On the topic of withholding taxes and having to wait to reinvest dividends, here’s a calculation based on the following assumptions:
- Swiss domicile investor
- world portfolio, US assets 62% and ex-US assets 38%
- dividend yield is 1.5% for US and 3% for ex-US
- L1 WHT
- US assets have 0% L1 WHT for US funds and 15% unrecoverable L1 WHT for IE funds
- ex-US assets have unrecoverable L1 WHT: 12% for IE funds, 10% for US funds (assumptions from Bogleheads wiki)
- L2 WHT
- US funds have 15% L2 WHT on the entire dividend amount (so ex-US assets as well), reclaimable through DA-1
- IE funds have no L2 WHT
- DA-1 paid out in full, on average 1 year after dividends have been paid out, which have missed 1 year of stock market returns of 7% on average
With these assumptions:
- IE funds lose out on 0.276% yearly performance
- US funds however also lose out on 0.135% yearly performance, because of unrecoverable ex-US L1 WHT and money gotten back through DA-1 can’t be invested for a year
- difference: 0.141% less gains for IE funds
Now maybe accumulating funds could be another aspect where IE funds could improve further, if dividends are invested immediately back into the fund, compared to about to, what, 2-3 months on average for distributing funds, provided the investor reinvests them the day they get them?