You are right. Invesco states this also on their website. It’s also accumulating which would reduce my costs even further (as I don’t have to reinvest the dividends with a 0.9% buying fee). Would you favour this over VTI in my case?
There is still the counterparty risk and we are talking about life savings in the end.
Well, it depends on your aversion about synthetic ETF, not sure if they are riskier than the usual physical replication.
You have the S&P500 one : Invesco S&P 500 UCITS ETF Acc | Invesco Switzerland
And the MSCI USA one : Invesco MSCI USA UCITS ETF Acc | Invesco Switzerland
In your case, if buying in USD is not to expensive, it could be a great solution. The fact that it is also a capitalisation one offer you peace of mind about dividend conversion.
This is my point of view.
Their reference benchmark is SPTR500N, I guess this assumes 30% tax on dividends. Might be interesting to compare the returns to SPTR500 instead.
There is even a CHF-version: https://www.justetf.com/ch/etf-profile.html?isin=IE00B60SX170#uebersicht
Which would further reduce my buying costs as I could just buy it without the FX exchange.
I just wonder what happened after 2017 when this ETF started outperforming its underlying index. Total outperformance is 7% if looking at the last 10 years. Maybe as @nabalzbhf pointed out it’s due to the performance drag of withholding taxes which don’t apply for this fund.
Are you sure about the CHF version? I think that justETF convert it automatically in the currency exchange website version if you are a swiss investor because it said that you can buy this ETF in USD on the SIX Swiss Exchange.
Maybe if you trade it on the BX Bern Exchange?
Iirc this was discussed before, IRS rules allowed to remove some tax drag for those ETFs. I don’t remember the detail and whether there is now no tax drag at all.
Just be careful about the index used. We need to compare with MSCI USA gross index
https://www.msci.com/documents/10199/67a768a1-71d0-4bd0-8d7e-f7b53e8d0d9f
Invesco ETF returns:
MSCI USA gross returns:
As my DA-1 refund has been rejected, the last two years as my income tax rate is lower than 15%.
I’ll move to a synthetic ETF at least for the US.
Maybe Invesco MSCI USA UCITS ETF and EXUS
Denied in full? Or did they credit some, so you just don’t pay additional tax on the claimed dividends?
yes, denied in full.
The dividends that I have declared is already the dividend minus the WH tax.
Hm, that doesn’t seem lawful. From the thread you linked in 2020:
Perhaps the problem is that you have reported the dividends net of withholding tax? If I remember correctly, tax credit is claimed on gross dividends.
Which index version it tracks? The Net Total Return with 30% L1 withholding tax on dividends calculated in? Any Irish ETF will pay only 15%.
https://forum.mustachianpost.com/t/tax-optimisation-for-etf-investing/67/404
Sorry, I declare what was on ICTAX, so it is gross. I need to check my tax declaration to see if they have reduce the income by the non refunded amount.
As it’s synthetic no L1 or L2 withholding tax applies
Btw, a good article
I am not talking about the taxes applied to the dividends distributed by the ETF!
I will reformulate my question: how do they (or, actually, their counterparty) calculate the value of the swap the fund is invested into?
You can also do an empirical analysis:
The ETF replicates the Gross Index already without 30% US WHT deduction
It seems that IRS is working on ending this synthetic ETF tax optimization for 2025.
That‘s big. This basically KILLS all the synthetic etfs and will have a big fallout. Would make them strictly worse.
Since this is the fifth time the IRS has delayed the broader application of Section 871(m) to Non-Delta 1 Transactions and combination trades, it raises the question whether the Regulations will ever fully go into effect. The U.S. Treasury Department had previously targeted the Section 871(m) regime for reform in an effort to mitigate burdens imposed on taxpayers, so it remains to be seen whether the current relief will be extended permanently over time.
because it is a synthetic ETF (use swap instead of holding the US stocks)
