Taxes/TER optimisation

Taxes
1

Hello,

I would like some advices about the following dilemma. I am a Swiss resident, using Swiss broker (CornerTrader).

Now, let’s imagine I want to invest in the S&P Small Caps 600 index. To do so, let’s consider the two following options:

  • iShares S&P SmallCap 600 UCITS ETF (registered within Ireland, traded on SIX), TER: 0.6%,
    ticker: IDP6

  • iShares Core S&P Small-Cap ETF (registered within the US, traded on NYSE Arca), TER: 0.07%,
    ticker: IJR

Considering the difference in TER and the taxes, which option is the best?

Thanks for your help.

2

The second one, for TER & tax reasons.
And change to Interactive Brokers.
See CornerTrader Questions

3

The Irish ETF has 15% cross border (US-> Ireland) non recoverable tax in dividend.

The US ETF has a 15% cross border tax on dividend(US->CH) non recoverable and depending on your status and your broker another 15% tax but recoverable when you fill you tax declaration. The good trick is that the non-recoverable tax can be taken as a credit on your final tax bill so it does not impact you at the end but it does impact the Swiss tax man.
With 1% dividend from the ETF, if you consider a TER without and with tax we get:

IDP6 0.60% 0.75%
IJR 0.07% 0.37%

Beware that fiscal situation of US securities held by non US person can change in time and that in case of inheritance US taxation may apply.

I am surprised that there is such a large difference between the US and the Irish ETF for the TER.

4

Thanks. However, IB seems a bit expensive with the inactivity fee.

5

Ok, thanks. So if I fill a DA-1 form I will recover the 15% cross border tax and the remaining 15% will be deducted from my tax bill, I am right?

6

Or maybe it’s just you who’s a bit cheap. Is 100k really a lot of money around here? This is Switzerland, not some dirt poor eastern european country. I easily clear more than that each year

anyway, there are some resellers of IB platform like captrader who’ll waive account fee from 10k minimum investment or so

What remaining 15%? US withholding tax for swiss residents is only 15%. Assuming you earn enough, you get it all back with DA-1 and then pay your normal swiss income tax rate on the whole dividend

7

It is a bit confusing to me that people will be stressing out on 15% withholding tax on dividends and then at the same time complain about IB inactivity fees. This likely means that they have way less than 100k invested and the resulting withholding tax on the 1% dividend will be laughably small.

1 Like
8

You fill the R-US for the US recoverable tax and you fill the DA-1 for the non recoverable tax of the US but eventually other countries like Germany for example.

9

Who knows? Maybe we speak of 100M invested here. :slight_smile:

10

Mustachian philosophy aside, I probably wouldnt be doing taxes myself with that net worth :smiley:

11

Consider that with a difference after tax of about 0.4% you “break even” already at 30k at IB, compared to Ct.

12

Ok, in this case it’s different. Could you please show me the math behind?

13

Do u mean the math behind break even at 30k?
( 0.75%-0.37% p.a. ) x 30k is approx CHF 120 which equals the annual “inactivity fee”.
The math behind the 0.75 & 0.37 % is in many previous discussions.

14

Yes, that’s what I meant. Thank you.