Non-USA Domicile: Thank You IB, Vanguard, and Ishares

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galeno
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Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Sat May 26, 2018 5:47 pm

We converted to the Boglehead philosophy in 2005 and implemented it in 2006.

As non-USA domiciles we were constantly frustrated by less choice and higher costs compared to USA domicile investors. Less choice in brokers and funds/ETFs. More expensive ERs and TRs (tax ratios). The TR is the result of unavoidable withholding taxes on dividend and interest income. USA domiciles don't even have to think about this unless they invest in non-USA stocks and bonds.

Until about 2 years ago this was our situation. Then I discovered IB (Interactive Brokers). A low cost USA domiciled broker (safe + cheap!) which allows access to any stock market in the world. Ireland Vanguard and Ireland Ishares have created excellent low cost index ETFs.

After 13 years of playing catch up with USA domicile Bogleheads we've almost gotten to their level in the last two years. The ERs are still a bit more expensive. But the big deal was the reduction of the TR that was really hurting us.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

Maple
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Maple » Tue Jun 05, 2018 9:56 pm

BlackRock / iShares, just announced a reduction in the expense ratios for some of its UK/Irish domiciled ETFs. Price competition is occurring in Europe, hopefully it will continue aggressively as it has in the USA.

http://citywire.co.uk/wealth-manager/ne ... ories_list
Fund Name Ticker Current TER (%) New TER (%)
iShares MSCI Europe (Dist.) IMEU 0.35% 0.12%
iShares MSCI Europe (Acc.) IMEA 0.33% 0.12%
iShares MSCI EMU CEU 0.33% 0.12%
iShares EURO STOXX 50 (Dist.) EUN2 0.16% 0.10%
iShares Core MSCI EM IMI EIMI 0.25% 0.18%

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by alpine_boglehead » Tue Jun 05, 2018 10:52 pm

Maple wrote:
Tue Jun 05, 2018 9:56 pm
BlackRock / iShares, just announced a reduction in the expense ratios for some of its UK/Irish domiciled ETFs. Price competition is occurring in Europe, hopefully it will continue aggressively as it has in the USA.

http://citywire.co.uk/wealth-manager/ne ... ories_list
Fund Name Ticker Current TER (%) New TER (%)
iShares MSCI Europe (Dist.) IMEU 0.35% 0.12%
iShares MSCI Europe (Acc.) IMEA 0.33% 0.12%
iShares MSCI EMU CEU 0.33% 0.12%
iShares EURO STOXX 50 (Dist.) EUN2 0.16% 0.10%
iShares Core MSCI EM IMI EIMI 0.25% 0.18%
Very interesting, thanks a lot for posting. That leaves more $ for us for some :sharebeer

I hope other major providers and iShares themselves will follow suit. After these changes, the developed markets ETF (iShares Core MSCI World UCITS ETF USD (Acc)) now has a higher expense ratio (0.20%) than the emerging markets ETF (0.18%) which is a bit unusual - I'd expect this to be the next candidate for lowering prices.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Wed Jun 06, 2018 9:56 pm

Blackrock ETFs listed on the Tokyo Stock Exchange are now commission-free as of this week, so that might be related.

Their management fees, while low, are still a bit suspect in my view. ETF #1655 (Blackrock iShares S&P 500) charges 0.15% and holds nothing but IVV (the US-listed iShares S&P 500 ETF), so we're paying two management fees for an ETF inside an ETF.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by TedSwippet » Thu Jun 07, 2018 4:15 am

Captain Haddock wrote:
Wed Jun 06, 2018 9:56 pm
... so we're paying two management fees for an ETF inside an ETF.
You are paying the ETF management fee for 1655, which is... well, whatever -- I couldn't quite work it out from the iShares JP web site, but apparently "within 0.15%". But you are not paying IVV's 0.04% on top. That 0.04% is included in the "within 0.15%".

