Degiro Account in currency other than CHF

Investing / Brokers
1

I have been monitoring this forum for quite some time, but the time has come for me to register and ask a question.

Since 2 years now, I am holding a couple of USD denominated and EUR denominated ETFs on Interactive Brokers and I am very happy with them and their low fees. I would like to increase my holdings now and since I have a relatively good amount of money with IBRK, I would like to diversify the risk a bit.

In the beginning I thought of opening with Saxo, but I really didn’t like the platform, the stamp duty and everything, so I am thinking about Degiro. The issue is the currency and this is where I would like to get some info. I am fortunate enough to get a relatively steady stream of income in EUR from outside Switzerland and since I cannot use it here, I would like to invest in some EUR denominated ETFs. I don’t want anything complicated, just simple all world of S&P500 ETFs but in EUR. My understanding is that if I open an account in Degiro.ch, my base currency will automatically be CHF, and I will be suffering a lot from conversions, etc. I am looking for a simple approach like the one I have with IBRK, where even though I have USD as my base currency, I can deposit EUR, hold EUR and invest in EUR without any fees. Should I open an account with Derigo.de for example to bypass this problem? Do you see any better alternative?

2

If you just want broker diversification, open an account at a cantonal bank with state guarantee. Transfer half of your assets there. Continue buying cheaply at IBKR. But you don’t seem to value convenience higher than small expenses, because you try to optimize small one-off fees like currency exchange and stamp duty. Therefore:

US domiciled ETF are normally in USD. Degiro doesn’t offer USD accounts. Degiro also doesn’t offer US domiciled ETF.

IE domiciled ETF are suboptimal for Swiss residents, since you can’t get Swiss tax credit on US withholding tax from them. That doesn’t matter if there are no US stocks in your ETF, but S&P 500 is the opposite of what you want here.

Everything else is less problematic, as getting tax credit for other countries is more difficult and the amounts are smaller than the US part (for market cap weighted allocations). You could split your stock allocation into US and the rest: Europe, Japan, Canada, Pacific-ex Japan (, Israel), EM with iShares ETFs on MSCI indexes. If you market weight them, there shouldn’t be too much rebalancing going on. Although, if you still buy frequently with small amounts, splitting is expensive.

Generally US domiciled ETFs have less internal costs than European UCITS ETFs (TER, taxes). This you will pay if you choose a broker that only lets you buy UCITS. But Degiro accounts in EUR countries or in CHF Switzerland are both possible choices here. Many big ETFs are offered in both currencies. CHF will probably have less liquidity and therefore higher spread, though.

It can be said optimizing small expenses is not that easy, since all kinds of small effects can offset and reverse your optimization.

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3

Thank you for the inputs!
Firstly, regarding ZKB, I do not have an account with them but I have with PostFinance. Are they equally safe? And do they offer EUR balances and access to EUR denominated ETFs? If yes, then it would be very convenient as I hold my EUR there.

Now, I would be interested to invest part of the EUR on VUSA, which is a EUR denominated ETF for S&P500 and IMAE which is MSCI Europe and has nothing to do with the US and maybe VWCE which is an all World ETF and has obviously some US stocks in it. Would there be any difference between IBRK, Degiro, PF, ZKB, etc?

The thing is that coming from an EU country and possibly going back there, I do not see the point of changing my EUR to CHF, assuming the FX risk on money not needed for everyday life (although I live in CH), so I try to optimize on fees, if that makes sense. I have see the broker comparison table on another thread, the differences are huge! But maybe I am completely mistaken and what I am doing is completely wrong, so any advice would be very welcome.

4

Just to make sure you’re aware, the currency you use to buy a given ETF doesn’t matter (you can buy it in USD EUR or CHF it’s the same result, no FX risk).

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5

We even have a wiki post (written by me :grin:):

ZKB has a state guarantee (by the canton of Zurich), PostFinance does not anymore.

As far as I know, bigger Swiss brokers offer multiple different currency accounts, they also offer UCITS and not-UCITS securities (e.g. US domiciled ones). All of this for a fee of course.

The brokers should only influence buying and holding fees (sometimes more fees on dividend payment and other corporate actions). Everything else (taxes, expense ratios, etc.) should depend on the security you buy.

A small exception are withholding taxes on dividends from US securities (not IE ETFs). Swiss brokers will reduce US withholding from 30% to 15% for Swiss residents like all other brokers worth their salt (which you can get Swiss tax credit for), but will send another 15% to the Swiss FTA (which you can reclaim).

Do you avoid US domiciled ETFs in general?

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6

Based on your post, it seems you have following requirements

  1. you want a broker which doesn’t attract stamp duty
  2. you want to diversify away from IBKR

Based on this, actually there are not many options other than Schwab Switzerland and Degiro Switzerland.

For Degiro -: you will incur a currency conversion fees because it seems you can only deposit money using CHF. But you can choose to pay 0.25% fees and buy CHF denominated ETFs trading on SIX. If you want Euro denominated ETFs, maybe you will end up paying another forex fee. Maybe you should call them because it’s a bit strange setup.

For Schwab -: you need to check details as I think they also have min deposit of 25000 USD to open account

——-

Following are some other options but they will require some additional steps

  1. buy Euro ETFs at IBKR
  2. transfer them to Swiss brokers / banks like (Swissquote, Saxo, ZKB, PF, UBS etc)
  3. pay custody fees for the duration you hold them
  4. sell the ETFs and pay stamp duties and trade fees for the Swiss brokers
  5. you can avoid step #4 by transferring ETFs back to IBKR in few years.

