As I understand it, it’s not a loophole at all. FIDLEG allows buying funds without BIB/KID with execution-only brokers. This has nothing to do with IBKR not being a Swiss broker. Swissquote and Yuh also still offer US ETFs. Please note that FIDLEG differs from EU PRIIPs in this regard, if I remember correctly.
Also, even if retail investors were no longer allowed to buy US ETFs, I haven’t seen any indication that retail investors wouldn’t be allowed to hold US ETFs they already have (as far as I know, EU residents who are blocked from buying US ETFs can still hold them). And qualified investors will in any case continue to be able to buy and hold US ETFs. I don’t anticipate any changes in how DA-1 will be handled.
Did your friends clarify why this could be a big headache? What possible concern could tax authorities have with people holding US ETFs? FIDLEG is not relevant to tax law at all, as I see it.
Automatic dividend reinvestment (e.g. IBKR DRIP) is equivalent to manually buying new shares whenever you receive dividends. If we were to be blocked from buying US ETFs after all, I’d expect automatic dividend reinvestment to be blocked as well.
I followed your post, thanks very helpful. I had a couple of questions. In the account settings there is the possibility to choose about the dividends, if you reinvest or receive them, I can put the reinvestment setting to bypass the fact that VT distributes the dividends, so as not to have to declare them (having a long period ahead I would prefer anyway reinvest them than receive them)? Another thing, Tiered pricing, do you think this is still the best choice? I would like to make a fairly large initial payment and then monthly fixed payments of about 1k chf (I was also thinking about the possibility of paying every 3 months to reduce taxes), also in this case is Tiered pricing the best solution? Thank you
As others have said, it does not matter for dividends. But there is an option to reinvest dividends. But I think it works only for US stocks (and likely ETFs).
As for Tiered pricing, in the vast majority of cases, it’s the best. I would not worry about the cost of the large initial payment. It’s going to be cheap regardless of the pricing system and there is not point in optimizing for a few dollars for any large one-time payment.
I was wondering why exactly US ETFs can’t be made available in the EU. An interesting find:
According to certain views, US issuers cannot develop KIDs for their US ETFs. One reason for this is the fact that PRIIPs require disclosure of likely future performance under four different scenarios, and US issuers cannot make such forecasts under US legislation.
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.
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.
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.
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)
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.
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%.
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.
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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