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by FrugalFrida » Thu Jun 07, 2018 4:57 am

My bank (Swedish, member owned) have two Vanguard Ireland funds available for direct investment. I have invested in the Vanguard Ireland U.S. 500 stock index fund, 0.25% ER. $100k initial investment.

This fund is in an account where we pay capital gains tax, although my main account has no capital gains tax but a yearly fee on the whole balance around 0.6% right now. My thinking is that I have different time-frames on the accounts and avoid paying yearly fee on funds for longer term use e.g. 15 years.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Fri Jun 08, 2018 2:07 am

TedSwippet wrote:
Thu Jun 07, 2018 4:15 am
Captain Haddock wrote:
Wed Jun 06, 2018 9:56 pm
... so we're paying two management fees for an ETF inside an ETF.
You are paying the ETF management fee for 1655, which is... well, whatever -- I couldn't quite work it out from the iShares JP web site, but apparently "within 0.15%". But you are not paying IVV's 0.04% on top. That 0.04% is included in the "within 0.15%".
Oh, okay. Good to know! Most of Blackrock's Tokyo-listed ETFs seem to be the same — just containers for the equivalent American ETF.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Fri Jun 08, 2018 2:13 pm

For us it's important to shop for our stocks and bonds at the right market in the right bags. For us that market is called the London Stock Exchange.

The investment products we use are Vanguard and I-Shares ETFs inside an Ireland wrapper.
Captain Haddock wrote:
Fri Jun 08, 2018 2:07 am
Oh, okay. Good to know! Most of Blackrock's Tokyo-listed ETFs seem to be the same — just containers for the equivalent American ETF.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by bpp » Fri Jun 08, 2018 6:01 pm

TedSwippet wrote:
Thu Jun 07, 2018 4:15 am
Captain Haddock wrote:
Wed Jun 06, 2018 9:56 pm
... so we're paying two management fees for an ETF inside an ETF.
You are paying the ETF management fee for 1655, which is... well, whatever -- I couldn't quite work it out from the iShares JP web site, but apparently "within 0.15%". But you are not paying IVV's 0.04% on top. That 0.04% is included in the "within 0.15%".
Are you sure? The prospectus shows the fee being allocated between BlackRock Japan and Mitsubishi UFJ. The Japanese taxes on those fees suggest those fees are all incurred in Japan. I don’t see where IVV’s internal fee is listed.

TedSwippet
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by TedSwippet » Sat Jun 09, 2018 2:29 am

bpp wrote:
Fri Jun 08, 2018 6:01 pm
Are you sure? The prospectus shows the fee being allocated between BlackRock Japan and Mitsubishi UFJ. The Japanese taxes on those fees suggest those fees are all incurred in Japan. I don’t see where IVV’s internal fee is listed.
Not certain, no. But the usual treatment of ETFs that hold other ETFs is that the fees of the component parts are all rolled in to the 'outer' ETF's TER. The only solid thing I have found so far is this Canada-centric article in which a man from Blackrock says says:
Oliver McMahon, director of product management for iShares Canada, said investors are "only charged once with iShares, and I'm not aware of any exceptions to this statement with other firms' products."
Much extrapolation on my part, then. The only way to really know would be to ask iShares Japan, I guess. In the UK, mutual funds-of-funds are permitted to effectively double-charge, but I'm not aware of any case where an ETF would do so. You would also, I suppose, hope that one iShares ETF holding another iShares ETF would get a discount or zero-cost holding. And sometimes listing another fund as the (only) holding in something can be just a way of making the outer fund a differently-fee'ed facet of the inner one without also having to duplicate all of the literature as if it were really something different.

So yes, a bit of speculation on my part based on what happens in other countries but I suppose may not in Japan. In this case, IVV's fee is 0.04%, so any double-dipping here is likely to be negligible relative to alternative funds. Maybe not the case with other ETF-of-ETFs, though. Don't know.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Kesev » Sat Jun 09, 2018 7:01 am

Am I correct that IB currently charges 0,05% trading fee with no cap on USD-nominated LSE ETFs?

