BNDW Bond Taxation vs VT

Taxes
1

Good Morning,

I am currently evaluating the potential benefits of adding BNDW to my investment portfolio to reduce volatility. Before proceeding, I seek your advice on the tax implications associated with investing in BNDW, particularly in comparison to VT, as both are US-based and listed on ICTAX.

My understanding is that dividends from VT are subjected to a 15% withholding tax, which Interactive Brokers (IBKR) deducts on behalf of the government. I am interested in knowing if BNDW dividends are treated in the same manner and whether I can reclaim this withholding tax through my tax declaration.

My portfolio is solely comprised of VT shares at the moment; however, I am considering the inclusion of a bond ETF to diminish volatility. Having recently moved to Switzerland, I have decided not to venture into investments within the 2nd or 3rd pillar for the time being.

I value your insights and thank you in advance for your guidance on this matter.

Best regards,
A poor swiss investor

2

Given the relative flexibility of pillar 3, you might want to consider transferring part of VT each year into an equivalent in the pillar 3 and enjoying the tax benefits.

3

I personally don’t own BNDW or any US domiciled Bond ETF, I don’t know for sure. But I think ETF is treated like a stock for all practical purposes and hence would have same taxation.

I would be curious to see what others might say.

By the way- did you also consider bond ETFs in Switzerland like CHCORP ?

4

As a swiss investor why would you invest in USD-hedged bonds instead of CHF hedged? This will still be pretty volatile due to currency changes.

(AGGS, CHCORP, etc. are likely more appropriate, though also make sure you assess the duration and credit risk)

1 Like
5

thanks @Abs_max & @nabalzbhf , for your insights.

I’m still in the process of making a decision and it’s crucial for me to understand the tax implications before finalizing any investments.
My goal is to hold these investments indefinitely, primarily to reduce portfolio volatility. I’m currently considering allocating 15% to BNDW and 15% to V3GH, or, following your suggestion, to CHCORP.
However, I’m keen to understand the taxation aspect of these investments. Could you share more details on how dividends from these investments are taxed?

Thank you once again for your valuable advice.

6

For time being I only have CHCORP and CS Corporate CH blue bond fund. Both of them track same index. Only difference is one is ETF and other one is Bond Fund.

Both of these started this year for me, so I have not yet seen tax deductions. Unfortunately cannot share practical experience

But I expect both will have tax deduction at source 35% and then I will claim it as tax credit.

7

Data should be in ictax (note: you’ll get less than 15% effective US withholding with BNDW, since US sovereign bonds don’t have withholding, IB issues a refund beginning of the following year).