Czech Republic, EU - Vanguard VT or Vanguard VWCE?

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Topic Author
MildlyOverrated
Posts: 3
Joined: Sat Jul 17, 2021 9:15 am

Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by MildlyOverrated »

Country of Residence:
Czech Republic, EU

International Lifestyle:
No plans to live abroad. Maybe some international assignment but definitely not moving out for good.

Currency:
USD or EUR

Emergency funds:
About 7 months of my expenses

Debt:
About 35k USD of mortgage

Age:
45

Desired Asset allocation:
100% equity

Current portfolio: about 50k USD in Vanguard VT ETF, adding roughly 10k USD/year



Hi all,

looking for advice regarding what ETF to start buying.

I have started with buying ETFs about 3 years ago. I did not want to overthink and over complicate it so I simply buy VT ETF through my broker regularly. I convert CZK to USD, send USD to broker, buy VT.

I have found this forum recently and found out that non US investors do not buy VT. Instead they would go for VWCE or some equivalent. Therefore here goes my question:

What are the main benefits for me to buy VWCE (probably on XETRA) over buying VT? Is there any significant tax difference? Better legal protection in case of any disputes?

Thank you for your insights!
TedSwippet
Posts: 5166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by TedSwippet »

Welcome.
MildlyOverrated wrote: Sat Jul 17, 2021 9:56 am What are the main benefits for me to buy VWCE (probably on XETRA) over buying VT? Is there any significant tax difference?
The significant tax difference for you is, primarily, full insulation from potential and rapacious US estate tax. For non-US citizens living in one of the many countries that lack a US estate tax treaty (this includes your own country), US estate tax begins at just $60k of 'US situs' holdings, and may take 26-40% of your investments above that amount. At $50k and $10k/year additional, you're getting close to this limit, then. Details in this wiki page:

Nonresident alien investors and Ireland domiciled ETFs - Bogleheads

In any case, since 2018, an EU regulation known as PRIIPs has made it hard to impossible for EU and UK investors to readily buy US domiciled ETFs. It is interesting that your current (presumably, non-US?) broker apparently still permits this.

Additionally, VWCE is an accumulating ETF. For investors in some countries -- and I don't know if the Czech Republic is among them -- there can be a bit of a local tax saving where the country would tax distributed dividends but not accumulated ones. You will need to investigate local tax law to see if you get any extra benefit from VWCE there; I don't know how domestic Czech tax law operates.
Topic Author
MildlyOverrated
Posts: 3
Joined: Sat Jul 17, 2021 9:15 am

Re: Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by MildlyOverrated »

The significant tax difference for you is, primarily, full insulation from potential and rapacious US estate tax. For non-US citizens living in one of the many countries that lack a US estate tax treaty (this includes your own country), US estate tax begins at just $60k of 'US situs' holdings, and may take 26-40% of your investments above that amount. At $50k and $10k/year additional, you're getting close to this limit, then.
Thank you for reply and the link to additional info. I did not know about this tax at all. Well that is the reason why not to add more funds to VT of course. I’ll do my reading about this topic now.
XtremePWN
Posts: 43
Joined: Fri Aug 23, 2019 3:01 am

Re: Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by XtremePWN »

If you are an EU citizen VWCE
Fireishere
Posts: 102
Joined: Thu May 27, 2021 4:48 am

Re: Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by Fireishere »

XtremePWN wrote: Sat Jul 17, 2021 3:51 pm If you are an EU citizen VWCE
I agree. I own nothing but VWCE and VAGF. I’m an EU citizen.
bhcz
Posts: 6
Joined: Mon Apr 04, 2022 7:18 pm

Re: Czech Republic, EU - Vanguard VT or Vanguard VWCE?

Post by bhcz »

It is more tax efficient to hold accumulating funds in Czech Republic to avoid the 15 % tax from dividends. I’m Czech and I use VWCE. :sharebeer
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