Hi, new member here.
It seems that people talk about IB and CT everywhere but I haven’t seen a summary so I’ll post this question/answer here to have a single post where people can read/comment/rant.
1: Why no one talk about all the cost of IB? From what I"ve read, you have to have at least 100000usd otherwise you’ll pay 10 dollars a month just to keep your deposit. Actually this isn’t the deposit fee, it’s just a fee. I didn’t find if the deposit costs (0 chf in CT and max 150 per year on swissquote I believe).
2: The reason people like IB is for the lower cost of transactions compared to CT
3: Someone likes buying US ETF, so IB makes sense because you can get back the 15% more tax that you pay compared to CT+European ETF.
4. No one talks about using IB and European ETF. This would be a nice mix: less commission and ETF witthout the hassle of Tax hurdles.
Am I right about 4. ? I am not sure I want to fill papers and papers for an unclear reason. If I got it correctly there is almost no difference between US ETF and Ireland ETF, so going with IB makes sense to avoid the initial costs.
It’s mostly to experiment I believe, since I’d prefer I higher initial cost (trading costs) and less yearly expenses than the opposite. I should probably a point about the security of using a bank in Switzerland… maybe someone could write about it.
With IB you have a minimum fee of $10 per month if you don’t do any transactions. Above 100’000 this fee is lifted. If you’re serious about early retirement, you should reach the 100’000 mark pretty quick. Save 4000 a month and you’re there in 2 years.
Transactions + Taxes + Better choice of ETFs
There is not only the 0.3% tax difference, but also the 0.27% purchase and sale cost, 0.05-0.15% higher ETF custody fee. Buying for 100’000 at CT and selling after one year would cost you 540 CHF + 300 CHF lost on tax. At IB you would pay 2x$7 for exchanging currencies and 2x$5 for buy and sell. That’s $24.
In Europe you have 0.1% stock exchange commission even on IB. You’re only bypassing the Swiss stamp duty. And you have higher custody fee on ETFs. For most people with Swiss residency it’s just not worth it.
Transaction costs at CT at SIX are 0.20% for under 75’000 and 0.12% over 75’000. For NYSE it is 2 cents per share. So for example 1000 shares priced at 100 per piece will cost you 120 at SIX and 20 at NYSE.
Yes, you can buy US stocks with CT.
IB charges 0.5 cents in US and 0.1% in Europe. But you can even get paid for some US trades with a different pricing plan.
IB charged me $2 commission for converting currency. They were buying CHF for sth like 1.09000 USD and selling for 1.09007 USD. So you could convert 100’000 CHF to 109’000 USD and then you would need 109’007 USD to convert it back to 100’000 CHF. Total cost $11. For large amounts you can basically forget this cost exists.
Taxes: Irish ETF holding American stocks receives dividend worth, let’s say 2% of the portfolio value. It pays 15% on this dividend to USA. That means 0.3% of the portfolio value. You receive the remaining 1.7% and then have to pay Swiss income tax on it.
With the American ETF, YOU get charged with the 15% withholding tax. When you pay the income tax in Switzerland, you can basically say: “hey, I have already paid some taxes on this dividend” to which the tax office will say “ok, so you just have to pay the difference”.
Like you don’t have some? This was a forum for swiss residents last time i checked…
Minimum balance requirement can be lower than 100k though if you sign up for an IB account through some of their white label resellers like captrader. Or if you’re under 25, the monthly fee for under 100k account is $3 instead of $10.
European ETFs have both higher commissions and enormously higher trading costs including potentially stamp duty.
Effort needed to fill the tax declaration is about the same, filling DA-1 is only marginally more involved than filling main WV form, what’s exactly your problem with it? You get paid for this effort with reclaimed taxes
Losses on dividend withholding taxes is one of the biggest differences. How’d you like to give up 0.30% of your wealth each year for no good reason?
Well, with US ETFs you have both - low yearly expenses thanks to the economy of scale and very low trading costs
US brokers have SIPC protection for securities - swiss banks have nothing like that. 100k swiss deposit protection is for cash only, securities aren’t covered. SIPC cash protection limit ($250k) is also higher than esisuisse’s
Thank you all for your answer. I’ve already started to edit my first post a bit. I am not sure about the formatting though. I hope it’s clear. I had to break most of the links since I’m new here. Sorry about that.
I did put quite some effort into the US Witholding taxation issue. please cosult this thread
from what you can read there, you will find the general principle of witholding taxes everywhere: the counties of domicile of a fund and it’s underlyings usually witholds a certain percentage. US 30%, CH 35%, IE 0%. for the combination of US domiciled assets and Swiss resident, the 30% can be lowered to 15%
Thanks, I will have a look. I am also curious if you mention the differences between those taxes at the end of the year. For example, the 35 you mention for Switzerland is usually given back fully while the 15% for US funds I don’t know.
I might have to differentiate the domicile of the fund and the domicile of the assets. An IE Fund (0%) with US assets (30%-15%) etc… Well maybe it doesn’t make sense to differentiate, since you can’t really buy the same assets with different domicile…
15% stays in the US no matter what with no possibility to reclaim it, but the swiss can reimburse you it if you’re paying swiss taxes in it, as part of double taxation relief per US-CH tax treaty. Reimbursement is requested by filing DA-1 form, which is a lot like Wertschriftenverzeichnis from the main tax declaration.
If your swiss tax rate is less than 15%, you won’t get everything back - reimbursement comes out of your future swiss taxes and they can’t afford to give back more than what you pay them
Since when?? There are some assets you can’t buy without a certain domicile like controlling shares in chinese companies, but assets from most developed markets are freely traded unrestricted across borders
IE fund with US assets is losing you 15% of dividends each year that you can’t reclaim (yet you have to pay swiss taxes in full on them), on top of expensive TER
They do not use the same index. Of course you can compare but if you look into the past this 0.35% is not a given. Sometimes vwrl does better! Securities lending (also active decisions of managers) has way bigger impact
I think the threads are interesting as they show the way we ended up with the conclusions. There are actually multiple Threads considering the current problem but they have not been active for a while.
I’d prefer threads linked to a definitive answer. I do sometimes mix up words and get corrected and this happens to other people as well. Sometimes there are questions that get mixed in the same thread and all this could be problematic especially for people that are not experts on the field and/or not native speakers.
I could put up a wiki in minutes, but I suppose it would be better if it’s hosted on this domain. Nugget’s google sheet could be transformed in a dynamic way to calculate costs, but we should also 100% agree on it’s correctness
i know what you mean, and it made me put up this guidepost of the forum and its underlying guides/threads. however, the forum structure limits the way we can organize it’s content in a way that you would find it.
bluntly speaking 90% of that was written in this forum is lost to outside users because you cannot browse for it efficiently. for example this thread: hardly anyone is going to start at the top and read all the way down here. there is no summary of the findings in this thread…