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US ETFs no longer purchasable in Europe

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Comments

  • Registered Users Posts: 947 ✭✭✭ Prezatch


    wasabi wrote: »
    The deemed disposal regime is a really serious tax drag that will take huge bites from your long term investment returns.

    Not to mention the administrative pain in the arse it would be to note the 'deemed disposal date' for every purchase you make. You also don't get the annual exemption and are charged a considerably higher tax rate than CGT.

    If I held these ETFs all I would do right now is nothing. Continue saving, wait for Degiro to get the documentation in order and then continue buying the US ETFs after that. No panic


  • Registered Users Posts: 3,612 ✭✭✭ Dardania


    wasabi wrote: »
    Dardania wrote: »
    I get that not writing losses against other equities is a potential problem, but why is the 8 year deemed disposal an issue? From reading your linked document, it seems that when you actually dispose of the ETF that you subtract any taxes paid at the 8 year increments from the final tax? Not so bad?

    Nope, it's still pretty bad. Usually you want to hold your investments for as long as possible, letting it just sit there and appreciate, and getting the benefit of growth on your capital gains as well as your initial capital - the whole idea of compound interest.

    The 8 year deemed disposal means that every 8 years you've got to sell some units to fund the tax, 41% of the growth of the last 8 years. So if I start with 100 units of an UCITS ETF @eur100, and their value doubles over 8 years to eur200 each, then I have a eur20,000 valued investment with eur10000 gains. I would owe tax of 4,100 and so I would have to sell about 21 of my units to fund that (or of course pay from another cash source but let's leave that aside as it makes the comparison less clear).

    Conversely, anyone holding under a normal capital gains regime has no bill due and gets to continue holding their full 100 units and benefiting from their price appreciation in the future. They will pay CGT on eventual sale but for right now, they still have 100 units sitting there appreciating, earning dividends, etc.

    The deemed disposal regime is a really serious tax drag that will take huge bites from your long term investment returns.
    Makes perfect sense - really well explained.

    Would a possible solution be to sell the whole lot every 8 years? You realise all the gains at that time, and are liable for the tax anyway? In comparing UCITS and non-UCITS tax regimes, it's clear that 41% applies to the UCITS disposal -what about non-UCITS - is that the 33% number? And is there USC or PRSI applied to the non-UCITS number?

    One advantage I can think of for UCITS ETFs is that you can get accumulation share classes, whereas with US, they're obliged to pay out dividends (which have a dividend witholding tax)....maybe that mitigates the hassle of selling every 8 years?


  • Registered Users Posts: 370 ✭✭ wasabi


    Dardania wrote: »
    Makes perfect sense - really well explained.

    Would a possible solution be to sell the whole lot every 8 years? You realise all the gains at that time, and are liable for the tax anyway? In comparing UCITS and non-UCITS tax regimes, it's clear that 41% applies to the UCITS disposal -what about non-UCITS - is that the 33% number? And is there USC or PRSI applied to the non-UCITS number?

    One advantage I can think of for UCITS ETFs is that you can get accumulation share classes, whereas with US, they're obliged to pay out dividends (which have a dividend witholding tax)....maybe that mitigates the hassle of selling every 8 years?

    I guess selling the lot every 8 years and rebuying might reduce admin but you're still losing that big chunk in tax regularly, it'll still destroy your returns.

    Yes - dividends are taxed a bit less (for higher rate taxpayers) and some funds roll those up, although from what I've seen the majority of UCITS funds are still distributing anyway. The fact that on a gross roll-up fund the exit tax is 41% versus 33% capital gains on distributing funds roughly evens out, for many investments. The rates are fair enough.

    But this isn't enough to compensate for the 8 year deemed disposal nor the fact that you can't offset capital gains and losses. So UCITS tax regime is very strictly worse.


  • Registered Users Posts: 370 ✭✭ wasabi


    Prezatch wrote: »
    Not to mention the administrative pain in the arse it would be to note the 'deemed disposal date' for every purchase you make. You also don't get the annual exemption and are charged a considerably higher tax rate than CGT.

