Which of the two ETFs should I invest with a German broker?

Investing / Portfolios
1

Gruezi everyone,

I will open a free ETF Sparplan (ETF savings plan) with a German broker soon with the aim of long term investing in a global ETF (both developed and developing world). We chose a German broker because there are no ETF Sparplans on offer in Switzerland unfortunately that offer free and automatic monthly investments.

I’ve narrowed it down to these two ETFs:

Since me and wife are Swiss residents which one would be better from a tax point of view? As far as we know there are some differences regarding Swiss taxes between accumulating and distributing ETFs? But this is as far as our knowledge goes. Basically, we just want to accumulate monthly and not touch it for years to come. Of course in a most tax efficient way.

So which of the two (or do you have a better option?) should we choose?

Merci!

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2

They should be equivalent tax wise. You could check by yourself on ictax: ICTax - Income & Capital Taxes

Unless the broker has cheap FX (usually not the case for most retail brokers), maybe pick one where you don’t incur too much currency conversion.

3

Without having looked up the tax figures to the cent:
Accumulating, for automatic reinvestments of dividends.
Also, no currency conversion on USD distributions (fund currency is USD), though probably negligible.

Quality.

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4

Does that mean that I won’t have to declare these dividends in my yearly tax returns because they are accumulating?

Generally, is there any difference between accumulating and distributing ETFs with regards to needing or not needing to mention them in yearly tax returns? Less work with tax returns is always desirable…

I found these 6 ETFs: ETF Screener | justETF. Are you talking about these? Which one looks the most attractive?

5

The plan is to transfer CHF to Wise, convert them there to EUR and send EUR to the German broker. Does that change anything on which of the two ETFs is better?

6

In Switzerland you always have to declare the dividends, independent of whether it’s an accumulating or a distributing fund. There are no tax differences between the two (unlike some other countries).

However, many funds (incl. VWCE/VWRL) are in the federal tax database (ICTax), which tax filing software uses to automatically calculate the dividends for your investments. As long as you pick one of these funds, it doesn’t matter whether the fund is accumulating or distributing with regards to the tax declaration.

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7

If I remember correctly, the Wise conversion fee is about 0.4%. Is the fee actually higher at the German broker? Degiro charges 0.25%, as far as I can tell, and IBKR charges 0.002% (minimum USD 2).

8

I would take the distributing one out of simplicity.

The implied dividends in accumulating fonds have to be declared. For that, the fund has to publish his numbers with the Swiss tax authorities, and with ICtax you can then find out how much dividend you should declare.

With distributing fonds, you just take the number you received on the broker, much simpler (and less hassle), since often, it takes some time that the funds is transmitting the numbers to ESTV, then to ICtax etc.
BTW, if the fund is not ESTV tax compliant, you pay the full deal of capital gains if it is an accumulating fund.

Finally, I guess most brokers would allow free automatic reinvestment of the dividends.

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10

Section 4.2, 1st paragraph p.16 :
Loosely translated in english (except the “as long as”) : Capital gains are not submitted to taxation as long as they are published separately. These gains are published on the ESTV list.

So in my understanding, if the fund is not publishing his capital gains separately, you have to pay tax on the whole gain (makes kind of sense, if the fund is unwilling to the work, why should tax authorities be lenient).

Anyway, for most of us it is not an issue, since most funds we can access are publishing the numbers to ESTV.

11

IE00BZ56SW52 WisdomTree Global Quality Dividend Growth UCITS ETF USD - accumulating
IE00BX7RRJ27 UBS ETF (IE) Factor MSCI USA Quality UCITS ETF (USD) A - distributing
LU1681041890 Amundi MSCI Europe Quality Factor UCITS ETF EUR - accumulating

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12

Thank you, Sanfran. I’ll take the fist one if available at DKB or Smartbroker for Sparplan. If not, I’ll take the second and third one together.