US ETFs no longer purchasable in Europe

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

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

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

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?

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

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 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.

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.

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

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.

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

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.

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

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 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

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?

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.

Mitchell Short Salesperson wrote: »

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.

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.

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.

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

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:

Welcome to https://www.justetf.com/uk/find-etf.html folks.