@Bojack MSCI and VWRL don’t follow the same indexes. To make a good comparison, you should take MSCI World ETFs . Anyway, the differences dividend differences are too high in your table.
I have tried to compare multiple ETFs with the ICTAX data (all currency is CHF). There are no major trends and now I have even more questions .
Few observations:
IE00BK1PV551 distributes only once a year. This would potentially have an impact on the ratio
I have some doubt about the return data from justETF
You really need to compare the same indices and the Vanguard ETF tracks the FTSE all World Index That includes approx 10% EM whereas MSCI World is without EM. Having said that there should not be a difference between MSCI World ETFs on the dividend. The dividend can be easily looked at if you look at the index and I guess this is how the tax authorities come up with the dividend yield. For the return data I would only compare those synthetic ETFs that replicate the gross index which is Invesco and Amundi vs the Physical Ishares and Vanguard. Here there will be a higher payout for the synthetic as they do not hold back 15% US Witholding Tax. If you take Lyxor, DBX and some of the other synthetic providers there can be indeed a difference in the payout as the replicate the Net Index and agree with an investment bank on a swap term for 12months and meanwhile if the dividend yield changes you still will get what was agreed on the time the contract between the ETF and the Investment Bank was closed for the SWAP. So best is reall comparing those synthetic ETFs that follow the Hire Act871m rule which is the Invesco and Amundi ETF and compare that to the physical replicated ETFs. Btw on some of the platforms it can happen that there are some data errors.Maybe this is also the reason for divergence but this is another topic…
I don’t see how the 10% emerging market could cause such a huge disproportion. But ok, let’s try with the iShares MSCI World accumulating.
ETF Year Income Value Ratio
MXWO 2018 1.284 51.78 2.48%
MXWO 2019 1.661 65.79 2.52%
MXWO 2020 ?.??? 69.22 ?.??%
IWDA 2018 1.037 48.49 2.14%
IWDA 2019 1.115 61.10 1.83%
IWDA 2020 0.982 64.85 1.51%
So for 2019 the difference was huge, 0.7%. Put 40% income tax on that, you got yourself a 0.3% loss. So not worth it, really, at least for that year. And for 2020 there is still no data, so if I wanted to file my tax declaration today, I wonder how would that work.
Does anyone own a NL-ETF (Netherland ISIN, eg VanEck NL0009690239, NL0009690221)? Wondering what the L2WT is for Swiss tax payers. Ie do they deduct anything from dividend payouts like US-ISINs or is it 0% like IE-ISINs? Thx!
I (… tried to…) read it - also the pwc one at Netherlands - Corporate - Withholding taxes - but I’m not certain enough I get all the tax language correct: I think that 15% WHT is deduced and you can get that accounted for swiss tax (DA-M) - in which case it would be similar to the 15% US-L2-WHT - but it’s bit confusing and I might totally misunderstand it.
That’s why I was hoping someone who already bought a NL-domiciled ETF paying taxes in CH could explain what they experienced.
If NL is similar to US with L2-WHT, then it would be less ideal to buy than eg IE domiciled ETFs … as with IE you pay 0% L2-WHT and that does make life a bit easier in my view.
I think this question has been asked before but I have still not a clear answer.
I am a EU Citizen on a B permit living in Canton Lucerne. I earn less than 120k per year and since recently I have about 20 k CHF invested in distributing ETFs on Degiro (iShares Core SPI ETF (CH) and Vanguard FTSE All-World UCITS ETF USD Dis). I have recently been paid out some small dividends and it looks like Degiro has held 35% of it for tax. Given that I am taxed at source, do I need to do anything else to declare the future dividends that I will be paid out?
"Personen, die gemäss § 101 Absatz 1 der Quellensteuer unterliegen, werden nachträglich im ordentlichen Verfahren veranlagt, wenn (…) b. sie über Vermögen und Einkünfte verfügen, die nicht der Quellensteuer unterliegen."
(Note: b should refer to the Quellensteuer on your employment income according to this cantonal law. Do not confuse this with other withholding taxes you or your dividends may be subject to somewhere in the world. Put differently, your dividends will constitute income that is not subject to this withholding tax and would appear to need additional declaration - even if a “withholding tax” of some sorts is withheld on it somewhere in the world)
The withholding was on a dividend of the iShares Core SPI ETF (CH), so I believe it was withheld by the swiss authority?
