Fun times, Ireland funds may soon get higher withholding taxes, up to 50%, if there are no changes to the bill.
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I am not surprised, there are continuous attempts to take money from foreigners. Remittance tax was another one.
The article says due to DTAA, taxation on dividends paid to IE fund might go up to 35% and I guess for Switzerland and LUX, it would be up to 50%
Not clear what this means for VT which is US domiciled because if they increase the withholding to 35% as well for individuals, then CH is not going to give credit for the additional 20% on top of 15%
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I guess thatâs:
US withholding rate vs Swiss tax rate - #20 by nabalzbhf
coming into place (it was announced right after the inauguration).
edit: that kinda reinforces my plan to switch to synthetic ETFs for US investment, theyâre less likely to want to mess with that.
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If this becomes mainstream maybe new ETFs would be launched to offer more such products.
But I think this random behaviour to bypass treaties is very concerning. It could also result in retaliation by EU to apply similar tax on dividend paid to US citizens or corporations.
Btw -: the following statement is interesting. This might mean that Ishares, vanguard or blackrock might not be impacted but Amundi, Xtrackers, UBS etc might be.
As Ireland (along with all other EU Member States, the UK, and many other countries) has legislated for UTPR, these countermeasures, if enacted, would apply to all Irish resident individuals and, unless owned more than 50% by US persons, to all Irish resident companies (including funds).
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You interpret it as if Vanguard IE is owned by Vanguard US theyâd be exempt basically?
Definition: United States-owned foreign corporation from 26 USC § 904(h)(6) | LII / Legal Information Institute is the rule they apply.
(US codes are way to convoluted to properly understand tho, youâd need to follow all the references and also know how vanguard ETFs are owned/structured).
this would be shocking, lets wait first if that bill ever makes it beyond the draft status.
With regard to ownership, I would argue that Vanguard IE was owned by Vanguard US - but the Vanguard IE ETF (as a legal entity) was owned by the ETF Investors, and hence still the higher WHT applied, no?
It already passed the house, that bill will definitely pass (it might be changed, stuff might be dropped but the bill is the main tax/budget vehicle and kinda has to pass, otherwise thereâs the cliff where all the Trump tax cut from last time expire)
that is shocking⊠is there already some press coverage on this?
Thatâs what I am thinking but I donât know how it works. Letâs see what the final law would be
This is why investing in foreign assets should be done with caution because no one cares about foreigners. Good thing is that there is no new provision for capital gains tax on foreigners.
â nobody cares about investors. Investors get expropriated, each side always expropriates the other sides investorsâ - (Eugene Fama)
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Think about it⊠US Shares are at record P/E, meaning the prospect of capital growth was limitted (vs. other Jurisdictions). Meaning that the return on dividends matters quite a bit more (even though dividend distribution rates are much lower). If such change came into effect, I could imagine trully tectonic shifts of assets out of the US Stock Market. At the same time, looking at the pace of change, it could trigger a few investors to fear that the US somewhen woke up and decided to as well apply Capital Gains Taxes on Foreign Investors.
In addition to this, would this as well include foreign ownership of US subsidaries? That might as well heavily impact companies appetite to invest into US.
Long story short, these bills will heavily impact Joe Sixpack and both his retirement savings as well as his labour market prospect. Looks like the US goes into a block building mode where we are not part (or donât want to be part I guess) of their blockâŠ
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Same if the US trade deficit actually were get meaningfully reduced.
Less dollars in the hands of overseas investors = less dollars will be plowed into US fixed income, equitiy, and real estate markets.
Or more flow into tech and more stock picking, and synthetic funds.
I think if someone wants exposure to US then they need to account for these extra tax leakages which would reduce the expected returns over long time (0.30% per annum extra cost for S&P 500) as long as this extra tax is only for dividends and donât get extended to capital gains.
Stock picking or synthetic ETFs would not really replace standard buy and hold index funds with physical replication. Specially synthetic ETFs which are based on derivatives
I would also expect some sort of retaliation depending on if this tax is only for certain countries or all EU countries
What I find it a bit weird is why US is making itself more and more difficult for foreigners. This can become a real issue in long run because lot of US wealth has been built either by foreign workforces, access to foreign markets or access to foreign funds. Perhaps they like some types of foreign money (like from Middle East) and not all types of money.
Perhaps the type that has âa little somethingâ attached, a modest gesture of appreciation.
Earlier this month, NBC News reported the Trump Organization signed deals to build a Trump International Hotel and Tower in Dubai, a Trump Tower in Jeddah and a golf resort in Doha. The company also has a hotel under construction in Muscat.
Trump administration accepts jet from Qatar for possible use as (H)Air Force One
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What about synthetic exposure through options? Is it too cumbersome?
Wonât you have to roll them forward etc, would be way too cumbersome for me 
Edit:assuming future, not just option on etf, Iâm not sure how options would be affected by withholding shenanigans.
Anyone understand what kind of deal Nippon made with US? Nippon will invest 14 billion into a company which is worth 12 billion but the control will remain with USA and US govt will have golden shares ?
Is this a smart play by both sides or Nippon got coerced to pay for basically not really owning the whole thing?
Maybe a bit off-topic, but I donât understand why the OECD (or anyone else) acts as the global tax authority, forcing countries to implement more bureaucracy and a minimum tax rate (15% over 750mm revenue).
Regarding the UTPR, which has a similar goal, consumers in the EU already pay an exorbitant amount of VAT, so itâs not like the government doesnât get any money from the companies. Amazon employs ~40k people in germany that pay income and social taxes.
I clearly donât see the full picture. If anybody has a better explanation, I would be happy to understand your viewpoint.
Thank you for your attention to this matter! /s
OECD is not special, itâs just countries coordinating together.
And donât think itâs possible without going into political arguments, but thereâs good reasons to avoid a race to the bottom and artificial profit shifting to tax heavens.
(Itâs classic prisoners dilemma if you coordinate youâre better off)
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