    If I held these ETFs all I would do right now is nothing. Continue saving, wait for Degiro to get the documentation in order and then continue buying the US ETFs after that. No panic

    Also very true.

    Yeah, this is my strategy for the moment, wait it out for a few weeks and if no movement or concrete word about dates then I'll pull the trigger on a US brokerage account. Don't want to deal with another account but meh, I will if I have to.


  • Registered Users Posts: 17,665 ✭✭✭✭ keane2097


    While wasabi's post is a great illustration please note it's actually something of a best case scenario.

    In reality we probably all invest a certain amount every month, in which case with a UCITS ETF you will have deemed disposal every month after the initial eight years and will have the administrative ball ache of having to be able to figure out what price you paid for your shares each month eight years previously - the $100 -> $200 value example would seem like child's play by comparison to the reality.

    Also 41% tax with no exemption versus 33% after €1270 so probably eliminates the majority of the profits for many of us, why bother taking the risk?


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  • Registered Users Posts: 61 ✭✭ NotVeryHappy


    I was looking at GLD and IAU. Is there a EU equivalent?


  • Registered Users Posts: 947 ✭✭✭ Prezatch


    I was looking at GLD and IAU. Is there a EU equivalent?

    Did you miss the part above where we outlined how you get screwed buying European based ETFs?


  • Registered Users Posts: 61 ✭✭ NotVeryHappy


    I did not


  • Closed Accounts Posts: 3,502 Mitchell Short Salesperson


    Perhaps a silly question but am I right in thinking that the deemed disposal is simply that - deemed, and you can indeed pay the tax bill from a cash source and keep the original holdings? It's poorly explained on revenues site (as with most things).


  • Registered Users Posts: 17,665 ✭✭✭✭ keane2097


    Perhaps a silly question but am I right in thinking that the deemed disposal is simply that - deemed, and you can indeed pay the tax bill from a cash source and keep the original holdings? It's poorly explained on revenues site (as with most things).

    Yeah you're not forced to sell - it's basically 'what would you owe us if you sold now'. You pay the bill whatever way you like.

    If you actually sold up it would just be a disposal, as you say.


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  • Registered Users Posts: 3,612 ✭✭✭ Dardania


    I've setup a spreadsheet to try understand this issue over 24 years, starting from a notional E1,000 - feel free to twiddle the numbers, and let me know if I've made a bad assumption: https://docs.google.com/spreadsheets/d/e/2PACX-1vSeQni67A5rcgf8drQP8KgQIntNSibeG5KSKHX5PgR1TXnsvQ8jymFVGvvvD87f8SYJ0AuAoppVz6mu/pubhtml 

    In some cases, the difference isn't so much, and in other cases it is disastrous for the UCITS scenario.

    Having Accumulation type ETFs is essential in the UCITS world to be competitive from what I can see - in order to get a big spread compared to income type ETFs from the US.


  • Registered Users Posts: 655 ✭✭✭ Viscount Aggro


    Revenue are laughing their asses off at this.

    People getting tied up in increasingly complex account set-ups and boxed into less and less options.
    If you open an online account with a US broker, make sure you declare it to Revenue, because its an offshore account.

    They dont want people investing outside of pension structures. This gives people more financial freedom, and thats a threat to the system.
    They want dependents, from cradle to the grave. Good little citizens, spending and paying their taxes.


  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    If you open an online account with a US broker, make sure you declare it to Revenue, because its an offshore account.

    Unless I am very very badly mistaken...........
    This is totally inaccurate, there is absolutely no need to inform Revenue that you are opening a US broker account, you open the account, declare your annual US dividednds (E-Foreign Income, 310 US dividends on Form 11), same as you would do for Irish, UK or EU dividends, pay any CGT due on profits made on trades with your US broker, exactly the same as you would with an Irish, UK, or EU broker, makes absolutely no difference where the brokerage is located. If you don't pay tax on your dividends or CGT due from a US broker then Revenue will be well entitled to come after you same as they would for transactions with an Irish, UK or European broker.