Ok that is what I thought, but I was hoping that there was a threshold below which one does not need to declare? If possible I would rather avoid doing a full declaration when my salary is on Quellensteuer, so far I have only been paid 5 CHF of dividends. I do not speak good German so I am struggling to find information specific to the Luzern Canton.
Such a threshold exists in other cantons (e.g. CHF 3’000 in ZH), however, I can’t find a threshold either for Lucerne.
As I understand it, you aren’t required to do a full tax declaration if your net wealth is below CHF 62 500 and 35% Swiss withholding tax is applied to all your dividends. Those dividends should be considered taxed at source but you also wouldn’t get anything of those 35% back without a full tax declaration.
However, as you also have an Ireland-domiciled ETF where dividends are not subject to (Swiss) withholding tax and there doesn’t appear to be a threshold in Lucerne, my understanding is that you are obligated to do a full tax declaration.
If in doubt, I’d ask the “Gemeindesteueramt”. Hopefully, at least someone there speaks English.
Sorry for opening up this legacy thread - but it is the most fitting and I do not want to open a new thread for something that has been discussed this often.
I spent a lot of time reading and working through MP´s, Boglehead´s and this explanation and I am pretty confident I know the theoretical difference between IE and US ETFs for a Swiss investor: To put it short*,
IE ETF you lose ~15% no matter what, as that is the tax rate between the US company and the fund itself. However, you do not pay tax when you yourself receive the dividend.
So: Company ➔ -15% ➔ ETF ➔ -0% ➔ You
US ETF you do not lose anything between the company and the fund, but as Swiss you lose either 30% or much more likely 15% (with a filed W8-BEN) to taxes, which you can however get back through a tax declaration.
So: Company ➔ -0% ➔ ETF ➔ -15**% ➔ You
**: As explained, can be -30/-15/0 depending on your filing.
Now my big riddle is this - shouldn’t we see a roughly 15% better performance when comparing the dividends of a US ETF to an IE ETF on paper? Because that is the 15% we actually see overall. The US ETF deprecating -15%** should only be applied once the dividend hits the depot.
But, alas, if I open the statistics I see that they tend to be almost identical for both; here an example for VT and VWRL which might not have exactly the same companies, but the dividend yields are scarily close and no clear 15% difference is seen:
So if I look in my depot now, only VT gets subtracted another 15% before payout, so where am I going awfully wrong?
Cheers and thanks in advance!
*for the sake of the argument I am conveniently ignoring that the considerations technically only apply to US stocks which make up about 57% of these ETFs, but every single post does the same…
The advantage of VT vs. VWRL in level 2 withholding tax is more like 7%.
7% of 2% dividend yield is 0.14%. There is another disadvantage of VWRL, 0.14% higher TER. These costs are also taken from dividends
So the difference of dividends distributed by VT vs. VWRL should be more like 0.28% p.a. I have no idea why you don’t see this difference. And I also don’t think these are index yields. I guess it is some kind of accounting artefact.
Try to check manually actual value distributed at a specific date divided by the closing price of the ETF unit a day before and sum up values for one year?
I edited my post above and did the calculation for VWRD before you submitted yours.
And though it’s just a singular data point, seems you were pretty right on target
Hi, thank you both for the replies and the interesting links.
Where I am coming from: I am still in source tax and it is highly advantageous for me compared to regular tax. I cannot get dividends back without a ‘nachträgliche ordentliche Veranlagung’, which I don’t want to do as it costs me more money than the dividends bring.
So of course, when the second tax is 0% thanks to reimbursement VT comes out on top. Interestingly enough, if I do count those 15% tax on 2% of the dividend i get 0.03% disadvantage - ironically almost the same as the 0.028% advantage we get from L1 tax and TER difference.
So for someone in source tax the two are almost identical? In that case VT only makes sense if you plan on leaving source tax at some point in your career, cause from that moment on you can reclaim and regain the advantage.
Edit: adding to that, as someone who plans to retire in EU (or, definitely not in the US) it is also advantageous to have the ETF listet in EUR already. I know exchange rate doesn’t play a role for performance, but simply not having to exchange when drawing money from it later is an advantage, no?
Keep in mind that you’re required to switch to ordinary tax assessment anyway as soon as your untaxed dividend income and/or wealth reaches a certain number (depending on the canton). I.e. while you’re below that number, the difference is probably tiny in absolute terms.
There is an extra 0 in your numbers. It’s 0.3% and 0.28%.
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