Aaand tariffs are back…
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The law of this country is a joke…
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I wouldn’t say that laws in US are a joke.
But I would agree that current US administration is trying to make it sound like that.
Continuously bypassing Congress just to show the power is in one man’s hand is showing to the world that US checks and balances might not be that robust as the world believed them to be. All you need is to win with enough votes and then by making right appointments, you can really break the back of the so called “system”. What is unbelievable is that half of the population is actually enjoying this…
I also find it bizarre that US president can simply pardon whoever he likes irrespective of what crime the person might have committed. Wouldn’t it be great to do an insider trading, make multiple billions and then get pardoned.
The US „Big Beautiful Bill“ provides for a hefty tax increase for foreign investors (hidden in Section 899). Withholding tax on income may go up by up to 20 percentage points, if you are resident of a ‚discriminatory’ country:
WHEN IS A COUNTRY “DISCRIMINATORY”?
A country becomes “discriminatory” when it implements taxes the US considers unfair, including:
- DSTs
- DPTs
- Organization for Economic Cooperation and Development Pillar Two measures, notably UTPRs
- Any additional taxes the Treasury designates as unfair or discriminatory.
The Treasury will maintain and publish a quarterly updated list of these jurisdictions. Some examples of key jurisdictions and regions that may be affected by this rule include most of Europe, Asia-Pacific (e.g., Australia, India, South Korea, and Japan), Canada, and the Middle East (e.g., Saudi Arabia, United Arab Emirates, and Qatar). This list is not intended to be exhaustive.
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That would tip the balance towards IE-based ETFs regarding tax efficiency, right?
I guess this is so dynamic that it’s fine to wait until it actually happens (i.e. first time not all dividends arrive from IBKR). It should start with 5% more in the first year if no deal is made between US & CH.
The double tax treaty should still be valid, at least I hope it will.
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the US stocks in IE ETFs might be hit with the same, so if you’re in a country without “unfair taxes”, which is I think the case for Switzerland compared to IE/EU, it might be better to just wait it out. Especially considering we can just switch ETFs later without tax consequences. Now US asset popularity might reduce, but derisking that needs an allocation change, not just an ETF change.
Obviously if things happen having the non-US allocation not in an US ETF does derisk things a bunch.
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No. this tax will be on top. So either 30% + 20% or 15% + 20%
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Absolutely. And it wouldn’t even be that bad: in FTSE All-World, US makes up 62% and has a dividend yield p.a. of 1.3%, which is 0.8% of total performance. So e.g. with a WHT of 50%, 0.4% of yearly returns would be lost if you waited a year of switching to a synthetic fund AFTER this new law has come into effect.
I think changes should not only be based on Fund domicile but investors would need to rethink their allocation itself. A country where rules can change just like that under whatever pretext (specially to reward domestic players & disadvantage foreign investors) deserves >60% of foreign investors portfolio?
Lets see what happens, but I think US is slowing becoming a problematic area to invest. Hopefully there would be a “deal” citing any random agreement which simply would mean its valid for few months before another threat of being “unfair”.
For CH - anyways they didn’t want to apply high corporate taxes, so maybe they will find an excuse to roll back.
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This was discussed 4 days ago 
I was already planning to switch to synthetic etf for US holdings (low ter, no tax leakage), that’s another confirmation it’s a good idea.
The annoying thing is that I’d have to move away from single ETF portfolio)
How exactly does a synthetic ETF generate its exposure, and how cann we know that Trump won‘t close that loophole?
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Do you have any examples of ETFs (ticker, provider, fees) that you are considering using? 
And their concrete benefits/advantages from this potential change?
I am fairy confident Switzerland will either slip by or navigate cleverly.
We can switch without taxes, but the switching itself is risky, switching just after a nosedive is basically losing far far more money than the proposed gradual tax, and switching before anything definitive is known in practice is just as risky in my opinion.
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Perhaps there will be a buying opportunity once sovereign and institutional investors / pension funds from Europe and APAC have stampeded out of US treasuries and equities to avoid the tax.
/ modest facetious mode
One would hope TPTB realize the “potential” and back away before it is law…
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I think so as well. We have the fortunate situation to be able to buy US domiciled etfs and the double tax treaty hopefully stays in place.
Why is that a problem? You sell and buy the other fund immediately? You are out of the market for a few seconds at best with a margin account.
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Here is the actual court case document
Also if govt lose, then they need to pay refunds. The stay was granted keeping in mind balance of outcomes
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Sure, I meant if this goes forward and there is an exodus from US-based and US assets it could crater the price, exiting then would lock in big losses.
I think this is the crux of the problem, though, the hope that signed treaties of 70+ years ago won’t be trampled on, because goodwill and respect for the law, and ethics seem to be waning nowadays.
For example this one.
Some advantages are that you can opt for accumulating funds, and you get the full WHT “back” even if you wouldn’t qualify for a full refund currently (low income, low taxes, mortgage etc.).
Yeah, I think Switzerland has no DST which seems to be the prime example, and is also not a fan of the OECD minimum taxes which have been the other example, so I don’t thik Switzerland would be first on the chopping block.
As for switching ETFs, since they hold ~the same underlying assets doing a quick change of ETF domicile shouldn’t be an issue as a Switzerland based investor. For US assets devaluing from capital flight you need an allocation change and there earlier can be better indeed, though you run the risk of the capital flight not happening.
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