    I am happy to be proven incorrect on this, but I would like to see the Revenue link as evidence.


  • Registered Users Posts: 655 ✭✭✭ Viscount Aggro


    I am going by the Taxes Consolidation Act 1997 Section 895 to which Form 11 refers, which says:

    “deposit” means a sum of money paid to a person on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made;

    “foreign account” means an account in which a deposit is held at a location outside the State, for whatever purpose;

    With such a general definition it seems quite possible that a foreign brokerage account is a "relevant account" - it seems there is no choice but to declare it, which is what Revenue suggested anyway. Remember that a brokerage account has both securities and cash account element to it. I know because I work in the industry.


  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    I am going by the Taxes Consolidation Act 1997 Section 895 to which Form 11 refers, which says:

    “deposit” means a sum of money paid to a person on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made;

    “foreign account” means an account in which a deposit is held at a location outside the State, for whatever purpose;

    With such a general definition it seems quite possible that a foreign brokerage account is a "relevant account" - it seems there is no choice but to declare it, which is what Revenue suggested anyway. Remember that a brokerage account has both securities and cash account element to it. I know because I work in the industry.

    Where does it say that you must declare that you have opened an account with a foreign stockbroker (ie one outside Ireland, be that US, UK, EU wherever)


  • Registered Users Posts: 370 ✭✭ wasabi


    In this thread here: https://www.boards.ie/vbulletin/showthread.php?p=105773615#post105773615 I have asked DeGiro to commit to keeping a version of their commission free ETFs list up to date (bimonthly), showing which are and are not available.

    They claim products are being added back but I have no bloody idea how I'd find them.

    If an updated list would be useful to anyone else, you might like to head over there and +1 the request so I'm not the lone crank :)


  • Registered Users Posts: 17,665 ✭✭✭✭ keane2097


    I have just responded there also.


  • Registered Users Posts: 432 ✭✭ Gordon Gekko


    I just had a reply from Vanguard Europe's customer service people effectively saying that they will not be producing KIIDs for US-listed Vanguard ETFs, and instead pointing me to their range of UCITS ETFs. They told me they couldn't advise on the tax issues around UCITS vs. non-UCITS ETFs, which is totally reasonable.

    IMO it's reasonable from their point of view that they wouldn't intend to release KIIDs for US-listed ETFs - as far as they're concerned, they've already jumped through the expensive, convoluted and time-consuming hoops necessary to develop UCITS-compliant ETFs, so why should they incur further cost and effort in making their US-listed ETFs PRIIPs compliant simply to comply with the European Commission's efforts to build a protectionist wall around the European funds industry?

    Basically, the root of this problem is with the protectionist European Commission, and the Irish Revenue and their anti-investing attitude - anyone who makes a profit or shock horror has some money left over to invest is inherently evil and should be taxed for the greater good, right lads :rolleyes:


  • Registered Users Posts: 17,665 ✭✭✭✭ keane2097


    **** sake.


  • Registered Users Posts: 3,612 ✭✭✭ Dardania




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  • Registered Users Posts: 5,757 ✭✭✭ jive


    So is there any Non-UCITS US ETFs available? All my holdings are Vanguard so this is a total pain in the hole.


  • Registered Users Posts: 1,899 ✭✭✭ ronivek


    Hey guys,


    So is the only option for now (until/unless KIDs are completed appropriately for them to be listed again on Degiro) to go with a US-based brokerage if we want to avoid the 8 year disposal issue?

    Would anyone have any recommendations for a brokerage where that's possible? The few I've looked at all require US residency...


  • Registered Users Posts: 370 ✭✭ wasabi


    I'm in process of setting up with interactive brokers. 10K USD minimum deposit to activate account, though.


  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    ronivek wrote: »
    Hey guys,


    So is the only option for now (until/unless KIDs are completed appropriately for them to be listed again on Degiro) to go with a US-based brokerage if we want to avoid the 8 year disposal issue?

    Would anyone have any recommendations for a brokerage where that's possible? The few I've looked at all require US residency...