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by LadyGeek » Sat Jun 09, 2018 8:05 am

FYI - Kesev is requesting portfolio assistance here: US OTC market for Irish ETFs (NRA question)

Kesev, Welcome!
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Kesev » Sat Jun 09, 2018 8:25 am

Thank you, LadyGeek!
I also would take an opportunity to thank galeno, whose info on NRA situation is most informative. If I've read some of his posts earlier I might have even considered Panama domicile for an investment vehicle.

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galeno
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Sun Jun 10, 2018 12:14 pm

That is correct. Using IB.

I like to look at it like this. I double the commission to 0.1% and add it to the bid/ask spread. That's my cost for buying an Ireland domicled ETF on the LSE. The cost for selling is FREE.

IIRC, the bid/ask spread on VWRD in Jan was 0.3%. You can try to "shave" the spread by offering less on the buy and more on the sell. But that takes time and doesn't always work.

So the round trip cost of VWRD is 0.4% of the value. For $10K that would be $40.
Kesev wrote:
Sat Jun 09, 2018 7:01 am
Am I correct that IB currently charges 0,05% trading fee with no cap on USD-nominated LSE ETFs?
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by RME » Sun Jun 10, 2018 2:21 pm

Lyxor also lowered their fees for some ETFs:
Image


Source: https://portfolio-adviser.com/cheapest- ... -launches/

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galeno
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Sun Jun 10, 2018 4:31 pm

Thank you. I will watch this group and consider it. I've only used Ireland Vanguard and iShares ETFs.

So far my favorite equity ETF is VWRD (Vanguard) ER = 0.25%. My favorite bond ETF is AGGU (iShares) ER = 0.10%.
RME wrote:
Sun Jun 10, 2018 2:21 pm
Lyxor also lowered their fees for some ETFs:
Image


Source: https://portfolio-adviser.com/cheapest- ... -launches/
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Maple » Sun Jun 10, 2018 8:55 pm

RME wrote:
Sun Jun 10, 2018 2:21 pm
Lyxor also lowered their fees for some ETFs:
Source: https://portfolio-adviser.com/cheapest- ... -launches/
RME,

Thanks for sharing this information. I was not previously aware of these funds. The more price and diversity competition, the better, for NRA investors!

One quote from the news link indicates a property of these funds which is disadvantageous in my opinion (others may disagree):
"He said the products ... will not use securities lending."

This has a slight negative impact to the fund return. In my experience, lending out securities for suitable collateral, provides incremental fund income with good risk/reward. So, even if a Lyxor ETF is exactly the same in all other ways to an iShares or Vanguard ETF, it would still underperform slightly.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by bpp » Sun Jun 10, 2018 11:21 pm

TedSwippet wrote:
Sat Jun 09, 2018 2:29 am
bpp wrote:
Fri Jun 08, 2018 6:01 pm
Are you sure? The prospectus shows the fee being allocated between BlackRock Japan and Mitsubishi UFJ. The Japanese taxes on those fees suggest those fees are all incurred in Japan. I don’t see where IVV’s internal fee is listed.
Not certain, no. But the usual treatment of ETFs that hold other ETFs is that the fees of the component parts are all rolled in to the 'outer' ETF's TER. The only solid thing I have found so far is this Canada-centric article in which a man from Blackrock says says:
Oliver McMahon, director of product management for iShares Canada, said investors are "only charged once with iShares, and I'm not aware of any exceptions to this statement with other firms' products."
Much extrapolation on my part, then. The only way to really know would be to ask iShares Japan, I guess.
I called BlackRock Japan and asked. You’re right! The ER for IVV is included in the “0.15% or less” that they quote for 1655, and is not on top of it.

