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US ETFs no longer purchasable in Europe

Corky1

Hi,
This week I had the following message from my uk broker

"New regulation being introduced on 1 January 2018 will affect dealing in some of your holdings.The new regulation requires that issuers of certain types of investments (known as ‘Packaged Retail Investment and Insurance Products’or ‘PRIIPs’) must publish a Key Information Document (or KID) if they are available to private investors.Without a KID, private investors will not be able to make any further purchases in that stock, although they can continue to hold the PRIIPs they already own. They can also sell at any stage."

This means all the dollar-denominated Vanguard non-UCITS ETFs will unavailable for purchase in Europe from 1st January 2018 because Vanguard are not providing KIDs for them.

I think nearly all the iShares non-UCITS ETFs likewise will be gone.

DeGiro told me they didn't know what ETFs they would be allowed to market and told me to check the website in January 2018

I haven't seen any specific announcements about this and I wondered what Boards.ie users knew about it, and in particular if they knew of any US ETF issuers who were going to provide KIDs ?

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TiGeR KiNgS

Does this include VOO ?

Cute Hoor

Everything you ever wanted to know about PRIIPs and KIDs but were afraid to ask:

https://esas-joint-committee.europa.eu/Publications/Technical%20Standards/JC%202017%2049%20%28JC_PRIIPs_QA_Final%29_clean.pdf

Corky1

Yes, I think VOO will be gone too

I don't hold these, but all my current Vanguard ETFs will be off limits and on a phone call my broker said that they were withdrawing all Vanguard US non-UCITS ETFs from sale from January

Deloitte and the like seem to be selling PRIIPs packages to non-UCITS fund issuers. I imagine it is the cost of these, and the fact that this is all being rushed through, with legal liabilities for getting KIDs information wrong, which is putting Vanguard etc off. And for most other countries in Europe their UCITS ETFs are fine - its just for us in Ireland the UCITS taxation treatment is tedious

But I am only guessing. So if any Boards.ie user actually knows the background , or any way round it, I would be glad to hear

q85dw7osi4lebg

Presume we will be able to continue to hold current VOO holdings etc?

A pity if that goes, makes up the largest % of my portfolio.

Corky1

Yes, any US ETFs you already have you can keep, you just can't buy any more

amacca

ffs....those were the products I was most interested in.

Any chance this will change at some stage in the near future?

q85dw7osi4lebg

Corky1 wrote: »

Yes, any US ETFs you already have you can keep, you just can't buy any more

May pile in on Tues / Weds to be sure.

Viscount Aggro

Pile in, to securities that may no longer be tradeable by European residents?

Are you aware of market commentary, about multiple asset classes being at record high valuations? Have you read Goldman Sachs latest market commentary?

650Ginge

But Vanguard a open for direct business in some Europe countries already.

I suppose they don't have to offer US based funds but it means they are aware of the situation and I am sure they can easily work out if it worth adopting priips or not.

My guess is they will. The EU market is what 350mil people. After america probably Europe is biggest market.

Tails142

The management fees I have noticed are generally higher on UCITS ETFS than on equivalent us etfs that track the same thing

q85dw7osi4lebg

Viscount Aggro wrote: »

Pile in, to securities that may no longer be tradeable by European residents?

Are you aware of market commentary, about multiple asset classes being at record high valuations? Have you read Goldman Sachs latest market commentary?

No but I don't try to time the market, I'm up a substantial amount over the past 5 years and I am happy with my own rulebook. I'll stick to it through the ups and downs.

jive

Great, best way of investing in Ireland is essentially killed off then. Not worth it if you have to suffer through the 8 year deemed disposal tax, hopefully vanguard do what's required and people in Europe can still purchase... some sickener if not!

Can't even rebalance existing portfolio with this change then given all my ETFs are vanguard US.

Frogdog

Just spoke to a Certified Financial Planner/Qualified Financial Advisor, googled for extra information about this, and rang DeGiro myself as a customer - none of the OP's first post is true. A complete and utter campaign of misinformation and "alternative facts".

Everyone can stop believing the sky is falling down now.

Alternatively, if anyone wants, I can give you my PayPal account details and you can transfer your funds to me and I'll mind your money for you. A fool and their money are soon departed and all that!

Cute Hoor

Frogdog wrote: »

Just spoke to a Certified Financial Planner/Qualified Financial Advisor, googled for extra information about this, and rang DeGiro myself as a customer - none of the OP's first post is true. A complete and utter campaign of misinformation and "alternative facts".

Everyone can stop believing the sky is falling down now.

Alternatively, if anyone wants, I can give you my PayPal account details and you can transfer your funds to me and I'll mind your money for you. A fool and their money are soon departed and all that!

