About US domiciled ETFs for non-US persons, you can read this vey helpful article and explanation, then look into the table for specific countries of residence. Hint, you will find for Switzerland as neither to “avoid” nor “prefer”. Neutrality in its glory, I guess Nonresident alien’s ETF domicile decision table
This is a deeply complicated matter where your physical residence doesnot matter as much as your fiscal residence does, and that last one, gets even more complicated as sometimes it also depends on which country youre a national of. For example, there are countries (the US is notoriously known for this, but also some in the EU) where have you been a national you continue being liable for *parts* of your global earned income even if youre permanently working and living in another county. On the other hand, there are others, where as long as you moved out permanently, the taxman forgets all about you.
You will have to take into account where you come from, where you are now and where you will be and sort what applies/shall apply to you.
Trivial sidenote for the “land of the free”… I have a vague impression–maybe am wrong here-- that even if one renounces citizenship, Uncle Sam still collects. Or something.
Which EU countries do this? I only know about the US and Eritrea, but I think the idea is getting more popular. The green party in Germany for example wants to tax Germans based on their citizenship and there’s a good chance they will be part of the government in September. Hope for the best, prepare for the worst…
Switzerland appears for one(okay, non EU, Europe), if my reading is correct
“Government officials or individuals working for a public law corporation or institution who live outside the territory of Switzerland and are in this jurisdiction subject to a partial or total income tax reduction remain liable to taxation in Switzerland.” https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/
Ireland another, I think, in different way.
Sweden, “or who have previously been resident in, and still have close ties to, Sweden, are liable to income tax and must report their worldwide income.”
Bulgaria, “resides abroad on assignment of the Bulgarian State, its authorities and/or its organizations, or Bulgarian enterprise, and also the members of his/her family, or”
Lithuaniia, " any natural person who is a citizen of the Republic of Lithuania but does not meet the above mentioned criteria, and who receives remuneration under an employment contract or (…)"
Could go on.
But in any case, it’s a deep dive into a rabbit hole, is bilateral, depends on limited /unlimited liability claims per side, respective treaties, etc. and we`re no experts to start digging. Prudent to stick more to a principle of know thyself, i.e. where one individual “was, is, will be” as I mentioned before.
This seem to be edge cases like working for the government abroad or having “close ties” when your family is still living in the country, but you work somewhere else for a part of the year. I’d not worry too much about this as an average expat.
About US domiciled ETFs for non-US persons, you can read this vey helpful article and explanation, then look into the table for specific countries of residence. Hint, you will find for Switzerland as neither to “avoid” nor “prefer”. Neutrality in its glory, I guess Nonresident alien’s ETF domicile decision table
thanks, that article is spot on !
Though I struggle to understand why Luxembourg is not recommended since the table shows a 15% dividend taxation for both countries.
@nugget : perhaps you want to integrate your (useful) wiki post with the link above? It includes info for Luxemburg based ETFs in addition to other countries that you omitted in your article.
This article about the ETF domicile is also quite interesting but it is still not 100% sure to me whether the ISIN code represents the domicile or not (LUxxxx, IExxxx).
Domicile: “the country in which the fund’s holding company is legally incorporated”.
Beside that, what is the process to get this tax benefits with the Irish/US tax treaty compatible ETFs? I am quite sure that the first step is to inform the broker (during the registration phase, “eligibility for a U.S. benefit tax treaty”). Then there is probably a form to fill but it is not clear when I would have to do that W8-BEN form though… . Is the broker going to ask for it? Or perhaps the tax office? Or I just have to send it somewhere.
Beside that is there something else to do? (question open to everybody)
I won’t entirely agree to that.
Could be, could be not. I’m no expert to know. But I highligted few points here and there that I could easily spot and can be interpretted either way, and I can always assume that the taxman’s interpretation overules and may be not as ubiased as one would naturally want…
For example, I see Bulgaria insist a claim if you’re Bulgarian working for a Bulgarian company abroad (punt here, Microsoft has a centre in Bulgaria along with several oher multinationals, what about started working there and they later transfer you abroad?), Sweden claims on close ties, is your Swedish parents being alive and living there such?.. Lithuania appears to make it very clear about carrying your citizenship around working for a company, etc.
But as I said it is a deeply complicated based on specifics matter, let’s not deviate the discussion from the topic of question from the OP
I could be remembering this wrong, but I think it is on the basis that Ireland does not impose to non-residents their own national withholding taxation on top of that US -15%, in effect it passes you the full divident it receives after US withholding. Where Luxemburg, not.
Having said that the unfortunate ones are Irish residents owning Irish domiciled ETFs.
UPDATE: strike that out. It is in the source article, “but because of a less favourable US treaty ETFs domiciled in Luxembourg suffer 30% tax withholding on dividends from US stocks.” So the ETF is losing the full amount to so called L1 withholding, which means Uncle Sam to the ETF. Which it is then non recoverable by you.
It is the broker who does ask, because it is their liability as withholding agent to withold, you dont deal with IRS yourself. Sometimes is opaque from the information you submit when registering, e.g. Interactive Brokers, sometimes they have designed their own separate substite form that resembles the IRS one and ask you to submit e.g. Degiro, Schwab, sometimes you just fill the IRS`s pdf and send to the broker, e.g. TD Ameritrade.
All in all, it is the broker you work with.
Aslo, to note, the W8BEN form is needed only in the case of US-domiciled ETF or if you buy US stocks. For Ireland ETFs plays no role.
Yes. Many countries do have a few exceptions where they do tax non-resident citizens on at least part of their income. Or upon departure. They are designed to combat particular exploitation(s) of the system.
Very few have true, comprehensive non-resident citizen tax (for EU citizens, the freedom of movement in principle prohibits such discriminatory taxation).
Correct, the locally earned income is the simple one to sort as to the most there is clarity and then there are the treaty agreements, yet, it is for the other part --the globally earned income, such as from investments-- which can become complicated, as everyone wants to claim the pie there.
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I have a vague impression–maybe am wrong here-- that even if one renounces citizenship, Uncle Sam still collects. Or something.
