15:52
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Re: Withholding tax on ETF

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An EFT is traded on the open market, not bought & sold by the fund manager once a day so I am not convinced your correct.
A simple test would be to buy an ETF domiciled in Ireland and test to see if any stamp duty is levied. I can provide some examples from different issuers, maybe someone who traded these ETFs can confirm for sure.

I'm 99.9% certain.

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EDIT, Irish EFT's are exempt from stamp duty when traded on the LSE.
I think it really doesn't matter where they are traded.

So as an extension to my simple test above, we might have to test buying / asking the different exchanges whether they levy any stamp duty on ETFs. I am not aware of any that do. (Maybe Swiss Stock Exchange, levies some transaction tax on ETFs? not sure)
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Old 30.12.2016, 16:47
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Re: Withholding tax on ETF

Found the following documents on Irish domiciled ETFs which might be useful as a future reference:

Deloitte note: here

Quote:

Irelandís attractiveness as an ETF domicile is due to several factors, including Irelandís extensive network of tax treaties with key jurisdictions worldwide which enables ETFs to access the double taxation treaties where the fund is demonstrated to be trading. In particular, Irish ETFís can benefit from the USA/Ireland double tax treaty which reduces withholding tax to zero on interest and 15% on dividends.

Irish funds, including ETFs, are not subject to Irish taxation on any income or gains realised from underlying investments.

They are also exempt from withholding tax. Similarly, no stamp duty regarding shares in an ETF, or on the underlying shares it holds (as long as those underlying shares are not issued by an Irish registered company, do not relate to Irish property). ETFs can also enjoy beneficial VAT exemptions.
A rehash of the same info from irishfunds.ie

Link: here


Another piece of information is regarding the VCC (Variable Capital Company) structure which a lot of these ETFs are set up as in Ireland.

Link: here


And finally a note on the ICAV (Irish Corporate Asset-management Vehicle) structure which is supposed to cater specifically for funds.

Link: here


A lot of the information in these documents is a bit of an over kill for a retail investor, and will probably make very little difference in the end as the ETF issuers will change the fund structures to take advantage of the latest tax efficiencies etc.

Last edited by The_Love_Doctor; 30.12.2016 at 17:05. Reason: added info from irishfunds.ie
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Old 30.12.2016, 18:46
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Re: Withholding tax on ETF

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I'd have to check further but the major domicile centres of most European ETFs are: Ireland, Luxembourg, Switzerland, France and Germany. It would be interesting to see a comparison table to see how these domicile countries compare in terms of tax efficiency but my guess is that they are all fairly similar.
This make no sense. The point of having these various domiciles is so that individual investors can optimise their tax situation not how efficient all of the locations are to you.

For instance an Irish resident would first for Switzerland, followed by Germany or France, never Ireland! And so on.
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Old 02.01.2017, 19:36
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Re: Withholding tax on ETF

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Be aware there is a 1% stamp duty on Irish share trades v 0.5% for UK v 0% for US. It makes Irish domiciled funds look worse value than UK assuming you don't want to hold US assets.
I don't know where this 1% comes from? This is the first time I hear about it. I have already purchased VUSA a few months ago, I paid the 0.15% Swiss stamp duty and that's it.

I think a good read in the topic of withholding tax is this:

https://www.bogleheads.org/wiki/Nonr...%26_Irish_ETFs
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Old 02.01.2017, 19:58
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Re: Withholding tax on ETF

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I don't know where this 1% comes from? This is the first time I hear about it. I have already purchased VUSA a few months ago, I paid the 0.15% Swiss stamp duty and that's it.

I think a good read in the topic of withholding tax is this:

https://www.bogleheads.org/wiki/Nonr...%26_Irish_ETFs
It looks like the stamp duty is 0% if bought in the UK, I will test this in the next few days.
I could benefit from 0% withholding tax, rather than the 15% I pay on US EFT's / Equities with a US Broker.
Thanks for the tip
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Old 03.01.2017, 20:52
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Re: Withholding tax on ETF

So my broker has booked my first dividends.





Why was withholding tax was charged for VEUR, but not for VUSA? Why exactly 20%? Can I expect any pending withholding tax or is this it? Will I be able to reclaim this 20%?

And one more question: how does the ETF's TER get paid? Will I get charged from my broker account at some point? Is this an annual payment?
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Old 03.01.2017, 20:55
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Re: Withholding tax on ETF

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So my broker has booked my first dividends.





Why was withholding tax was charged for VEUR, but not for VUSA? Why exactly 20%? Can I expect any pending withholding tax or is this it? Will I be able to reclaim this 20%?

And one more question: how does the ETF's TER get paid? Will I get charged from my broker account at some point? Is this an annual payment?
TER is usually deduced daily from the NAV.
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Old 03.01.2017, 21:22
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Re: Withholding tax on ETF

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TER is usually deduced daily from the NAV.
You mean the cost in included in the NAV? But that would mean the ETF would over time diverge from it's index, right? The same would go for taxes that the ETF itself has to pay, or? I would like to see a chart that would illustrate this.
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Old 03.01.2017, 21:25
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Re: Withholding tax on ETF

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You mean the cost in included in the NAV? But that would mean the ETF would over time diverge from it's index, right? The same would go for taxes that the ETF itself has to pay, or? I would like to see a chart that would illustrate this.
It's one of the costs, bid/offer spread, the timing of deals & brokerage costs in addition to the TER plus errors cause deviation from the index.
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