Nonresident alien investors and Ireland domiciled ETFs

This page intends to discuss why it may be better for a nonresident alien (NRA in US IRS terms) with no US tax treaty to invest in Ireland-domiciled ETFs as opposed to the popular US-domiciled funds discussed often by US based investors.

This article will assume the non-tax-treaty rate of 30% for any dividend withholding calculations.

US tax treaties
Depending on your country of residency, you may be able to benefit from a US tax treaty for lower rates and higher exemptions.

List of treaties can be found at United States Income Tax Treaties - A to Z.

If you do, some parts of this article may not apply directly as you may be able to benefit from lowered treaty rates.

Why invest in Ireland-domiciled ETFs as an NRA?
A few reasons for preferring Ireland-domiciled ETFs over US-domiciled ETFs:
 * Ireland-domiciled ETFs can benefit from US-Ireland tax treaty rate of 15% on dividends and 0% on interest paid to Irish corporations, instead of 30% for non-treaty NRAs.
 * Double tax withholding for US-domiciled ETFs holding foreign securities. The US-domiciled ETF pays withholding to international governments, then the US levies 30% off of the remaining distributed dividends.
 * Complex and constantly changing US tax laws affecting NRAs. I'd prefer iShares and Vanguard Dublin to deal with those.

Caveats of investing in Ireland-domiciled ETFs?
Some of the downsides:
 * US-domiciled ETFs often have lower expense ratios.
 * US domiciled ETFs have higher liquidity, in turn narrower bid-ask-spreads.
 * Not many highly-liquid (large daily trading volume) USD denominated funds are available. So options are limited, but sufficient to build a Bogleheads-style lazy portfolio.
 * Depending on your broker, buying Ireland-domiciled ETFs usually costs more in transaction fees. Beware, some brokers like Saxo Bank (Denmark) charge a 0.12% annual custody fee, which is outrageous.

Ireland-domiciled ETFs and Irish tax withholding
Based on a few sources, no, Ireland does not withhold any taxes on capital gain or dividends paid by Ireland-domiciled UCITS ETFs. That seems to be true for Vanguard and iShares Dublin.

According to Dillon Eustace law firm :

"Taxation of investors from the perspective of the investment funds (Non-Residents): As outlined above, Irish investment funds are not subject to any taxes on their income (profits) or gains arising on their underlying investments. In addition, there are no Irish withholding taxes in respect of a distribution of payments by investment funds to investors or in relation to any encashment, redemption, cancellation or transfer of units in respect of investors who are neither Irish resident nor ordinarily resident in Ireland, provided the fund has satisfied and availed of certain equivalent measures or the investors have provided the fund with the appropriate relevant declaration of non-Irish residence."

According to iShares UK :

"Distributions from Exchange Traded Funds (ETFs) such as Dublin-domiciled iShares are exempt from Irish withholding tax by virtue of the shares issued by Dublin-domiciled iShares being settled via a recognised clearing system (Crest)."

I also contacted Saxo Bank support in March 2015, their reply was:

"Our corporate actions team replied that on VWRL there has previously been 0% tax. On Irish ETFs in general they can’t give an answer – it may be different on different ETFs."