I have been living in Switzerland for a few years (I am Italian) and at some point in the next 2-3 years I might come back to Italy. In these years I have been investing in ETFs and most specifically into VT / VTI / VOO.
I am still investing, primarily in VT, but I think I need to start thinking about the future and what that means in case I move back to Italy. Considering that as an Italian resident I wouldn’t be able to use VT anymore, what’s my best strategy and what could I do with my ETFs at that point? Should I start investing now in the EU equivalent of VT?
I would keep VT, sell everything when going to Italy and then buy VWRL. Transaction costs are close to zero, and the risk that stocks will rise by 20% in this short amount of time as well. Plus I would look out for changing the broker from IB to an Italian one, since it might be already compliant with local tax forms, and transferring funds is often easier than transferring shares.
You won’t be able to buy VT anymore as Italian resident (unless you qualify or EU fixes the regulations), however, as far as I know, EU residents can still hold VT they bought before. This means it would be possible to keep VT and switch to buying VWRL when moving to Italy. Whether this makes sense depends on taxing details in Italy (incl. US estate tax treaty).
If it’s not clear yet whether you’ll move back to Italy, I’d probably buy VWRL (or the cheaper combination VEVE+VFEM) from now on but keep the VT you already have. If/when you move, you can still decide whether to swap the VT shares as well or keep holding them.
You should also check whether distributing or accumulating ETFs are better tax-wise in Italy, if there is a difference (there is no difference in Switzerland).
Just some transaction costs which are negligible (you sell one day before your official move date, transfer your funds to the new account in Italy the same day, buy again one day after the move day). Risk of huge variations is small and will not be a big thing if your investment horizon is long enough. Furthermore you might be forced to do it anyway because you will have to change broker from IB to an Italian one (otherwise capital tax gain might be nightmare).
Finally Jay’s comment is valid that accumulating ETFs might have a preferential tax treatment (by not taxing until you realize the gains). To be checked though.
For an eventual move to France for myself I will probably take that option, because it allows kind of a reset for tax purposes which is easy to prove.
Got it thanks @Patirou and thanks @jay.
What’s the best version of VWRL to buy (assuming this is accumulating, sorry I need to check), I see the UK version and then even an italian one but I am always worried about the liquidity of these smaller funds.
VWRL is always distributing, and I think what you are talking about is buying the same fund on different exchanges (Rome or London), doesn’t change much. You can also buy it on Xetra. Amsterdam etc. Basically the same product (VWRL), but in different supermarkets (exchanges). Might be a bit cheaper here or there, but that is negligible in the grand scheme of things.
The accumulating equivalent would be VWRP/VWRA/VWCE with another letter according to which exchange and currency.
Sell and rebuy if you anticipate substantial capital gains taxes. Keep if you don’t.
That said, you can likely sell, realise gains and rebuy a position in US ETFs while still in Switzerland.
Bottom line: if Italy would tax capital gains made while residing Switzerland (such as by applying purchase price as the basis for taxation, rather than current price at time of immigration), sell first.