Hi, is anyone buying VWRL on EBS (Swiss Exchange) in CHF or everyone here converting to USD and buying VT or VWRD on LSE?
Why do you ask?
I buy VWRL on Degiro in EUR on Xetra because there are no costs per trade except for the 0.1% Degiro conversion fee
@yetanothername does Degiro have a good spread on exchanging currencies? Or is it all included on the 0.1%?
Depends on your broker. If you are with a Swiss broker, it may be the cheapest way due to fees and poor currency exchange rates. If this is the case, probably best to switch brokers.
I am on IB and I am trying to decide whether to buy from EBS (I dont need to convert my CHF) or LSE (I need to convert to USD).
Then your best choice is VT.
0.3$ per transaction. 0.08% TER and no stamp fees.
If already on IB I definitely second what @glina says.
Oh and buy VT in NY, not LSE.
Right, if you use Swissquote or a Swissbroker, VWRL on SIX/EBS is a good choice.
If you use IB, VT is the best choice. Unless you need absolutely an Irish ETFs like VWRL. I don’t want to enter in detail, but in some cases, it could make sense.
I am buying VT in USD on NYSE Arca through IB.
One such case would be if your wealth is over the estate tax exemption limit, that is $11 million. The hefty 40% in case you die easily overweighs any benefits of VT over VWRL. But somehow I feel not many in this forum have to battle with this problem.
+2$ for FX.
Being an expat living in Switzerland, the dividend is taxed at 15% for VT. But if I leave Switzerland for a country with no tax treaty with US, the dividend tax will go to 30%.
In this case, I would guess that holding VWRL would be more advantageous since the dividend tax would still be 15%.
Is this understanding correct?
Being domiciled in Switzerland, you pay 15% WTAX on VT. Then you pay your regular income tax on that income.
withholding tax = 15% * dividend income
income tax = tax rate * dividend income
You can reclaim the withholding tax, but you can’t reclaim more than you paid in income tax, so:
tax refund = min(15%, tax rate) * dividend income
If your tax rate is over 15%, you will get the full refund and effectively will have paid no withholding tax.
Then the other case: if you live in another country, you have to know their tax law. I don’t know if you can reclaim the withholding tax in other countries, especially the ones with no deal with USA (30% withholding tax).
In case of Ireland-based ETFs, the ETF itself pays the 15% withholding tax and it’s a done deal, you can’t reclaim any of it.
If anyone is interested, I had a quick look on how the situation is in Poland. If you are with a broker who can enforce the W8BEN form, you will also only pay 15% withholding tax, which you can reclaim, same as in Switzerland.
Actually, I found a table with the list of withholding tax rates, and almost all European countries have 15%. Below the PDF and the website I found it on.
Thanks Bojack! The information you have provided is very useful. The table could serve as a nice reference on where to retire
As mostly mentioned by @Bojack , the three cases:
- Estate tax
- Not able to reclaim withholding taxes
- Force to buy European ETFs. This is the case if you live in EU outside Switzerland
Has anyone opened a brokerage directly in USA (instead of IB) in view of the no-fee when buying/selling ETFs?
True, forgot about this “little” problem.
Well, maybe. Even if the country is not on the list and you have to pay 30% tax, you may still be able to reclaim it in that country. But to reclaim it fully, the income tax rate in that country would have to be over 30%. In any case, when going with the Irish ETF, the loss on withholding tax is 15%.
But you will probably only get around 2% of your wealth through dividend. The other 2% will come from capital gains. Let’s say you invest 1’000 today and you let it grow to 10’000, then you sell it. You have just realized the capital gains of 9’000 (or 90%). Now imagine you live in Poland, where capital gains are taxed 19%, or some other country where it’s taxed as regular income. You could look at an annual tax loss of 90% * 19% = 18%.
This is such an important reminder! Sometimes when looking for advantages in fractions of a percentage point, we forget the bigger picture of capital gains…
By the way, countries implemented the directive in various ways. In some countries it doesn’t seem too hard to be classified as a professional investor (e.g. only need high net worth).