US WHT on US and Non-US asset ETFs

[shri]

hi @shri did you have any thoughts on this - are there any online calculators to weigh up pros and cons of selling all my SCHB (TER .03%) for e.g. this ireland S&P500 etf at .05%?

https://www.justetf.com/de-en/etf-pr...n=DE000A1JM6F5

My calculations would probably be a very simplistic spreadsheet with two columns. US and UK (UCITS)

All things equal it would be an easy calculation

USD$100 Investment - to keep things simple, find an ETF that tracks the same index on both sides of the pond and trades in USD
10% div on US side, 10% on UK side
10% expense ratio on US side, 10% on UK side and assume it is taken from the dividend.

So at this point, your effective dividend on both sides of the pond would be $9.

30% tax on US side, 15% on UK side

In this case, I'd get US$ 6.3 / year in the US and 7.65 in the UK, assuming a cost of 0.25 to sell and 0.25 to buy in the UK, you incur a $0.50 cent charge to switch (may be a few other misc cost..add them to the spreadsheet).

All things kept the same you make $63 in the US and $76.50 in the UK over 10 years.

In this case it makes sense to switch - high dividends and same expense ratio. Things will change if you play around with the expense ratio, which will be different for the US and UK funds.

In the your case from the earlier example I think from memory the dividend yield is quite low (0.53%?) and the expense ratio of the fund is incredibly low (0.03%?).

Check and see if its worth switching. I suspect it might not be..

[shri]

By the way, I'm still waiting on some contacts to come through and introduce me to people who can help me follow the dollar.

What I want to understand is unfortunately too complicated for mere mortals.

1) Companies A, B, C, D which are all not US listed are held by an ETF listed in the US. How does the cash flow from the dividends paid by those companies into my account, at say HSBC. Assuming that I've filed the right paper work with HSBC.

2) US Fed "instruments" A, B, C and D are held by a US owned ETF. What is the cash flow like?

A lot of intermediaries seem to be involved and I'm unable to figure out why I get different results for different ETFs from a single provider like iShares.

For example SHY every month declares that 100% of the dividend is tax free, yet I see 30% missing from my credit in HSBC. At the same time MUB is credited without any tax taken out. And then there are issues with ETFs like LQD which should be 72% tax free, still ends up with a 30% deduction at HSBC. Where is the leakage?

Some folks tell me "it gets paid back" - but I cannot identify a process by which it gets paid back to me. Why would one ETF follow a different set of rules from another.

Am waiting on a friend who works at Vanguard to help me find someone who might have a better view from their perspective on how the cash flows in and out of their fund's distributions before it reaches me and then beyond - when they presumably claim back from the IRS after identifying that I am an overseas, non-treaty investor ... or whatever.

[greenmark]

By the way, I'm still waiting on some contacts to come through and introduce me to people who can help me follow the dollar.

What I want to understand is unfortunately too complicated for mere mortals.

1) Companies A, B, C, D which are all not US listed are held by an ETF listed in the US. How does the cash flow from the dividends paid by those companies into my account, at say HSBC. Assuming that I've filed the right paper work with HSBC.

2) US Fed "instruments" A, B, C and D are held by a US owned ETF. What is the cash flow like?

A lot of intermediaries seem to be involved and I'm unable to figure out why I get different results for different ETFs from a single provider like iShares.

For example SHY every month declares that 100% of the dividend is tax free, yet I see 30% missing from my credit in HSBC. At the same time MUB is credited without any tax taken out. And then there are issues with ETFs like LQD which should be 72% tax free, still ends up with a 30% deduction at HSBC. Where is the leakage?

Some folks tell me "it gets paid back" - but I cannot identify a process by which it gets paid back to me. Why would one ETF follow a different set of rules from another.

Am waiting on a friend who works at Vanguard to help me find someone who might have a better view from their perspective on how the cash flows in and out of their fund's distributions before it reaches me and then beyond - when they presumably claim back from the IRS after identifying that I am an overseas, non-treaty investor ... or whatever.

@shri - other than MUB, are there any other US-listed bond ETFs that you know don't have the withholding tax taken?
(ie those you know, not those for which you are waiting for a refund)

[Morrison]

By the way, I'm still waiting on some contacts to come through and introduce me to people who can help me follow the dollar.

What I want to understand is unfortunately too complicated for mere mortals.