    Firstrade ($2.95 per trade), TDAmeritrade ($6.95 per trade), and IB (0.1% with minimum for some exchanges), all take Irish clients. A piece of cake to set up.

    TDAmeritrade do some commission free ETFs but no Vanguard as far as I can see
    https://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp


  • Closed Accounts Posts: 3,502 Mitchell Short Salesperson


    Cute Hoor wrote: »
    Firstrade ($2.95 per trade), TDAmeritrade ($6.95 per trade), and IB (0.1% with minimum for some exchanges), all take Irish clients. A piece of cake to set up.

    TDAmeritrade do some commission free ETFs but no Vanguard as far as I can see
    https://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp

    Any recommendations on which of the above is best in terms of the trading platform etc?


  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    Any recommendations on which of the above is best in terms of the trading platform etc?

    All 3 are grand but I find the Firstrade website the most user friendly and I find them very good to deal with, wouldn't be critical of any of them though.

    Firstrade have a special offer now, refer a friend and both get $50 if the friend signs up, if you're interested pm me, no pressure.
    https://www.firstrade.com/content/en-us/promos/referafriend/


  • Closed Accounts Posts: 3,502 Mitchell Short Salesperson


    Cute Hoor wrote: »
    All 3 are grand but I find the Firstrade website the most user friendly and I find them very good to deal with, wouldn't be critical of any of them though.

    Firstrade have a special offer now, refer a friend and both get $50 if the friend signs up, if you're interested pm me, no pressure.
    https://www.firstrade.com/content/en-us/promos/referafriend/

    Thanks, will do some homework.


  • Registered Users Posts: 5,757 ✭✭✭ jive


    Cute Hoor wrote: »
    Firstrade ($2.95 per trade), TDAmeritrade ($6.95 per trade), and IB (0.1% with minimum for some exchanges), all take Irish clients. A piece of cake to set up.

    TDAmeritrade do some commission free ETFs but no Vanguard as far as I can see
    https://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp

    Estate tax issues relevant for these accounts I assume (40% on anything exceeding >$60k)?

    Revenue's deemed disposal rule is such a pain. With the pension crisis on the horizon I don't see how they can still insist on those penal rules for private investments.


  • Registered Users Posts: 370 ✭✭ wasabi


    jive wrote: »
    Estate tax issues relevant for these accounts I assume (40% on anything exceeding >$60k)?

    Revenue's deemed disposal rule is such a pain. With the pension crisis on the horizon I don't see how they can still insist on those penal rules for private investments.

    AIUI the the estate tax issue is the same for US domiciled shares/ETFs/funds regardless of whether held in a European or US based brokerage.

    The deemed disposal is bloody annoying. We should all complain to our TDs TBH. Squeaky wheel and all that.

    I would also dearly love a tax-free dividend allowance similar to the UK has and to increase the 1270EUR CGT allowance - to be at least doubled, considering it hasn't been touched in something like 20 years.

    And much more transparency in pension fund fees, although I guess KIDs do help here. Haven't seen any KID for my Irish Life pension funds yet though!


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  • Registered Users Posts: 3,612 ✭✭✭ Dardania


    wasabi wrote: »
    jive wrote: »
    Estate tax issues relevant for these accounts I assume (40% on anything exceeding >$60k)?

    Revenue's deemed disposal rule is such a pain. With the pension crisis on the horizon I don't see how they can still insist on those penal rules for private investments.

    AIUI the the estate tax issue is the same for US domiciled shares/ETFs/funds regardless of whether held in a European or US based brokerage.

    The deemed disposal is bloody annoying. We should all complain to our TDs TBH. Squeaky wheel and all that.

    I would also dearly love a tax-free dividend allowance similar to the UK has and to increase the 1270EUR CGT allowance - to be at least doubled, considering it hasn't been touched in something like 20 years.

    And much more transparency in pension fund fees, although I guess KIDs do help here. Haven't seen any KID for my Irish Life pension funds yet though!
    By my calc, it should be doubled in order to match inflation since the original figure was legalised - I think it was 1000 punts in the mid 90s


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