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US WHT on US and Non-US asset ETFs

  1. #11

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    Jun 2011
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    The withholding tax we are talking about is purely on dividends I pressume? Or could we get taxed on capital gains as well as HK residents buying stocks in the US?

    As a general thought, the most tax efficient solution must be finding a ETF which reinvest dividends instead of paying them out?


  2. #12

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    Quote Originally Posted by calcio1
    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..
    Have a GeoExpat related problem - please create a support ticket.

  3. #13

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    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.

    Have a GeoExpat related problem - please create a support ticket.

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