New UAE-based Investor seeking advice!

For residents of the United Arab Emirates.
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csnohra
Posts: 1
Joined: Sun Jul 28, 2019 6:22 am

New UAE-based Investor seeking advice!

Post by csnohra » Sun Jul 28, 2019 7:28 am

HI there,

As per what the topic suggests, i am a new investor looking to get into the game.

I have opened an IB account and transferred $ 10k yesterday. I am looking to start building a long term investment portfolio (15+ years). I am just over 40 years of age, a non-us person, and i wish to allocate my investments accordingly, slightly more aggressive than what was suggested in the numerous books i have read thus far.

I want to portfolio to look something like the below:
70% in equity stocks.
30% in bonds.
a. Investment in stocks must be through UCITS ETFs (for the obvious reasons). 60% in US market and 40% in worldwide/emerging markets.
b. Investment in bonds would have the same allocation and characteristics as per above point (a).

At this point in time, i couldn't care less about dividends, as compounding on capital is more attractive. I would like some advice on which UCITS ETFs for stocks and bonds to buy, according to the criteria mentioned here. With so many options out there, i am (tentatively) set of the following:

a. US equity stocks - Vanguard's VUSD & ishares' CSPX.
b. International stocks - Vanguard's VWRD & ishares SWDA.

I am looking for solid advice on:
a. US Bonds - UCITS ETF.
b. International bonds - UCITS ETF.

I look forward for your feedback on all of the above and your suggestions for funds to choose from as per my required investment portfolio above.

Question:

Since US-Stocks and Bonds are subject to withholding tax (whether in different percentages between the US/Ireland domiciles), Are non-US stocks (international markets) traded vis US broker (IB) also liable to withholding tax?


Thank you for your feedback.

glorat
Posts: 279
Joined: Thu Apr 18, 2019 2:17 am

Re: New UAE-based Investor seeking advice!

Post by glorat » Sun Jul 28, 2019 10:46 am

Short answer that meets everything is
70% VWRD
30% AGGU

If you look at the underlying regional distributions, it is roughly in the ratios you wanted. As in you don't need separate US and global ETFs as the global ones are already majorly covering the US.

me81
Posts: 27
Joined: Fri Jan 04, 2019 1:37 pm

Re: New UAE-based Investor seeking advice!

Post by me81 » Mon Jul 29, 2019 4:54 am

Other than agreeing in principle with glorat on the above, just two small things to consider:

VWRA is the new version of VWRD, with Accumulating Units.
VAGU is the new Vanguard Global Aggregate Bond ETF USD Hedged. TER 0.1%. Overall it should be extremely similar to AGGU in the long run. Still very small.

So my advice:

- 70% VWRA
- 30% AGGU (or VAGU)

I would not bother at this early stage with US-only bonds, especially as you're not a US citizen.

Good luck!

me81
Posts: 27
Joined: Fri Jan 04, 2019 1:37 pm

Re: New UAE-based Investor seeking advice!

Post by me81 » Mon Jul 29, 2019 5:04 am

Question:

Since US-Stocks and Bonds are subject to withholding tax (whether in different percentages between the US/Ireland domiciles), Are non-US stocks (international markets) traded vis US broker (IB) also liable to withholding tax?
My understanding is that depends on the tax treaties between your country of origin and your tax residency.

Being UAE based, the answer is that in most cases only US companies will have a 15% witholding tax as most EU countries have tax treaties with the UAE. As always with tax issues, expert advice is always better, specific to your own situation..


Edit: see below for a more accurate answer.. learning never ends..
Last edited by me81 on Mon Jul 29, 2019 7:15 am, edited 1 time in total.

TedSwippet
Posts: 2488
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: New UAE-based Investor seeking advice!

Post by TedSwippet » Mon Jul 29, 2019 6:54 am

me81 wrote:
Mon Jul 29, 2019 5:04 am
Since US-Stocks and Bonds are subject to withholding tax (whether in different percentages between the US/Ireland domiciles), Are non-US stocks (international markets) traded vis US broker (IB) also liable to withholding tax?
... Being UAE based, the answer is that in most cases only US companies will have a 15% witholding tax ...
15% is the US's usual tax treaty rate when taxing dividends. A few countries have treaty rates lower than 15%, a few higher than 15%. The standard rate for non-treaty countries is 30%. The UAE has no tax treaty with the US.

Some other countries also withhold tax on dividends from stocks paid out of companies based in that country. There is a table here and which might provide some guidance:

https://www.theice.com/publicdocs/data/ ... _table.pdf

Treaties may reduce some of these rates. At 30%, the US is among the highest taxers. Only five or six countries impose a rate of more than 30% on non-residents.

me81
Posts: 27
Joined: Fri Jan 04, 2019 1:37 pm

Re: New UAE-based Investor seeking advice!

Post by me81 » Mon Jul 29, 2019 7:11 am

Thank you csnohra for raising the issue and TedSwippet for the further insight.

After looking around, I guess the Irish Tax and Customs website has the exact answer to the question:

https://www.revenue.ie/en/tax-professio ... index.aspx

Now, comparing the document TedSwippet shared here:
Some other countries also withhold tax on dividends from stocks paid out of companies based in that country. There is a table here and which might provide some guidance:

https://www.theice.com/publicdocs/data/ ... _table.pdf
with the list above should give a clearer picture.

Something new under my hood then.. ;)

Cheers

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