Accessing US ETFs

jpd

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The problem is that the EU have imposed new reporting obligations on funds (including ETF's) to better protect investors from themselves and the US based funds can't be bothered (I'd use another word but it would probably be censored) to adhere to the format required. Thus their funds are barred from the EU market. There are plenty of EU based funds that offer similar low cost funds but the Irish tax situation means that they are not really viable for Irish resident investors :mad:
 

Horatio

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242
Do you buy US ETFs? Do you know if transferwise has its account in your name?
not US ETF's but US stocks.

I don't know if the account is in my name with TW, sorry. All i know is the money lands intact on time.
 

Cormac

Registered User
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I have had an etrade account for many years now so am ok, however I am concerned as to the future, could it be the case that US brokers like etrade will stop irish residents from trading on their platform?
There are probably people who are more qualified than I am to offer an opinion on this, but I am pretty sure that I did read about US brokerages suddenly refusing to allow EU customers to purchase US-listed ETFs, even though the customers had been purchasing via that medium for some time. I'm pretty sure I read this on AAM, but I can't definitively say. Perhaps a trawl through the ETF forum might find the relevant posts .....
 

Cormac

Registered User
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In an effort to gain access to US-listed ETFs, what if I was to open a brokerage account in, say, Canada or Australia (English speaking, solid economies, probably well regulated) and purchase the US-listed ETFs through such an account?
FX fees could be an issue; perhaps I could open a US dollar account, although that would need looking into .....
Has anyone any opinions on this?
 

Djimi Traore

New Member
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Has anyone ever gotten an explanation of the ridiculous tax situation from Revenue and how they think it's justified? I can't fathom how these complex rules have been in place so long. I'm going to be moving back to Ireland from Australia in the next year or so and am dreading it (from an investment perspective) after 8 years in a simple, low-tax system. I'll probably end up keeping my Australian bank and brokerage account open and have to invest in US ETFs that way. Will be a nightmare from an FX and tax admin perspective.
 

Horatio

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242
Has anyone ever gotten an explanation of the ridiculous tax situation from Revenue and how they think it's justified? I can't fathom how these complex rules have been in place so long. I'm going to be moving back to Ireland from Australia in the next year or so and am dreading it (from an investment perspective) after 8 years in a simple, low-tax system. I'll probably end up keeping my Australian bank and brokerage account open and have to invest in US ETFs that way. Will be a nightmare from an FX and tax admin perspective.
I'd be very surprised if revenue would engage with a Punter on justifying their rationales. If you're heading home in the next year there is some planning you can start now that may benefit you from a tax perspective / CGT. Maybe consider an appointment with a tax advisor in Ireland with experience with expats moving to Ireland. That expat experience is essential as there are different factors to consider. spend a couple of hundred EUr on a couple of tax sessions, can save you a lot more depending on where you're at right now.
 

Djimi Traore

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I'd be very surprised if revenue would engage with a Punter on justifying their rationales. If you're heading home in the next year there is some planning you can start now that may benefit you from a tax perspective / CGT. Maybe consider an appointment with a tax advisor in Ireland with experience with expats moving to Ireland. That expat experience is essential as there are different factors to consider. spend a couple of hundred EUr on a couple of tax sessions, can save you a lot more depending on where you're at right now.
Yeah I'm definitely going to get some international tax advice before doing anything. I just wonder what Revenue's motives are. Must be some powerful people who don't want things changed to make sense. I'm guessing maybe the large banks/insurance companies who are worried people might pull out of their overpriced investment funds if ETFs become more mainstream.
 
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fistophobia

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106
Theres no great mystery or hidden agenda about this. Revenue are taxing ETFs in the same way as other unit funds - they simply clarified the position.
They recently said, there is no discernable drop off in usage of such investment funds due to the taxation.
It goes against the tide of investment trends globally, but its the law.
 

Cormac

Registered User
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Theres no great mystery or hidden agenda about this. Revenue are taxing ETFs in the same way as other unit funds - they simply clarified the position.
They recently said, there is no discernable drop off in usage of such investment funds due to the taxation.
It goes against the tide of investment trends globally, but its the law.
Do you have a link/reference to where they said this please?
 

Djimi Traore

New Member
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4
Theres no great mystery or hidden agenda about this. Revenue are taxing ETFs in the same way as other unit funds - they simply clarified the position.
They recently said, there is no discernable drop off in usage of such investment funds due to the taxation.
It goes against the tide of investment trends globally, but its the law.
I would say it is a bit of a mystery as it goes against logic as well as against what most other developed nations are doing. If they're taxing them as unit funds then why are US ETFs taxed under capital gains while Irish/EU ETFs are treated like unit funds. They've gone out of their way to create added complexity which definitely raises some questions.
 

AskTheQuestion

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Tax, UCIT ETFs, US ETF etc etc have been discussed at length on here. Some relevant threads include tax advice

https://www.askaboutmoney.com/threads/the-tax-treatment-of-etfs-for-irish-residents.199443/
https://www.askaboutmoney.com/threads/tax-treatment-of-etfs-and-investment-companies-trusts.175887/

8 year tax = UCIT (i.e. non-US funds only)
AFAIK US funds required to distribute dividends, so there are no accumulating US funds.
Estate tax in US is also an issue.
I understand that US ETFs have to distribute dividends, but has there been any consideration given for non-US/Non-EU domiciled ETFs that do not distribute dividends? In Canada for example I know there are some ETFs that will auto reinvest dividends and not pay out in cash. Would these be able to avail of gross roll up, and also subject to the CGT regime as they are non-UCITS?
 

Marc

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1,070
It doesn't matter if the dividend is reinvested, it is still taxable in the year it is paid,

However, there are some interesting benefits of US dividends in the taxation of irish residents.

See my tax guide for detailed analysis
 

AskTheQuestion

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It doesn't matter if the dividend is reinvested, it is still taxable in the year it is paid,

However, there are some interesting benefits of US dividends in the taxation of irish residents.

See my tax guide for detailed analysis
Thanks Marc,

I am specifically talking about ETFs such as this https://www.horizonsetfs.com/ETF/HXQ-U

As far as i can tell the dividends are reinvested internally with this being reflected in the NAV of the ETF with no dividend changing hands, and no distribution to the ETF holder (https://www.theglobeandmail.com/investing/education/article-how-total-return-etfs-can-ease-tax-pain/)

If there is no dividend paid, can you be subject to tax?
 

Marc

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1,070
Ok, that's different it's a swap contract and therefore not a physical etf fund. So the big question becomes counterparty risk - google "Lehman Brothers" and "financial crisis"

But, no dividend so no income to tax but don't assume revenue will automatically treat as CGT due to imponderable "material interest" provisions of the Irish tax code.

Obviously, as this thread expands the question of retail investors having access to non-EU ETFS is problematic.

I've used ZDP shares to good effect for decades to shield from income tax and UK split cap trusts are still available to retail investors.
 

Live Well

New Member
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6
See my tax guide for detailed analysis
Link to Marc's post in another thread.

 
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