international001 wrote: ↑Mon Jul 16, 2018 4:42 am
alpine_boglehead wrote: ↑Sun May 06, 2018 1:12 pm
A problem with this withholding tax is that it isn't passed through the funds, so in your home country you likely pay taxes on the dividends as if they hadn't been taxed yet (but this may depend on your jurisdiction). E.g. for me in Austria this means that I pay 15% US withholding tax and then 27.5% on what remains in Austria, as opposed to direct stock holdings for which the 15% are taken into account, so only 12,5% are taxed in Austria.
By my calculation, VWRL (Vanguard FTSE All-World) is reduced from a gross yield of roughly 2.7% to 1.4% after taxes and expense ratio.
(sorry if it's not appropriate to bring back and old thread)
I thought that if the fund was accumulation domiciled in Ireland, you would not have to pay taxes on dividends in your home country. And if it was not distribution, you can typically take a credit in your home country for the amount of taxes paid
There's two parts to the topic
a) Regarding the tax handling of accumulation - this probably depends on your country, there seem to be countries where accumulating funds have the advantage that the reinvested dividends are not taxed immediately. But not where I live, here there's "dividend equivalents" (German "ausschüttungsgleiche Erträge") which are taxed immediately, and the cost basis for the holdings is raised to prevent double taxation.
b) The problem that the withholding taxes already paid (e.g. 15% for the US) are not taken into account when you're taxed in your home country is called dividend tax leakage. It's very real for me. VWRL distributions (on which withholding taxes have been paid) are taxed at 27.5% local tax.
I've considered replicating the S&P 500 via individual holdings. It would be doable, but too much effort for my small portfolio, be anything but simple, and there don't seem to be ex-US ETFs (aka "International" in the US

) in Europe, only more specialized like Europe, Japan, Emerging ..., contributing to complicating things. Yet, the wheels are in motion, maybe someday a broker/robo advisor will pop up that will do just that for you, i.e. replicate the market via individual holdings (with the double benefit of preventing double taxation and tax loss harvesting on individual positions). I'd wager that there's already such a service for wealthy individuals. Or maybe not, as they obviously put their portfolios offshore.