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  • 1 Post By fuzzzrite
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Buying Non-US Securities & Withholding Tax

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  1. #1

    Buying Non-US Securities & Withholding Tax

    Hi all,

    I am a typical retail investor that purchases broad market ETFs. So far I've been buying through Schwab on the US stock market. This means I pay no capital gains tax and a withholding tax of 30%. I am considering if for non-US securities I am better off opening an account with Interactive Brokers and buying them through another country's exchange. I was hoping to get some advice on this topic, as well as suggestions on what country has the best tax arrangements.

    My limited research points to Switzerland which has no capital gains tax and a 10% tax treaty with HK. However, I am not sure if Interactive Brokers would take the tax treaty into account on my behalf. There may also be better options I am not aware of.

    Thanks in advance


  2. #2

    Join Date
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    Open an IB account and purchase Irish domiciled USD denominated funds listed on the LSE e.g VUSD or VWRD. Withholding tax is 15%.

    Avoid buying EUR or GBP (or CHF) funds (unless the constituents are entirely UK or European companies) since they are hedged which drags on your returns. All Swiss listed funds (that I have seen) are actually Irish domiciled so the tax is still 15% but are hedged to CHF.

    If you'd like a referral code for IB (full disclosure: you get $1k IBKR shares and I get $200) DM me

    Last edited by aw451; 01-10-2023 at 08:31 PM.
    shri likes this.

  3. #3

    Join Date
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    “ So far I've been buying through Schwab on the US stock market. This means I pay no capital gains tax and a withholding tax of 30%.”

    No. There is only a 30% dividend withholding tax for dividends paid by US companies.
    That means you can keep your account with Schwab and buy stocks of foreign companies
    that are listed in the US or elsewhere and only get deducted that foreign country’ s dividend
    withholding tax. And you enjoy the treaty rate, if any.
    It’s just additional paperwork. In the case of dividends paid by Swiss companies it is somewhat tedious, from what I have read a few years ago.

    As to the capital gains tax, that applies to investors that are residents of a country that has a capital gains tax.
    If you are resident in HK and have realized capital gains by trading a foreign stock
    there is no capital gains tax levied by that country.
    Neither does HK tax your capital gain.

    And it is an entirely different story if you are an American ( or Eritrean ) citizen, as these countries tax your worldwide income.

    Last edited by Morrison; 01-10-2023 at 08:56 PM.

  4. #4
    Quote Originally Posted by Morrison:
    “ So far I've been buying through Schwab on the US stock market. This means I pay no capital gains tax and a withholding tax of 30%.”

    No. There is only a 30% dividend withholding tax for dividends paid by US companies.
    That means you can keep your account with Schwab and buy stocks of foreign companies
    that are listed in the US or elsewhere and only get deducted that foreign country’ s dividend
    withholding tax. And you enjoy the treaty rate, if any.
    It’s just additional paperwork. In the case of dividends paid by Swiss companies it is somewhat tedious, from what I have read a few years ago.

    As to the capital gains tax, that applies to investors that are residents of that country.
    If you are resident in HK and have realized capital gains by trading a foreign stock
    there is no capital gains tax levied by that country.
    Neither does HK tax your capital gain.
    If you lived in France or Germany, for example, then you would have to pay capital gains tax
    on any stock trade. ( unless you have been holding these stocks for decades, and bought prior a capital gains tax reform took effect )
    I'm not sure this is correct for ETFs. I have several Developed and Emerging ETFs, dividends have always had a 30% tax. I assume it's because the ETFs themselves are domiciled in the US so they count as US companies. I cannot comment on individual company stocks.

  5. #5
    Quote Originally Posted by aw451:
    Open an IB account and purchase Irish domiciled USD denominated funds listed on the LSE e.g VUSD or VWRD. Withholding tax is 15%.

    Avoid buying EUR or GBP (or CHF) funds (unless the constituents are entirely UK or European companies) since they are hedged which drags on your returns. All Swiss listed funds (that I have seen) are actually Irish domiciled so the tax is still 15% but are hedged to CHF.

    If you'd like a referral code for IB (full disclosure: you get $1k IBKR shares and I get $200) DM me
    Thanks for the advice! Unfortunately I already started the process with IBKR..
    aw451 likes this.

  6. #6

    Join Date
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    Quote Originally Posted by fuzzzrite:
    I'm not sure this is correct for ETFs. I have several Developed and Emerging ETFs, dividends have always had a 30% tax. I assume it's because the ETFs themselves are domiciled in the US so they count as US companies. I cannot comment on individual company stocks.
    For your ETFs that seems to be the case.
    I don’t invest into ETFs but in individual stocks.
    Sorry for the confusion.