DA-1 - How much VT to exceed minimum of CHF 100

Up until now I have bought VRWL with a Swiss broker. Now, I have opened an account on IB and the new investments will be in VT.

Question: What is roughly the amount of VT to be held, in order to exceed the CHF 100 threshold in connection with the DA-1 (assuming the same dividend payments and no hard crash)?

Are you asking people to do the math for you? You have all the data you need publicly available - just look it up and make the calcs yourself.

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Given a dividend yield of ~2% and a WHT-rate of 15% you would need X * 0.02 * 0.15 = 100.-
So x = 33’333.- CHF

Keep in mind that VT is only 55-60% US, if that plays the calculation role.
(I don’t recall if it’s the fund domicile only or also the components that do)

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Yes, i could do the analysis an the calculation by myself. However, if someone in the community knows the math by heart, my limited time and myself thank for sharing.

ps. if in this forum only questions would be asked, which could not be answered by according research, it would be quite empty …

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Not for the withholding tax applied to dividends distributed to you. But yield was around 1.8% recently, so more like 40k.

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VT with full DA-1 return gives you the same return than VWRL; so why bother investing in VT; and by doing so putting part of your return at risk (in case DA-1) was not granted?

Superiority of VT over VWRL is an urban legend only - once you have a look at the data, you can easily proof it to be wrong.

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Thanks.

Does that mean that VEA and VWO can be listed and accepted in the DA-1 too? :thinking:

Foreign withholding taxes on paid dividends can be “counted as a tax payment” at least partially for any foreign security, such as ETF or a stock. And not only from US, but also from other countries that have it. So for example NL funds can be attractive with this respect.

How come?
One get’s you back lost taxes the other one doesn’t… Plus VT has more holdings than VWRL (this could work both ways).
There is no way on earth that VWRLs performance is equal because they just aren’t the same fund with the same holdings AND one loses taxes

Isn’t that the same if you use IBKR + DA-1? You pay 15% and you get those back.

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Well, yes, this is what you are doing. But there are many more cases when it works. Although I personally have only US and IE ETFs.

Thank you for those interesting excel sheets!

Conceptually, VT holds more shares. However, this is simply a very long tail that was non-material (from an exposure percentage point of view). VT theoreticaly as well offers better Tax treatment on ~55% of shares. But its unclear how the situation was on Non-US shares. At the same time, VT comes with a lower TER.

In practice, we best just compare total return post Swiss Dividend Taxation and forget about all this theoretic nonsense. What do we see then? VT has ZERO edge over VWRL. So why bother?

VT introduces massive risk. Be it from the Fact that VT shares Equity with Non-ETF Index funds, that use VT for a complicated tax evasion scheme (Google heartbeat trades & Vanguard). That may at any time colapse and expose not only Index Fund holders but as well the ETF Holders.

The second risk is that some countries might be faster with confiscating US held shares (aka VT) than IE held shares. Ultimately, VT is another politically unstable layer that can cut you off not only from your US based VT holdings but as well from the international ones.

So VT comes with equal, to lower, return than VWRL and yet with higher risk.

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There is never a lower return, because you lose all other withholding taxes as well + the US one. With VT you at least get back the biggest portion of the dividend payment. You call that a theoretical construct, I call it common sense.

IE Funds still pay German, Swiss,… WHT

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And the US one doesn’t?

Yes it does, but you can claim the dividends of more than half your portfolio back…
In an ideal world, we’d have the option to buy IE ex-US ETFs and a something like VTI… If you want to optimize it by yourself you could even do it a bit better.
US-ETF for USA + Canada
IE ETF for EUROPE and EM
JP ETF for Japan (also has some reclaimable taxes)
Idk what to do with Pacific ex. Japan though…

But VWRL is never going to be the better option tax wise, because you always lose 15% of the US WHT which you can reclaim as a Swiss investor - so why not use this advantage in your favor? Best case they break even… Except for when tax treaties between IE and the rest of the developed world countries are much better than with the US. This is most likely not the case.

What are you talking about ?

I was asking myself about this comment :thinking: Could you please elaborate it @TeaCup?