I asked where this might be documented, since the prospectus is not clear on this point (though has some suggestive language that it might be the case), and the representative I spoke to acknowledged that it was not clearly written anywhere. But he was quite sure the expense ratio of the underlying ETF is included in the published overall expense ratio.

Good to know!

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Mon Jun 11, 2018 12:07 am

bpp wrote:
Sun Jun 10, 2018 11:21 pm

I called BlackRock Japan and asked. You’re right! The ER for IVV is included in the “0.15% or less” that they quote for 1655, and is not on top of it.

I asked where this might be documented, since the prospectus is not clear on this point (though has some suggestive language that it might be the case), and the representative I spoke to acknowledged that it was not clearly written anywhere. But he was quite sure the expense ratio of the underlying ETF is included in the published overall expense ratio.
Thanks for doing that! I've started buying 1655 instead of IVV (through Rakuten Securities) because I could get it commission-free. I haven't gotten a dividend yet, but I assume they pay you the whole thing if you hold it in a NISA account, whereas a large percentage was always deducted from IVV's dividend as tax. (That's another one of those things I can't find any information on in English or in Japanese.)

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by bpp » Mon Jun 11, 2018 1:06 am

Captain Haddock wrote:
Mon Jun 11, 2018 12:07 am
Thanks for doing that! I've started buying 1655 instead of IVV (through Rakuten Securities) because I could get it commission-free. I haven't gotten a dividend yet, but I assume they pay you the whole thing if you hold it in a NISA account, whereas a large percentage was always deducted from IVV's dividend as tax. (That's another one of those things I can't find any information on in English or in Japanese.)
I believe you will still pay the 10% treaty rate to the US on dividends either way (IVV or 1655). The NISA only saves you on Japanese taxes.

Once it falls out of the NISA and becomes taxable in Japan, I believe you should be able to take a foreign tax credit on your Japanese taxes for the US taxes paid, in the case of IVV held directly. I don’t think you can do this with 1655, though, since the US taxes were paid within the fund and not directly by you. On the other hand, 1655 should protect you (or rather, your heirs) from having to deal with US estate tax paperwork. So pluses and minuses either way.

(I could be wrong about the above; corrections welcome.)

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Mon Jun 11, 2018 4:56 am

Yeah, I've had 10% deducted from dividends paid on American ETFs in my NISA account, and 28% (!) deducted from dividends paid on American equities and ETFs in my non-NISA account. That seems really high, since the capital gains tax is only 20%. Hopefully I can lower that by opening an account with an American brokerage eventually.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by bpp » Mon Jun 11, 2018 5:36 am

Captain Haddock wrote:
Mon Jun 11, 2018 4:56 am
Yeah, I've had 10% deducted from dividends paid on American ETFs in my NISA account, and 28% (!) deducted from dividends paid on American equities and ETFs in my non-NISA account. That seems really high, since the capital gains tax is only 20%. Hopefully I can lower that by opening an account with an American brokerage eventually.
That 28% comes from 10% being paid to the US, then 20% of the remainder being withheld for Japan. You should be able to get a foreign tax credit on your Japanese taxes for the part paid to the US, to make the net overall rate 20% (10% to the US and 10% to Japan).

You should be able to do this with IVV. Don’t think you can do this with 1655, however, so you’ll end up paying 28% on 1655 dividends — though you won’t know this from the tax paperwork you get. It’ll simply look on paper as though 1655’s dividend rate was 10% lower than IVV’s to begin with, and that you then paid 20% to Japan on that lower dividend. (Be happy to be shown wrong on this!)

Having an American brokerage account would not change the tax rates, by the way, which are determined by treaty.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Mon Jun 11, 2018 6:34 am

At the very least, I could presumably reinvest the 20% owed as Japanese taxes until I file my tax return.

Any idea if taxes are withheld from dividends paid by companies/ETFs listed in Hong Kong, Singapore, and South Korea?

