Optimization of portfolio (withholding taxes)

[Brndete]

I asked for a table comparing numbers from a screenshot from your 2021 analysis (linked above from @Abs_max ) with the GTP numbers.

Country	Region	Weight PI	Weight GTP	PI US	GTP US	PI IE	GTP IE
United States	US	60.1	58.0	0.0	0.0	15.0	15.0
Japan	Japan	5.8	6.2	10.0	10.0	15.0	15.0
China (mainland)	Emerging markets	4.0	4.0	10.0	10.0	10.0	10.0
United Kingdom	Developed Europe	3.7	3.8	0.0	0.0	0.0	0.0
Canada	Canada	2.9	3.2	15.0	15.0	25.0	25.0
France	Developed Europe	2.9	3.1	15.0	15.0	3.0	15.0
Switzerland	Developed Europe	2.6	2.8	17.5	15.0	35.0	15.0
Germany	Developed Europe	2.4	2.6	12.0	15.0	12.8	15.0
Australia	Asia-Pacific ex Japan	1.8	2.1	0.0	0.0	0.0	15.0
Taiwan	Emerging markets	1.7	1.8	20.0	21.0	20.0	21.0
South Korea	Emerging markets	1.5	1.6	17.6	22.0	22.0	22.0
India	Emerging markets	1.3	1.4	7.5	25.0	5.0	10.0
Netherlands	Developed Europe	1.3	1.1	15.0	15.0	13.0	15.0
Sweden	Developed Europe	1.0	0.9	8.4	15.0	3.0	15.0
Hong Kong	Asia-Pacific ex Japan	0.8	0.8	0.0	0.0	0.0	0.0
Denmark	Developed Europe	0.7	0.7	15.0	15.0	15.0	15.0
Spain	Developed Europe	0.6	0.6	15.0	15.0	15.0	15.0
Italy	Developed Europe	0.6	0.5	15.0	15.0	16.0	15.0
Brazil	Emerging markets	0.5	0.4	8.2	15.0	13.0	15.0

Let’s ignore the weighting, might be timing or index used and it’s close enough. Could you comment e.g. the 3% for France with IE-domicile, or 17.5% for Switzerland with US domicile? I did find the 15% in the DTA, but haven’t read the fine-print.

Here’s the cheeky GTP answer, not mine

France

• France-US DTA: Typically, the withholding tax on dividends paid from France to the US is 15%【source: US-France Tax Treaty】.
• France-Ireland DTA: Typically, the withholding tax on dividends paid from France to Ireland is 15%【source: Ireland-France Tax Treaty】.

The 3% figure for PI IE seems unusual and incorrect.

The GTP rates seem to be more accurate based on the double tax agreements and authoritative sources. The discrepancies in the PI rates might be due to incorrect assumptions or outdated information.

[Dr.PI]

@Brndete

Could you comment e.g. the 3% for France with IE-domicile, or 17.5% for Switzerland with US domicile?

No I can’t . I suspect some tax optimization techniques behind the scenes such as use of derivatives around ex dividend dates or whatnot. I also suspect that inside EU it is easy to move stocks to an office in the respective county to avoid WHT and then claim income from the fully own subsidiaries or something.

Or if US ETFs invest via ADRs, the withholding tax is retained at the ADR level and this loss is not visible in the funds’ report.

[leman]

@Joe_Coconut

Found a great page by PWC, listing all country relations for WHT: France - Corporate - Withholding taxes

Seems like the US enjoys the same treatment as LUX/IE for France, germany, China etc. And even more favorable for Japan.

That is new information to me. I always acted under the assumption that it is better, from a tax perspective, to own:

• US-domiciled ETFs for US exposure,
• CH-domiciled ETFs for CH exposure,
• IE UCITS for everything else.

Is my knowledge obsolete?

Edit: Apologies - I stumbled upon this, and will do some homework first

Splitting the world: creating tax-advantaged global stocks portfolio using funds in 3a account

An N+1st attempt to summarize information helping to optimize taxes arising from investments with ETFs. Some preliminary comments: I am going to mostly refer to MSCI indices. Their definition/composition can be found at msci.com (search for pdf factsheets). MSCI ACWI is all-countries index: 50 countries, 23 Developed Markets, 27 Emerging Markets. An up to date country weights can be found at ACWI | SPYY : SPDR® MSCI ACWI UCITS ETF (see Holdings → Geographical Weights).

[Tony1337]

@leman

• US-domiciled ETFs for US exposure,
• CH-domiciled ETFs for CH exposure,
• IE UCITS for everything else.

This is still basically the status-quo from a practical perspective (and just market tracking).

If you will always get 100% of your DA-1, ex-US US domiciled is slightly ahead of IE on average. Plus the funds have lower TER. And you don‘t need multiple funds for developed and emerging markets.

But it‘s very dependent on if you can ensure the full DA-1 credit.
Also you are giving the US 15% tax for free, and costing Switzerland tax revenue at the same time.
That‘s the moral downside.
And ucits is a hedge against US regulatory risks, estate tax etc.

[leman]

Thank you!

@Tony1337

But it‘s very dependent on if you can ensure the full DA-1 credit.

Until now, I have always received full DA-1 credit, and didn’t know it could be at risk.
The portfolio is:
USXF for US exposure
DMXF for developed markets (ex-US) exposure
EMXF for emerging markets exposure.