Investing in an ETF as opposed to via Quinn Life funds

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ronaldo

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I have read a bit about ETF's and am quite interested in going down that route if my understanding of what I have read so far is correct. I do however have a few questions:

  1. Is there no stamp duty on ETF purchases?
  2. Are dividends paid out periodically or are they reinvested in the fund as with Quinn Life funds?
  3. Is the tax on dividends paid at your marginal rate (as with investing directly in shares) or at a set 23% (as with investing in funds)?
  4. Is the tax on gains in the value of the underlying ETF paid at your marginal rate (as with shares) or at a set 23% (as with funds)?
After analysing the responses to the above, I would consider purchasing an ETF. For example, Lyxor (which is a subsidiary of Societe Generale - a big French bank) has Lyxor ETF DJ STOXX Euro 50, code ISIN FR0007054358, which is available on the Euronext Echange in Paris. The annual management charges are 0.25% which are amongst the lowest for ETFs tracking this index.

Does this mean that:

If I purchase this through [broken link removed] at 0.75% commission and sell it at 0.75% commission it will cost a total of 1.5% in dealing charges compared to Quinn Life's 0%. However, all tax on dividends and gains (as far as I can see it) is treated the same with an ETF as it is for a fund. Therefore, as Quinn Life's annual management charge is 1% and the annual management charge of the ETF is only 0.25%, I will be saving 0.75% in charges per year. This means that, in order for an ETF to be more cost effective than a Quinn Life fund, you need to hold for only two years. Then, after that initial two years, you will save 0.75% of fund value per year. Is this a correct analysis?
 
Based on what I've read on www.askaboutmoney.com and www.stoxx.com, I see that :

  • There is, usually, no stamp duty on ETF's. This is because they are usually bought/sold on the secondary market.
  • Dividends are paid out periodically and a 20% tax is withheld from payments. This is a minor advantage over funds where dividends are reinvested in the fund and subject to a 23% tax on exit.
  • Tax on gains in the value of the underlying shares is at a rate of 23% when the ETF is sold.
If I were to invest in an ETF, I would be buying quarterly in batches of €2,700 worth (in order to minimise broker commissions). I would probably do this over a period of, for example, 4-5 years. And invest in the Lyxor ETF DJ STOXX Euro 50 which is traded in the Paris exchange. Based on this, I have another question:
  • If I purchase these on the Paris exchange, how much tax do they (Lyxor) withhold from the dividend? On the Stoxx website, it states that French tax on dividends is 25% whilst Irish tax is 20%. Do they just withhold 25% and then I claim the further 5% back in my Irish tax return or do they have a record that I'm from Ireland and only withhold the 20%?
 
Ronaldo,

I am thinking of doing the same thing - How do you intend to hold these ETF shares ? crest ?
 
ronaldo said:
Does this mean that:

If I purchase this through [broken link removed] at 0.75% commission and sell it at 0.75% commission it will cost a total of 1.5% in dealing charges compared to Quinn Life's 0%.
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Correct me if I'm wrong, but isn't the whole point of ETFs that they are traded like shares? You should be able to buy it through any discount stockbroker without commission, just a flat fee (and whatever the bid/offer spread is- given the size of the Luxor funds, it can't be that much.) Am I missing something?
 
ronaldo said:
  • If I purchase these on the Paris exchange, how much tax do they (Lyxor) withhold from the dividend? On the Stoxx website, it states that French tax on dividends is 25% whilst Irish tax is 20%. Do they just withhold 25% and then I claim the further 5% back in my Irish tax return or do they have a record that I'm from Ireland and only withhold the 20%?
Click to expand...

Buy them through Keytrade (Belgium) or Internexxt(Lux) and you won't have to deal with that as both countries have no CGT. In any case I think you only pay in Ireland but I'm not 100% on that.
 
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