To keep things simple, I think you shouldn’t focus on #5 but you can choose.

Trade fees can vary extensively between different brokers -: Saxo is cheapest, SQ is next for Key ETFs others (PF, UBS, ZKB) can be more expensive

Custody fees -: Saxo (120 CHF max per year), SQ (80-200 CHF max per year), UBS and ZKB have higher custody fees, PF I think is 72 CHF per year flat

——

Last approach would be to simply select a Swiss broker and buy ETFs there (SQ, Saxo) might be the best. You will attract Stamp duties but at least you will have simple operations

7

IBKR and Swissquote allows all UCITS and US ETFs

Saxo, UBS and ZKB -: I think you can only hold UCITS ETFs

PF -: I don’t know for sure if US ETFs are allowed. UCITS of course

All brokers in CH should support UCITS

8

It’s not about holding. Holding shouldn’t be an issue at all. The question is if they’ll let you do buy transactions.

Quite a few EU-based brokers will happily open accounts for Swiss residents.

Although some of the very lowest-cost app-based “neo”-brokers don’t.

9

Thanks for letting me know. Didn’t know that. In that case OP can simply open the account in Degiro EU

10

I confirm that this is (or at the very least was) possible.

11

Yes, I know. I did not phrase it correctly, what I mean is that since I earn in EUR and I am gonna need the EUR, there is no need to do double and triple conversions and pay fees, especially when the charge is 0.25% within Degiro and I need to convert the EUR to CHF to deposit the money in the first place.

As for the tax credits, I don’t think there is much to be done, I have uploaded a form on IBRK and my tax was reduced from 30% to 15% I think. I also select accumulating ETFs instead of distributing ETFs when I have such option, so I can optimize there.

I think that opening a Degiro account in another EU country indicating that I live in CH is the easiest option, I will let you know how it goes.

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12

Who did reduce which tax on what?

Accumulating indicates non-US domicile. There is nothing IBKR can reduce there, as US withholding taxes are levied inside the foreign ETF.

Or are you saying, Switzerland gave you a tax credit on dividends from IE domiciled ETFs?

Also, accumulating vs distributing does nothing for your tax burden in Switzerland.

13

I uploaded the W8 form so the tax deducted on my credit interest was reduced from 30% to 15%. I don’t think there is anything else that can be done to reduce the tax burden.

And by the way, all that was done in 2023, so I have not even submitted the tax returns, I am not sure how this works with the swiss tax authorities and if there is going to be any tax credits, but I suspect not.

14

You should look up the difference in tax treatment for Swiss residents between US and IE domiciled ETFs. Story short, both kinds of ETFs holding US stocks eventually have the same reduced 15% US withholding tax applied to their dividends, but only with US ETFs you also receive a Swiss tax credit for it.

To give numbers, for:

  • 15% marginal Swiss tax (t_{CH})
  • 2% dividends from US stocks (d_{US})
  • 15% US withholding tax (t_{US})

for US ETFs you will get:

\begin{align} 1.7\% &= d_{US}* \underbrace{(100\% - t_{US}-}_{\text{US withholding taxes}} \underbrace{max(t_{CH}-t_{US}, 0))}_{\text{Swiss tax with credit}} \\&= d_{US}*(100\% - max(t_{CH}, t_{US})) \end{align}

for IE ETFs you will get:

1.445\% = d_{US}* \underbrace{(100\% - t_{US})}_{\text{US withholding taxes}}* \underbrace{(100\%-t_{CH})}_{\text{Swiss tax}}

That is an additional annual cost of 0.255% on the US stocks in your portfolio.

Edit: Of course, the tax credit does not get multiplied separately. I corrected the formulas.

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15

If we’re very precise (and that helps to understand the difference), it’s not applied in the same way - or on the same level - though.

You do (so far) not get Swiss tax credit for the dividends from US stocks paid to the fund.

You receive tax credit for (up to) the 15% withheld from the U.S. fund’s distribution to you.

The key difference is that the U.S. fund will receive dividends from U.S. stocks in full (unlike the Irish fund, which will only receive 85% of them, after deduction of WHT). The withholding tax will be withheld on a different level - namely when the U.S. fund distributes to the individual investor.

16

So, here is an update regarding the Degiro account opening.
I opened an account with degiro.de, as I wanted to have EUR as my base currency. The process was extremely smooth, the whole thing, including the verification with ID happened within 10 hours. The platform has also an option for English, which makes life easier, especially if your German is not very good. So all in all, a very easy process.

The only thing I found as a drawback, is that it seems that they only offer a personal account, there is no option for joint account. In IBRK for example, I have a joint account with my wife where both of us are beneficial owners of the assets. This does not seem to be possible in Degiro. Does anyone know if my family could get hold of the assets, should something happen to me? Or are they lost and they cannot retrieve them?

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17

If it bothers you, you can check other European brokers:

flatex Gemeinschaftsdepot
Mit dem flatex Gemeinschaftsdepot eröffnen Sie ein gemeinschaftliches Wertpapierdepot und verwalten es zusammen mit einer weiteren volljährigen Person.

Those two are also retail banks:
comdirect
DKB