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by BeBH65 » Mon Jun 11, 2018 6:45 am

RME wrote:
Sun Jun 10, 2018 2:21 pm
Lyxor also lowered their fees for some ETFs:

Source: https://portfolio-adviser.com/cheapest- ... -launches/
Indeed Lyxor seems to be on the offensive recently.

Topics that have been discussed in recent threads are:
- iShares Ireland lowering the ER of some of their funds.
- Dividend Tax Withholding for funds by the US: for Ireland 15% is confirmed, for Luxembrug domiciled funds it might be 30%.
- Difference with respect of tracking error versus the index between Synthetic funds (based on swaps) and replicating (that really hold the assets)
- Difference between the funds that track the TR=Total Return and those that track the NR=Net Return version of the index.
In addition the difference between accumulating and distributing funds is often also important

When you compare funds make sure you compare all of these aspects.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by bpp » Mon Jun 11, 2018 7:29 am

Captain Haddock wrote:
Mon Jun 11, 2018 6:34 am
At the very least, I could presumably reinvest the 20% owed as Japanese taxes until I file my tax return.
True, though you would not be able to net losses in that account against gains and dividends in your Japanese accounts. (If that matters to you.)
Any idea if taxes are withheld from dividends paid by companies/ETFs listed in Hong Kong, Singapore, and South Korea?
Looks like Singapore does not tax dividends: https://ottaviaholdings.com/resources/t ... aty-guide/

Neither does Hong Kong: http://app1.hkicpa.org.hk/APLUS/1007/AP ... an_DTA.pdf

South Korea does, but it is capped at 15% by treaty for residents of Japan: https://www.nts.go.kr/eng/resources/res ... 73406#none
(Click on "Japan").

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Captain Haddock » Mon Jun 11, 2018 8:55 pm

Thanks! Time to give those Hong Kong ETFs another look.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by herpfinance » Sun Aug 05, 2018 11:41 am

Maple wrote:
Tue Jun 05, 2018 9:56 pm
BlackRock / iShares, just announced a reduction in the expense ratios for some of its UK/Irish domiciled ETFs. Price competition is occurring in Europe, hopefully it will continue aggressively as it has in the USA.

http://citywire.co.uk/wealth-manager/ne ... ories_list
Fund Name Ticker Current TER (%) New TER (%)
iShares MSCI Europe (Dist.) IMEU 0.35% 0.12%
iShares MSCI Europe (Acc.) IMEA 0.33% 0.12%
iShares MSCI EMU CEU 0.33% 0.12%
iShares EURO STOXX 50 (Dist.) EUN2 0.16% 0.10%
iShares Core MSCI EM IMI EIMI 0.25% 0.18%
I had not noticed these reductions, so thanks for the heads-up! Among those funds, I only use EIMI (well, IS3N). The cuts lower my effective TER in my retirement wrappers from 0.19% to 0.17%. A step in the right direction :sharebeer

Next thing I'm hoping for is a slash in TER for EUNL (developed stocks) and EUN5 (corporate bonds).
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Sun Aug 05, 2018 5:35 pm

We pay 10.3% dividend taxes on VWRD:LSE.

Could we buy it on the Singapore or HK exchange and NOT pay ANY dividend taxes?

We are USD based non-USA domiciled investors with NO USA tax treaty which is why we use Ireland domiciled ETFs bought on the LSE.

Our portfolio's ER is 0.19%. The tax ratio (TR) is 0.08%. So ER + TR = TER = 0.27%.

We'd love to eliminate 8 bps in portfolio costs by buying and selling VWRD on the Singapore or HK stock exchange IF TRUE.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by BeBH65 » Mon Aug 06, 2018 1:29 am

Dividend taxes are taken at three levels by three countries.
- asset level, by the country of the asset - dependent on asset country tax law and tax treaty with country of the fund
- fund level, by the country of the fund - dependent on fund country tax law and tax treaty with country of the investor
- investor level, by the country on the investor - dependent on investor country tax law - might include tax credit for previous level.

