I thought it was a widely acknowledged view on buyback.
Eg Wikipedia
Share repurchase (or share buyback or stock buyback ) is the re-acquisition by a company of its own shares. It represents a more flexible way (relative to dividends) of returning money to shareholders.
You are free to sell at market prices to anyone at any time.
There is no distribution or direct transfer of money to you, when a company buys shares at market prices.
It “only” helps to potentially prop up the stock price.
Also, with regard to taxation, capital gains are taxed in many (most?) developed countries.
Share repurchase - Wikipedia any idea why wikipedia would present it as a (more flexible) distribution to shareholders (and that’s also how I’ve always seen it mentioned in press, e.g. Matt Levine’s Money Stuff).
The wiki page has a nice table, there’s quite a few country who have lower taxation rates for capital gains (and surprisingly some countries are reversed).
The table appears to be bogus. They list 21.1% “top marginal tax rate” for Switzerland, which is clearly wrong. They either confused it with average tax rate, or they only accounted for federal taxes.
Most likely the latter, it’s pretty hard to have accurate international comparison for those things.
(anyway the point was that not having capital gain tax wasn’t super rare either)
The source is here:
https://www.oecd.org/tax/tax-policy/tax-database/corporate-and-capital-income-tax-explanatory-annex.pdf#page24
I haven’t wrapped around my head around that yet.
It’s a substitute to a distribution to share holders - stimulating the price by lowering availability (number of outstanding shares). Since nothing gets actually distributed to shareholders - but acquired at market price - it’s not taxable.
Continuing with the theme of tax-efficient distributions and different tax rates on dividends vs. capital gains, there is particular potential for tax savings with accumulating ETFs (albeit not in Switzerland):
„For most EU Long Term Investors, having an accumulating ETF is preferable since taxes on dividends are deferred until retirement“
https://www.bankeronwheels.com/distributing-or-accumulating-etf-share-classes/
You don’t seem to pay (income) taxes on accumulating ETFs before you sell them, in most countries in Europe. So if the country doesn’t have (or charge you) an exit tax, you could possibly spend years there while accruing wealth in your fund investments tax-free - before moving away and sell them, again tax-free, in a country that doesn’t tax (personal) capital gains.
There are, of course, also a number of (non-European) countries that don’t have any taxes - question is you can move there and if it’s worth the living expenses - or if you like it at all.
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%.
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.
