I'm a recent graduate in South Africa working at a multinational tech company, but will be moving to either the US or the UK in the next 2—3 years for my job.
I have the choice to go with either US- or Irish-domiciled Vanguard ETFs. I'm looking at a three-fund portfolio of VTI (Vanguard Total Stock Market ETF), VXUS (Vanguard Total International Stock ETF) and BND (Vanguard Total Bond Market ETF), or their Irish equivalents, in a 90:10 ratio for stocks and bonds. I'd start with a $10,000 initial deposit and $2,000 per month going forward.
The decision on which domicile option to go with is tricky given the circumstances that I'll try to outline below, so any advice here would be appreciated.
- Post-emigration — From my understanding, the IRS takes a rather draconian view of foreign ETFs; the tax liabilities from owning Irish-domiciled ones may be a pain when arriving and living stateside. From the UK side, investing in US-domiciled ETFs is no longer possible for a retail investor due to the EU's PRIIPs regulations. I'm a UK citizen but only a South African tax resident so don't see this impacting anything tax-wise.
- Tax — both US- and Irish-domiciled ETFs will have a 15% dividend withholding tax for the IRS due to tax treaties with the US. However, Irish dividends already factor in this deduction and it isn't recorded separately, and consequently some South Africans have reported struggles with convincing SARS (our local tax authority) that foreign taxes were paid in order to claim our foreign tax credit, so US-domiciled ones could have an advantage there.
- Estate duties — US-domiciled funds for foreign aliens attract up to 40% in estate duties, with Irish-domiciled ones not attracting any. I'm in my early 20s so don't think it's a huge factor for me right now.
- Brokers — I set up a TD Ameritrade account due to it not having maintenance or trading fees, but it's limited to US-domiciled ETFs. For Irish ETFs I can setup an Interactive Brokers foreign account, which unfortunately has $10/month maintenance fees (for <$100k balances) and trading fees; these are more than I'd like as I'm just starting out.
I'm personally leaning towards US-domiciled funds, but would appreciate any insight. I'd like to try and keep things as simple and streamlined as possible for myself in future. Thanks!