None of these taxes depend on the exchange where you buy the fund.
Irish domiciled funds do not have dividend taxation on the fund level.

Next to dividend taxes there are capital gains taxes, transaction taxes, and maybe more.
Again the laws and treaties of the three countries will determine what is paid successively in the three countries.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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galeno
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Mon Aug 06, 2018 9:15 am

You are incorrect. Assume a dividend of 2.0%.

If I buy VT from a USA exchange my dividend taxes are: TWR for VT = (2.0% * 0.039) + ((2.0% * (1 - 0.039) - 0.17%) * 0.30) = 0.07794 + 0.52562 = 0.60%.

If I buy VWRD from the LSE my dividend taxes are: TWR for VWRL = (2.0% * 0.103) + 0 (no L2 withholding) = 0.21%. A savings of 39 bps.

If I buy a FTSE all world ETF on the Singapore or HK exchange. ???????

BeBH65 wrote:
Mon Aug 06, 2018 1:29 am
Dividend taxes are taken at three levels by three countries.
- asset level, by the country of the asset - dependent on asset country tax law and tax treaty with country of the fund
- fund level, by the country of the fund - dependent on fund country tax law and tax treaty with country of the investor
- investor level, by the country on the investor - dependent on investor country tax law - might include tax credit for previous level.

None of these taxes depend on the exchange where you buy the fund.
Irish domiciled funds do not have dividend taxation on the fund level.

Next to dividend taxes there are capital gains taxes, transaction taxes, and maybe more.
Again the laws and treaties of the three countries will determine what is paid successively in the three countries.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by TedSwippet » Mon Aug 06, 2018 9:31 am

galeno wrote:
Mon Aug 06, 2018 9:15 am
If I buy VWRD from the LSE my dividend taxes are: ... If I buy a FTSE all world ETF (TedSwippet note: perhaps VWRD also?) on the Singapore or HK exchange. ???????
Perhaps I am missing something, but assuming that the fund domicile isn't Singapore or HK but is still Ireland then I cannot see a difference between these two cases either.

VWRD -- or any other Ireland domiciled global ETF -- internally pays 15% tax withholding to the US and whatever rate to other countries whose stocks it holds, based on treaties (or not) between Ireland and the countries involved, and then pays out the remaining money as the ETF's dividend. This remaining money is not taxed by the UK if you bought VWRD on the LSE, and would not be taxed by Singapore or HK if you bought it there either. Same result in both cases.

What is it specifically that suggests further savings by using a different exchange rather than the LSE for a VWRL holding? I do not seem to be following the logic here.

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Hyperborea
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by Hyperborea » Mon Aug 06, 2018 11:24 am

TedSwippet wrote:
Mon Aug 06, 2018 9:31 am
galeno wrote:
Mon Aug 06, 2018 9:15 am
If I buy VWRD from the LSE my dividend taxes are: ... If I buy a FTSE all world ETF (TedSwippet note: perhaps VWRD also?) on the Singapore or HK exchange. ???????
Perhaps I am missing something, but assuming that the fund domicile isn't Singapore or HK but is still Ireland then I cannot see a difference between these two cases either.
If the fund domicile does change then the US tax rate on the dividends the fund receives (asset level) will at best be 10% as that is the lowest treaty rate that the US has on dividends from US companies. Most of those countries with that rate aren't places I would want to put my money or countries which impose their own tax on the dividends that the fund would pay out to you (fund level).

US Tax Treaty Table (see column 6) - https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1.pdf
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galeno
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Re: Non-USA Domicile: Thank You IB, Vanguard, and Ishares

Post by galeno » Tue Aug 07, 2018 10:58 am

Ted is correct.

Best I can do is find a country with a 10% dividend tax rate on the USA domiciled stocks in the ETF.

None of the countries with the 10% dividend tax treaty with the USA interest me either as an investor.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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