1) Companies A, B, C, D which are all not US listed are held by an ETF listed in the US. How does the cash flow from the dividends paid by those companies into my account, at say HSBC. Assuming that I've filed the right paper work with HSBC.

2) US Fed "instruments" A, B, C and D are held by a US owned ETF. What is the cash flow like?

A lot of intermediaries seem to be involved and I'm unable to figure out why I get different results for different ETFs from a single provider like iShares.

For example SHY every month declares that 100% of the dividend is tax free, yet I see 30% missing from my credit in HSBC. At the same time MUB is credited without any tax taken out. And then there are issues with ETFs like LQD which should be 72% tax free, still ends up with a 30% deduction at HSBC. Where is the leakage?

Some folks tell me "it gets paid back" - but I cannot identify a process by which it gets paid back to me. Why would one ETF follow a different set of rules from another.

Am waiting on a friend who works at Vanguard to help me find someone who might have a better view from their perspective on how the cash flows in and out of their fund's distributions before it reaches me and then beyond - when they presumably claim back from the IRS after identifying that I am an overseas, non-treaty investor ... or whatever.

From what I have been doing, it could be like this.

MUB dividends are always tax free for you, and it's known by the bankers,
so the value in the puter system is x 1.
1 dollar paid times 1, so you get a dollar.

SHY needs to declare the percentage, which as you wrote happenz on a monthly basis.
E.g. Last month it was 100% tax exempt, this month it's only 90%.
So it's an unknown variable.
But for the bank to be on the safe side, the standard value in the puter is 0.7, the maximum you must pay under US tax law, 30% on every dollar and cent....

The tax withholding agent probably does not do his job, it est does not follow up on SHY's declarations, thus withholds 30 % every time, just because it's in the system?

What he should do is check what's SHY's declaration for the month and then recredit you
the difference. Allota work

You need to talk to your bank and demamd an adjustment.

And keep in mind that if it's like I described, the money is already in US IRS' hands.

[shri]

Original Post Deleted

- have not found any others which come through without any WHT withholdings. As Morrison says, this is a case of the tax agents not having the right tables / being lazy. To be honest, I do not have the will power or the time to be bothered and would rather hold non-dividend paying stock in the US or route through a UK ETF.

[john_1122]

I thought that the whole point of municipal bond etfs was to avoid paying taxes, but Saxo withdrew 30% for "taxes" on the dividend of my HYD. I am not at all happy with the situation. To me this is theft. I know that other people here have bought municipal bond etfs. Are other brokers also withdrawing 30% for taxes? Are they returning the money at the end of the year?

Everybody knows that municipal bonds are tax free, so why are they withdrawing 30%?

I asked them over 1 week ago for clarifications, and they said they will get back to me but have not done so in spite of my reminders. Is there any HK financial regulation agency I can complain to?

[Morrison]

Original Post Deleted

How long is the waiting time between fiscal year end and the re-credit of tax withheld in excess to your account ?

[michaelanddao]

I am new to all this and have only been studying about it for a few days. I'm a long term HKG permanent resident paid in HKD. With regards the 30% USA Withholding Tax and also the USA Estate Tax issues, does this apply also to non-USA ETFs purchased on the US Stock Exchange?
For example, I am considering Vanguard Total International Stock ETF (VXUS) from the NYSE which consists of developed & emerging non-US markets. Would I be charged the 30% Withholding Tax simply because this is on the NYSE, or would I not be liable for it because it has no USA stocks?

[shri]

@michaelanddao - have moved your post to a more relevant thread.

We have had some country specific ETFs (India / Brazil ) to be specific in the past and have seen 30% WHT taken out - sheer laziness by the parties involved and none of these "tax refunds" that some have mentioned here.

Other than MUB I have not found another tax free ETF (may be the Vanguard equivalent - but not bought it / tested).

I have yet to come across anyone who has an iShares / Vanguard ETF listed in the US show me a tax refund credit to their account. Would really like to see one!

In a practical sense - buy the ETF and hold for a quarter or two and see what your dividend statement looks like, if you really do want to check and verify.

[Morrison]

If you are conducting yer investments through a US bank or brokerage then check whether they are a member of FINRA, if so, file a complaint with FINRA.
I have done so about WTF WHT matters and only then did I get my recredit, though not ETF related.