Tax optimisation for ETF investing

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?

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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 :wink:

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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?

Please consider also the stock exchange purchase costs which might play a role depending on the size of your transactions

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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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If you can’t get 15% level 2 withholding tax on VT distribution back, you are coming to almost the same expenses as with VWRL:

If your portfolio is large enough, it makes sense then to split it to Developed Markets/ Emerging Markets ETFs to save on TER.

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Other random tidbits:

  • They don’t track the same indexes: VT is FTSE Global All Cap, VWRL is FTSE All World.
  • They don’t have the same holdings: VT has 9318 holdings, VWRL has 3782. AAPL, the biggest stock in both, makes up 3.68% of VT and 4.10% of VWRL.
  • They don’t have the same dividend yield: VT has 2.33%, VWRL has 1.99%.
  • They probably don’t practice the same securities lending policy.

You may have taken that into account in your calculations, I haven’t checked. I’m just pointing it out to underscore that the tax treatment of dividends is but one piece of the puzzle.

Also to note is that US stocks usually have a lower dividend yield, so dividends are not evenly distributed accross countries by market cap (there again, you may have corrected for it already).

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This is super helpful. I read through the thread but one thing I was not sure if I got it correctly is how much I would pay in tax at the end with the marginal tax rate. I saw that one can roughly estimate the marginal tax rate with e.g., Income tax calculator 2023 - Switzerland - salary after tax

Can somebody please help me out if I understood it correctly.
For example, one buys US S&P500 domiciled in the US. Providing one uses a qualified intermediary as broker (e.g., IBKR) after filling out W-8BEN, I’d be taxed 15% (instead of 30%) withholding. This I can claim back using DA-1 form when declaring swiss taxes. Where I am stuck is, dividends that one gets payed need to be declared as gross income and are therefore taxed by swiss authorities. For this, the marginal tax rate is used?

So let’s assume one gets 2000 CHF dividends (gross) per year, they’d be taxed somewhere 20-40% with the marginal tax rate? And if using an irish domiciled ETF I’d be taxed 15% withholding of the dividends (e.g., 0.15*2000=300 CHF assume 100% of the stock is US, which I can’t reclaim) and then again 20-40 marginal tax rate on the 2000 CHF dividends (gross).

No that would be on the net. The US withholding just isn’t visible to you.

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Not you. The fund.  

Unless you take a Synthetic ETF from Invesco or Amundi with 0% US WHT as they are tax exempt according to Hire Act 871m

Anyone living in Basel Stadt and filing taxis with Baltax online? As in the past, VT is not shown as eligible for credit for non-refundable US taxes (only stocks are). There was a workaround mentioned in the past to disable the online retrieval and put in the data manually. This does not seem to work anymore for me. Even if I disable that, as soon as I type in the ISIN, the screen jumps to “Ohne Verrechnungssteuer” and would not let me enter non-refundable taxes. Frustrating :frowning: Grateful if anyone could share a workaround.

Put one line for total brokerage account (no tickers) containing end of year amount, dividends and WHT, and attach the year statement.
Worked 2 years ago at least.

Called them this morning, very friendly, recommended me to just make a comment and they’ll deduct it manually :smiley:

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Same thing happens to me every year. I wrote it under comments and attached some forms, it worked.

How did that work out? Did you get any why?

Also after digging for information, I think I have reliable chain of proof for 0% L2TW on UCITS in Luxemburg:

That was fucking annoying to dig out. Searching in English was all shadowed by US witholding taxes and how much better Ireland is.

Ultimately could not try it. I have most of my assets with a German broker. They produce an annual statement of withholding tax, including also tax paid at the fund level (potentially this can be claimed in German taxes but I don’t know). They stopped however to produce this for customers not tax liable in Germany (I am registered as not tax liable in Germany with them as this avoids having to pay various German WHT). Without a proof, obviously cannot include this in the tax declaration…

A bit late but might help others located in Basel-Stadt. Totally agree that this is frustrating and had the same experience. Once placing the Valoren nr (from ICTax) or ISIN correctly (no spaces as required in the software) the option “Rubrik” which has
A: with Withholding tax (mit Verrechnungssteuer)
B: w/o withholding tax (ohne Verrechnungssteuer)
C: DA-1/R-US
switches immediately to B and does not allow you to select A or C.
A workaround I found was to place the Valoren Nr or ISIN at the beginning correctly, filling everything out, e.g., when and how many shares were bought over the year. Then at the end placing a space in the Valoren Nr or ISIN which then enables you to select the Section Rubrik again and it still recognizes the initial stock information as well as you can adjust the other values. On top of that, I agree, I would place A comment at the end of the pop up window under “Art/Schuldner/Bank”.

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Hi to all,

I read through the post and trying to learn some stuff. I just got started with a humble amount on IB, bought mainly US ETF S&P500 and VOO.

Anyone out there willing to share some tips on how to handle the tax declaration?
I’m trying to understand the basics. How does it work with the profit one would make? Does it only count when one sells a stock and gets cash dividends?

Or anyone could recommend Steuerberater? I’m based in Zürich.

Apologies for my basic questions, I’m a bit clueless. Any help appreciated! Thanks!