OP's first paragraph (the bit in quotes) is correct, these new regulations are coming in from the 1st January. I doubt the rest is correct though, I expect brokers will be providing clients with the required KIDs, that's my understanding anyway.

TiGeR KiNgS

Cute Hoor wrote: »

OP's first paragraph (the bit in quotes) is correct, these new regulations are coming in from the 1st January. I doubt the rest is correct though, I expect brokers will be providing clients with the required KIDs, that's my understanding anyway.

Vanguard's mantra is low cost investing for the masses.
Seems unlikely that they would pull the plug on europe for the sake of KIDs reporting (unfamiliar with it), surely it cant be that difficult/costly for ETF's ??

delta_bravo

So just wondering what are people planning on doing? Hold or sell and rebuy off a European exchange? My goal is to increase my holding in ETFs so not ideal having the same type in two difference exchanges and tax regimes.

Plasmoid

Not sure yet.
Was definitely caught out by this, as i'd planned to invest everything leftover from xmas spending, but for the amount i'm doing UCITS don't seem terrible worthwhile.

Keep holding and wait and see for me I think.

Dardania

Bugger - I have my eye on some US ETFs due to launch in January

Dardania

Bugger - I have my eye on some US ETFs due to launch in January

wasabi

Cute Hoor wrote: »

OP's first paragraph (the bit in quotes) is correct, these new regulations are coming in from the 1st January. I doubt the rest is correct though, I expect brokers will be providing clients with the required KIDs, that's my understanding anyway.

Well, DeGiro isn't returning any non-European ETFs in searches for me, and if I try to purchase any it gives me a dialog that says 'This product is closed for this customer'.

So yeah, there's restrictions in place for sure. Hopefully these get sorted out soon.

Otherwise I may need to look at setting up an account with Interactive Brokers or some other US based broker that is willing to deal with European residents.

keane2097

Also not able to purchase at the moment. Hopefully there will be some update soon.

wasabi

Is anyone a customer of an international brokerage who is still able to trade US ETFs while resident/citizen of Ireland?

I've mailed InteractiveBrokers to check if they can support this (before I fund the account I set up) but they don't seem sure

Cute Hoor

wasabi wrote: »

Is anyone a customer of an international brokerage who is still able to trade US ETFs while resident/citizen of Ireland?

I've mailed InteractiveBrokers to check if they can support this (before I fund the account I set up) but they don't seem sure

Doesn't appear to be any issue with IB, didn't activate the order but allowed me to pick the stock.
Same for Firstrade and TDAmeritrade

delta_bravo

Think I'm just going to sell and rebuy on the European exchanges. Very annoying considering the admin charges but I plan to hold for the long term so will just have to lump it.

Diarmuid

delta_bravo wrote: »

Think I'm just going to sell and rebuy on the European exchanges. Very annoying considering the admin charges but I plan to hold for the long term so will just have to lump it.

Aren't most of the EU based ETFs treated as UCITS from a taxation point of view in Ireland? Hence the 8 years deemed disposal + no writing any losses against other equities etc... Where as the US based ETFs are treated as equities by revenue.

keane2097

Yeah I won't be bothering with ETFs anymore if we can't get access to the non-UCITS ones.

delta_bravo

Diarmuid wrote: »

Aren't most of the EU based ETFs treated as UCITS from a taxation point of view in Ireland? Hence the 8 years deemed disposal + no writing any losses against other equities etc... Where as the US based ETFs are treated as equities by revenue.

Yeah you're right. I'm not really sure what to do to be honest.

Cute Hoor

If DeGiro really have stopped offering the US ETFs to their customers (I'd be surprised if they don't eventually facilitate it) then you can set up an account with one of the US brokers (Firstrade, IB or TDAmeritrade), very little difference in trading cost, just means your account will be in $ and will have to be funded in $.

Dardania

Diarmuid wrote: »

delta_bravo wrote: »

Think I'm just going to sell and rebuy on the European exchanges. Very annoying considering the admin charges but I plan to hold for the long term so will just have to lump it.

Aren't most of the EU based ETFs treated as UCITS from a taxation point of view in Ireland? Hence the 8 years deemed disposal + no writing any losses against other equities etc... Where as the US based ETFs are treated as equities by revenue.

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?

wasabi

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.

Think of it like this - you have a magical pie that grows over time and does not go stale. When you eat the pie you owe the government a percentage of the pie. You much prefer to leave the pie for decades untouched and owe the government one single slice of your bigger pie than to be cutting the government a smaller slice every 8 years, ending up with a much smaller pie overall by the end