I am not sure what withholding MSCI USA assumes. Maybe they assume 30% as standard while creating index calculations
Another complication is to compare returns because accumulating index funds with Swiss withholding tax would not have same returns as IE ETFs without any L2tw.
I fully understand VT (at IB) is best. Infact I use it myself. But I also would like to have an European ETF / Fund (for a portion of my portfolio) as alternate which can be bought via Swiss brokers. That’s why I was investigating this.
Looks like VWRL still wins even with Swiss stamp duties.
"The umbrella fund and sub-funds have no legal personality in Switzerland. They are subject to neither income tax nor capital gains tax.
The Swiss withholding tax deducted from domestic income in the sub-funds can be reclaimed in full by the fund management company for the relevant sub-fund. Any income and capital gains realised abroad may be subject to the relevant withholding tax deductions imposed by the country of investment. These taxes will, as far as possible, be reclaimed by the fund management company on behalf of investors resident in Switzerland under the terms of double taxation treaties or other such agreements."
The umbrella fund and sub-funds are registered with the US IRS as registered deemed compliant financial institutions under model 2 IGA within the meaning of sections 1471-1474 of the US Internal Revenue Code (Foreign Account Tax Compliance Act, including the relevant orders, “FATCA”)"
PS: Someone please translate the legalese and tell me if (as the documentation and info given to @Abs_maxkind of suggests to the layman?) these funds can be fiscally transparent, i.e. work as flow-through entities, with dividend distributions attributed to the Swiss resident personal investor, rather than the fund/fund company itself.
There’s a lamentable lack of tax lawyers well-versed in international taxation of securities investments on this forum. (That said, as someone considering himself interested slightly above-average in such matters compared to the average person on the street… if I were such a lawyer, I’d probably charge others the shit for my expertise and retire early, rather than giving it away for free on random internet forums).
I am considering selling a part of my portolio of irish-domiciled ETF as the majority of my portolio is US-domiciled ETFs and it would probably save me another 100 CHF/year due to DA-1.
As I generally have a buy-and-hold strategy, I never sold stock before, so I was wondering if I might miss something obvious. I checked the professional trader rules and I know there is a lot of fear mongering and the chances of being recognized as professional trader are extremely low.
I just wanted to check if I might miss something.
The ETFs were bought more than 6 months ago, I would make gains from the sell but I have a job and it would not be 50% of my income. Moreover, I would reinvest everything in a US-domiciled ETF.
Does it make sense in cases like this to email the tax authority or is this completely unnecessary?
Just be aware that your ETFs buy and sell might not trigger Wash sales reporting. Having said that I assume these ETFs might track different indices anyways and hence might not be part of Wash Sales logic
Saxo also applies eu law to swiss investors (kid requirement etc). You can freely disregard anything from there.
Also wash sales are only relevant when you incure a capital loss and then have that loss to potentially reduce taxes in the future.
That‘s why americans do tax loss harvesting (while avoiding wash sales).
Neither is applicable in Switzerland as there are no capital gains taxes.
said Index fund takes MSCI US NET Dividend as Benchmark (aka post FULL 30% Withholding Tax). Over the last 5 years it misses its Benchmark by about 0.24% p.a., which is 0.02% p.a.a worse than its TER. UBS is just terribly bad in managing Index Funds. The question is if anything will change there, as CS was terribly good in managing Index Funds.
The competitive CS fund takes the same benchmark, applies roughly the same TER but bets its TER by about 0.03% p.a. Still not a super good result actually; US shares should just be held through an ETF and this IE domiciled.
Just wanted to provide an update. It turns out the information provided to me was not completely accurate. So for US stocks, the order of domicile seems to be following
Why does this finpension articles just completely omit that you can in fact buy US etfs at ibkr and swissquote and others? It‘s like lying in your face.
Competition with their upcoming investment solution.
In my understanding, we are accessing US domiciled funds via IBRK (or Swissquote) because the brokers in question are acting as ‘execution only’. Meaning the investor has to sought these funds out. Most likely ( and I am 0paraphrasing my understanding here ) that FIDLEG or broker’s interpretation of it disallows brokers to actively advertise US funds to Swiss private investors.
If you search this forum you can find posts/ thread about Swiss investors potentially losing access to US domiciled ETFs in 2021/22 if / when IBKR/Swissquote decide to follow other brokers to make their life simpler (aka blocking Swiss private investor access to US funds) just as they have done so for EU residents following MIFID.
I think they are just saying it is difficult to buy US ETfs. And in fact it is difficult for retail investors. Only IB and SQ support that and there are so many banks and brokers in Switzerland. Just because 2 brokers allow it, doesn’t make it easy.
I would say that the spirit of the document is to explain tax advantages and disadvantages. I think they did a good job. They don’t have to recommend brokers on their webpage.
Thanks to @nugget’s sheet I tried to compare the total costs of an IE vs US domiciled world portfolio. Even with the Bogleheads Wiki it seems some of these values for L1TW or L2TW are estimations and not that easy to obtain.
One thing I am still struggling with is understanding why reclaiming the 15% L2TW for US ETFs via DA-1 does not lead to 0%.
If I am correct it requires a tax rate >15% and no mortgage. However, somebody mentioned the practical difference is 0.3% * (1- marginal tax rate). I don’t really understand why. 0.3% are clear (15% WHT of 2% dividends) but the marginal tax rate would apply to IE dividends also. What am I missing?
If I assume 0% for L2WT and compare VXUS vs VFEM&VEVE the total costs seem very similar.
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I have some VEUR.SW at Swissquote to give you an example.