|This page contains details specific to investors in the European Union (EU). However, it does not apply to residents of the EU who are also United States (US) citizens or US permanent residents.|
EU investing shows how you can apply the Bogleheads investment philosophy if you live in the European Union (EU). You must be aware of a few things described below.
US domiciled funds distribute their income periodically, and you must pay withholding tax to the US government. There may be other tax-related problems with US domiciled funds, depending on your country of residence. In short, US domiciled funds are not designed for investors from the EU.
|This page is not intended for US (tax) resident investors, as their situation is very specific.|
European MiFID II and PRIIPs regulations took effect at the start of 2018. These regulations make it difficult or even impossible for residents of the EU community to purchase US domiciled funds. See below for more.
There are few low-cost index mutual funds available in the EU, but there are a lot of index exchange-traded funds (ETFs) available. You can find all the ETFs available in the EU at etfinfo.com (enter keywords into the search field, such as "REIT", "emerging markets", or "MSCI ACWI", or use the advanced search function). These ETFs are usually domiciled in Ireland or Luxembourg. You should consult with your tax advisor before investing in ETFs. You must carefully read the Key Investor Information Document (KIID) and the prospectus of each ETF you choose. Look for important tax-related information in these documents. For example, UK citizens should investigate whether the chosen ETF has "UK Reporting Status" or not, and French citizens should look for "Plan d'Épargne en Actions" (PEA) eligibility.
Some of the country pages in the Non-US domiciles wiki category contain sample portfolios or suggestions for (ETF) funds. While these can be taken to draft a first portfolio it is good to post a question on the forum as every country is different and the recommendation might change over time.
- 1 Example of EU domiciled ETF providers
- 2 EU legislation : UCITS, MiFID II and PRIIPs
- 3 Accumulating/capitalizing vs. distributing ETF share classes
- 4 Base currency vs. trading currency vs. currency of the underlying asset
- 5 Sample Portfolios
- 6 Dividend taxation
- 7 Net total return vs. gross total return index
- 8 Securities lending
- 9 Index tracking strategies
- 10 Notes
- 11 See also
- 12 References
- 13 Further reading
- 14 External links
Example of EU domiciled ETF providers
|Deutsche Bank db X-trackers||link|
|SPDR ETFs Europe||link|
EU legislation : UCITS, MiFID II and PRIIPs
While every EU country has its own legislation there are a number of EU guidelines that most EU countries implement:
- MiFID II
Since 2018, the European MiFID II (Markets in Financial Instruments Directive) and PRIIPs (Packaged Retail and Insurance-based Investment Products) have become effective. The goal of this legislation is to protect the individual investor.
PRIIPs requires a retail investment product such as an ETF to provide a Key Information Document in a clear and relatively tightly specified format. US domiciled funds and ETFs do not currently produce such documents, and because the EU is not a primary market for them, few if any have indicated that they will do so. Products lacking these documents cannot be offered to EU investors.
As a result, it is now difficult or even impossible for residents of the EU community to purchase US domiciled funds. Shares purchased before the regulation came into effect can be kept and sold, but EU residents can generally no longer buy new shares of these funds or ETFs.
One of the bigger differences between US domiciled ETFs and EU domiciled ETFs is that EU domiciled ETFs can reinvest the received dividends/interests, without distributing them. As such, in some countries, dividends are not taxed.
Base currency vs. trading currency vs. currency of the underlying asset
The same ETF can have different share classes, and can be listed on several different stock exchanges in different currencies. Look for the ISIN code as unique identifier together with the name. Funds with different trading currency will have a different ticker if traded on the same exchange. If the fund is trading on different exchanges then it may or may not have the same ticker.
There are many Boglehead inspired portfolios that can be created. Here below are some EU investor portfolio examples for both accumulating and for distributing portfolios. Please also review the country specific pages
These examples should be checked for best fit in the investor's particular tax domicile as noted above and also to align with the investor's optimal costs.
|Description and comments
|iShares Global Aggregate Bd ETF HAcc
hedged (€) †
|iShares Core MSCI World ETF USD Acc
|Global, developed markets
|iShares Core MSCI EM IMI ETF USD Acc
IMI : Large+mid+small
|iShares MSCI World Small Cap ETF USD Acc
|MSCI World developped markets
|Description and comments
|iShares Global Govt Bond UCITS ETF GBP Hedged
|World dev, govt
hedged (£) †
|Vanguard FTSE All-World UCITS ETF
† For AGGH, hedging to the Euro is reasonable for investors whose future financial liabilities will be dominated by the Euro. For others, or where the local currency is pegged to the US dollar, possible alternatives are AGGU, accumulating and hedged to US dollar, and AGGG, distributing and unhedged. For IGLH, if hedging to UK Sterling is undesirable then an alternative is IGLO, distributing and unhedged.
Investors that hold funds that hold securities are taxed at multiple levels: level of the asset, level of the fund, level of the investor. Depending on the situation of the individual investor, one can optimize the taxation.
Net total return vs. gross total return index
Index tracking strategies
- EU non-habitual residence
- Investing from outside of the US
- Nonresident alien taxation
- Nonresident alien with no US tax treaty & Irish ETFs
- From the European Securities and Markets Authority
- UCITS IV: Key Investor Information Document-KIID, from PwC Luxembourg
- UCITS (Undertakings for Collective Investment in Transferable Securities Directives), from Wikipedia.
- Key information documents for packaged retail and insurance-based investment products (PRIIPs), European Commission.
- MiFID II, European Securities and Markets Association.
- SPDR® ETFs Tax Reference Guide, 2013, by SPDR ETFs Europe, viewed June 19, 2015. This guide explains how distributing and accumulating (offshore) funds are taxed in Austria, France, Germany, Ireland, Italy, Luxemburg, Netherlands, Switzerland. and in the UK in 2013. Reference: Re: NON-US (Ireland) ETFs - Simplified Ultimate Buy and Hold Portfolio, by forum member hafius500.