Yes just realized 2’ ago, sorry for the dumb question !
In the case of these two, they aren’t tracking the same index. MSCI World should have a higher share of US securities, which, on average, have lower dividend payout ratios than many other countries.
Last but not least, there might be difference in replication and costs.
1 Like
Guys I am very much surprised to see you not mentioning or investing in Invesco ETFs. These guys offer on S&P 500, MSCI USA and MSCI World the cheapest and best ETF in the market. The US exposure has a total fee of 0.05% AND this is the clue there is a 0% US Witholding Tax on the Dividends whereas with Vanguard and Ishares you pay 15%.No matter if the Irish domicile or you reclaim with the W8 form. Since 2017 and the HireAct871m Invesco replicates the Gross Index on S&P500, MSCI USA, MSCI World, S&P 500 ESG and S&P 600 Small Cap. All of those without reclaiming anything but just with 100% of the dividends!!!
Maybe you should revisit your portfolios. Because currently you pay 6times the management fee on taxes!!! - 30bps (2% Dividend Yield x 15% US Witholding Tax)
1 Like
You still pay the Swiss tax on those dividends, so it doesn’t matter.
The 15% US WHT are just used to compensate for some of your Swiss due taxes (due to double-taxation treaty).
So no real difference at the end point for a CH-based investor, unless I am missing something (indeed I do - someone having income tax <15%).
And VTI costs 0.03% TER, vs. that 0.05%. (not a big deal)
1 Like
There is a big difference because the US tax is taken at the source and you only receive 85% of the dividends. The Swiss tax applies no matter. So you pay 15% additional Tax. There were many article in NZZ, F&W etc exactly on this topic. Many investors Switch therefore from physical ETFs to synthetic that replicate the gross index (Hire Act 871m) is the clue.
Your dividends are taxed as income at your income tax rate.
It only could matter if your income tax rate is lower than that WHT 15%.
Not in my case, but could be in other cantons - I’ll let the others living there chime in.
P.S. What is the VTI equivalent with Invesco, i.e. US Total Market (not SP500)? I cannot identify it in their database.
It is the S&P 500 from Invesco:
That’s not the Total Market, I asked “not SP500”.
They don’t seem to have that on offer.
Well it makes a difference if you are taxed from 100 or 85…I earn rather more and are taxed on the 100…makes sense right? 
Ah what they have is MSCI World…
I suggest you read up on how taxation on your dividends (including international double-taxation treaties) works, and come back to discuss.
Please read the article that I send then you will understand.
Yes, there might not be actual dividend payments from U.S. shares to the fund, so there might not be something that withholding tax can be withheld from. The fund will likely, as far as I understand, incorporate equivalent returns from dividends synthetic replication - that is, they will likely credit a „virtual dividend“ to their shareholders, as part of their swap construction.
So will the (Swiss) authority.
Put bluntly, if there‘s no actual dividend payments from the fund, the tax authority will, quite literally, make stuff up out of thin air - and tax you on it.
2 Likes
So far they did not. As long as it is possible I am far better off with the synthetic UCITs ETFs…
Also those synthetic ETFs actually target the total net return benchmark. So if they don’t heavily beat the benchmark, it’s definitely not worth it. (Benchmark will use 30% withholding for US dividend, it takes the least favorable withholding rate possible).
Even a regular irish S&P500 ETF should beat it since it has a 15% treaty rate.
And as @San_Francisco says, unless the tax people haven’t caught up with it yet and it has a low “income tax” number due to being synthetic, you’re not saving on the swiss tax.
Just look it up. Even though it’s an accumulating ETF that doesn’s receive dividends, there’s a taxable income figure.
Based on the tax value, that‘s about 2.3% income.
3 Likes
Now here is where it get’s kind of funny (unless I am missing something):
-
From a quick look, dividend S&P500’s dividend yield shouldn’t even habve been 2.3% for 2019, more like 1.8%.
-
Vanguard’s (physically replicating but distributing) S&P 500 ETF IE00B3XXRP09 lists taxable income of only 1.8%.
-
iShares’ IE00B5BMR087 is physically replicating and accumulating as well - but has a taxable income of only 1.4%.
-
Oh, Vanguard has accumulating units as well (and yes, they’re physically replicating as well): IE00BFMXXD54, with taxable income of 0.2%. EDIT: This is a new ETF that was issued mid-year.
Disclaimer: I haven’t compared actual performance between these funds yet.
2 Likes
Seems to track the same as the ishares one: TradingView Chart — TradingView
So you likely lose the 15% withholding compared to US domiciled and the swiss taxes are higher.
If you want to avoid dividends you can just buy futures on an index. For example CME group S&P500 e-minis.
Maybe the cantonal authority will deem you a professional investor if you have your entire portfolio in stock index futures and charge you capital gains: “Private investors do not use derivatives (especially options), unless if it is for hedging the risks on their securities.”
But, would be interested in hearing if anyone has tried this.