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Investing in non-dividend paying US shares

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  1. #1

    Investing in non-dividend paying US shares

    Hi All

    I'm new to the forum, but have been busy reading some of the old threads trying to learn. Given that there doesn't seem to be much (any?) independent fee for service type investment advice in HK, the information sharing here has been really helpful.

    I moved to HK four years ago and I'm planning to be here long term. I'm trying to get started on some long term investing (10+ years). I am also keen to get some exposure in USD rather than holding everything in HKD denominated assets.

    Given the 30% withholding tax on US dividends and the fact that I don't need passive income now (I'm early 30's and working), I was considering initially focusing on some large cap companies that don't pay dividends, such as Berkshire Hathaway (B shares), Amazon, Alphabet etc.

    I was just wondering if others here have pursued a similar strategy or what your thoughts are on investing in dividend paying US stocks given the withholding tax applied on dividends.

    Thanks!


  2. #2

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    That's what I do currently. Individual stocks like AMZN, Goog etc and some very low dividend etfs like xlk through US. High div and accumulating through etfs in the UK

    Last edited by shri; 29-10-2018 at 08:43 AM.

  3. #3

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    Although you don't need passive income, your investments might need it.
    Having some extra cash can come in handy.

    As to the 30% withholding tax, it's difficult to work your way around it.
    Why does it have to be US stocks for you ?


  4. #4

    Interesting time to seek USD exposure - given that it has not been stronger for years.

    I think the most unfair thing about the US dividend tax is that it discriminates between foreigners and citizens- US is the only country I know that does that. And you can't apply to have the tax returned later either. Good reason to boycott their capital markets.

    That said I think you focus too much on the tax - income is just one reason for liking dividend paying stocks, and not the most important in my opinion.Obviously for reits it does not make sense - plenty of more attractive options outside US.

    Also note that there are many foreign stocks listed in US - you only pay the 30% tax on US stocks.For instance you could buy HSBC in NY and not be charged the 30% rate - perverse to do so from HK obviously.

    Last edited by Elefant&Castle; 28-10-2018 at 09:05 PM.

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    Seems like Japan has a WHT on overseas investments if I recall - 10%?


  6. #6
    Quote Originally Posted by shri:
    Seems like Japan has a WHT on overseas investments if I recall - 10%?
    Yes, most countries do this - in Japan's case it is 15.315%.

    I'm not sure you can apply to have it back if you are not resident in Japan. For many European countries you can - although most small investors don't bother.

    There have been some spectacular scams where clever bankers have been able to have the withheld dividend tax returned - without actually having paid it in the first place.
    Last edited by Elefant&Castle; 04-11-2018 at 12:51 AM.

  7. #7

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    Quote Originally Posted by Elefant&Castle:
    Yes, most countries do this - in Japan's case it is 15.315%.

    I'm not sure you can apply to have it back if you are not resident in Japan. For many European countries you can - although most small investors don't bother.

    There have been some spectacular scams where clever bankers have been able to have the withheld dividend tax returned - without actually having paid it in the first place.
    Where ?

    If you happen to refer to cum-ex stock "investment " deals, the dividend tax has been deducted automatically by the financial institute and was then claimed back ( from gov. Tax coffers ) more than once by more than one participant in that stock deal.
    shri likes this.

  8. #8

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    Not sure if the cum-ex issues affected a large e ough pool of investors to label this as a wide spread issue. I am happy to pay withholdings tax in Irish etfs which give US exposure.


  9. #9

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    Quote Originally Posted by shri:
    Not sure if the cum-ex issues affected a large e ough pool of investors to label this as a wide spread issue. I am happy to pay withholdings tax in Irish etfs which give US exposure.
    Exactly zero investors were negatively affected.

  10. #10
    Quote Originally Posted by Morrison:
    If you happen to refer to cum-ex stock "investment " deals, the dividend tax has been deducted automatically by the financial institute and was then claimed back ( from gov. Tax coffers ) more than once by more than one participant in that stock deal.
    Yes, that is the type of scam I referred to. Reason I mentioned it is I believe some countries have suspended or even stopped processing refunds in general.

    I'm surprised you call it an investment deal - has it been presented as such?
    I think you could only do this in bad faith.
    For it to work, I think they needed to have an 'accomplice' inside the financial institution that approved the refund - on behalf of the tax authority.

    For US you have to be happy to pay the dividend tax - because they don't refund. They even add extra tax for non-residents (30% instead of 15%) - Australia too as we learned above.

    Not sure about Japan?

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