Tax optimisation for ETF investing

[male]

@flumpertrank

The DA-1 is for any country levying withholding tax that happens to have a dual-taxation agreement with Switzerland, Thurgau have a nice list of those:

Thanks @flumpertrank for the hint! (The link didn’t work for me - but I found the same one here)

@rolandinho

Are u referring to Post 1 of this thread? Where is the wrong bit? It says L2WT is zero for IE and reclaimable for US & makes the correct analysis/recommendation IMO.

You’re right, it does say L2WT is reclaimable for US. But what I find wrong (or misleading) in this context are the conclusions - because if L2WT is reclaimable (leaving aside how complicated that might be) then it should be excluded from the calculation mostly! Because even if with IE L2WT is 0%, you’re still going to have to pay CH income taxes on the dividend (which is of course very individual depending on your tax bracket).

PS: I’m saying “mostly excluded” because one could argue that it would be money (USD) blocked for a couple months, maybe a year. And in that time you have currency and missing time in the market risk. So you could attribute indeed like 10-15% of yearly “cost” of that L2WT after all. BUT only on the part which you wouldn’t pay to the CH tax authorities anyway. So assuming you have a tax bracket which is in the area of 15% or higher, it doesn’t matter still (unless you go with a non-QI and pay 30% L2WT - then you’d have to include this cost imv)

So again: I’d argue L2WT should be ignored for the cost comparison.

Based on that, the following statement is actually wrong, as the TWR is not reflecting your costs accurately:

@nugget

however, based on this point of view, US and IE domiciled funds are perfectly equal for the total world case, assuming you file the W8-BEN. For the SP500 case, the US version is slightly superior. For the EM funds, the IE version is superior: Irelands tax treaties seem to kick in.

… if you remove L2WT from the picture, the numbers (taking latest figures for TER / L1WT based on latest annual reports from vanguard.com and vanguard.ch) would be:

       TER     L1WT     TER+L1WT(assuming 2.3% div)
VT    0.10%    5.53%    0.23%
VWRL  0.25%   12.43%    0.54%

VOO   0.05%    0.0%     0.05%
VUSA  0.07%   14.72%    0.41%

VWO   0.14%    9.72%    0.36%
VFEM  0.25%   10.67%    0.50%

(Note that VWO has lower L1WT than VFEM, if I did read the annual reports right - presumably these numbers change over the years, so perhaps it should be assumed they’re equal for the calculation, not sure…)

Based on these numbers the US domiciled funds (VT/VOO/VWO) would always have been better than the corresponding IE ones. There was no case the IE ones were better - which is a disappointment for me actually! I had hoped those holding non-US stocks to be better in IE but that seems not necessarily to be the case…

Now while I’m at it, one final aspect. It looks like for buying US ETFs you really want a broker that is a Qualified Intermediary. From other posts discussing this (including this one) it seems Interactive Brokers, Swissquotes are, while CornerTrader and Degiro aren’t. Is anyone aware of some official list where this could be confirmed? For example, what’s with Saxo Bank? PostFinance? Strateo?

And finally, if someone, for some unknown reason, would choose to buy a US ETF with a non QI broker, I read you could file a form to reclaim the “2nd 15%” withheld from IRS. Sounds utterly complicated and unsure to me. But just for the sake of it, has anyone tried this? Is it “doable”?