ok … first mistake made. I converted from chf to $ on the one day when the exchange rate was unfavorable and I lost 120 chf compared to the next day’s exchange … Does it happen to you too? Do you take this into account when the day of the month in which you have to pay the share arrives?
I don’t look at the exchange rates but just send my orders. Next month could be the other way around, making 120 chf in fx gain between day one and two.
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Don’t mistake a bad outcome for a bad decision. You (or anyone else) couldn’t have known how the exchange rate will move in a day. So don’t worry about what you can’t control.
But if this is already stressing you out, try to imagine how will you feel when the market tanks and things start to look grim… That’s a big behavioral risk we all have to overcome.
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As others have said, it’s not a mistake, you couldn’t have known. And even if you look at the current exchange rates, how do you know what will happen tomorrow? It could get worse, there is no way of knowing.
When I transfer money for my US ETFs, I convert everything I have transferred and don’t particularly look at how much I get out. Then I buy as many shares as possible with the USD I have got and that’s it, I don’t think about the fact that I could maybe have one more share another day. In the long run, this is irrelevant.
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Do you guys do fractional shares for your VT or other ETF’s/shares in IB? I did it last month for the first time but it kind of feels weird and somehow synthetic (even if the ETF is physical)
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I never do. It’s not worth it in my mind. I could not care less if 100$ was sitting in my account for a month.
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No, I like to keep it clean and a few dollars as cash is always good to have around if there is something like unexpected costs for too many snapshots etc.
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Any thoughts on this?
Also: Why does Ireland not simply abolish 15% L2WT for IE-ETF by means of a treaty with the US and become way more attractive to non-US investors?
L2WT for Irish Funds is 0%. Ireland can’t just abolish the L1WT, this is the tax that the companies in which the fund invests in withhold before it arrives at the fund. Ireland already has a tax treaty that reduces L1WT from 30% to 15%.
Take a look at this topic → Tax optimisation for ETF investing
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Sorry, I meant L1WT. It just seems so unnecessary for investors to lose the 15% they’re entitled to. This must be evident to US authorities aswell. I don’t understand why it’s not possible to figure out some kind of treaty mechanism to address this.
Why would it be in the US interest? They set a floor at 15% taxation, why go beyond and lose revenue (there’s nothing in it for them)
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You are asking a State to get rid of some revenue? In which world are you living?
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Ireland can’t abolish it, since it’s a U.S. tax.
Well, it is evident that the U.S. want to make sure to get their share (tax) on U.S. companies’ distributions.
Withholding tax is one of the safest and best ways to do so. Think about it, U.S. shares can be purchased by anyone - so can ETFs from countries that don’t have WHT on distributions (Ireland). And sold. Within split seconds - these are exchange-traded products after all. They wouldn’t have anyone else to charge that tax otherwise.
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I agree with all of you on the “necessity” of L1WT for states (sorry, didn’t express myself precisely), I just don’t get why there can’t be a mechanism for IE-investors to reclaim the 15% they are obviously owed. It seems so utterly anachronistic in world of globalized finance.
Because it’s not that obvious: the States want to get paid, so if they drop the witholding taxes, some other country would have to compensate them for it. Ireland doesn’t tax foreigners’ gains on Irish ETFs, so they have no reason to reimburse it themselves. The investor’s country does tax its investor’s gains (in most cases) but using those taxes to reimburse the US would mean:
- Accounting for the taxes witheld from all taxed investors in each individual ETF separately.
- Comparing the taxes witheld to the taxes paid to see if the taxes paid exceed them.
- Aggregating the funds and reimbursing the ETF provider of that amount.
- Having the ETF provider reimburse the US for the lost witholding taxes.
And that would mean for Ireland to have a tax treaty with every country people investing in IE funds could be residents of. Failing that, some of the tax witheld from the US could not be reimbursed to those specific investors.
For the tax domicile of the investors, this is a loss of taxes (they are the one providing the money to pay the US) and administrative hell.
For Ireland, that means tax treaties with every country possible, getting them all to agree to go through the administrative hell and tax loss previously stated.
For Irish funds, that means an accounting nightmare, that would probably cost higher fees, which would make them less competitive.
For the investor, that’s a tax declaration burden and probably a higher TER on IE funds.
Nobody has had high enough an incentive to make that happen as of now and I’m not sure it would really benefit the investor in the end if it was made to happen.
Easier is using US domiciled funds to invest in US companies and not to invest in Japan outside of tax sheltered accounts (for swiss investors).
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This sounds very reasonable indeed, thanks!
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One approach that would make sense to me is for IE funds to provide an audited report of paid L1WT. Swiss tax authorities could then provide a tax credit (like with DA-1) based on these reports (which should become part of ICTax). I.e. DA-1 could be more fine-grained, providing credit for parts of a fund. This wouldn’t require any new tax treaties, ‘just’ a reporting system that at least EU and CH agree on. This would still increase complexity.
The alternative would be for Switzerland to grant a flat deduction to approximately compensate for withholding taxes that cannot be declared. If I remember correctly, there are countries that have such a flat compensation for funds.
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Well, they do provide this as part of their (semi-) annual financial statements, don’t they?
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I don’t know whether it’s detailed enough (associating withholding taxes with specific dividend distribution dates). However, even if it is, it would have to be in a form that the tax authorities could (automatically) process. I don’t know whether a standard format for this already exists anywhere, and I don’t think ICTax has any provisions for this. It might even need small tax law changes in Switzerland. It would likely be possible if there was sufficient interest by all relevant parties, at least in theory.
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