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Tax efficient S&P 500 ETF investment

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  • 03-03-2020 1:35pm
    #1
    Patsy167
    Registered Users Posts: 1,790 ✭✭✭


    Hi Everyone -

    I am looking for advice on what is the most tax efficient method of investing in accumulating ETF's that track the S&P 500 using DEGIRO?

    I have done some research and it seems that investing in an Irish listed ETF fund (like Ishares) is my best option?

    Are there other ways to get exposure to the S&P 500 that I should be considering?

    All guidance greatly appreciated.

    Some background info

    - Pension contribution currently maximised
    - Will be trading using DEGIRO account
    - Irish resident/citizen / PAYE worker


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    #2
    russtini
    Registered Users Posts: 36 ✭russtini


    Patsy,

    Am in a similar situation but 1 year ahead - let me give you a little readout on my experience to date and personal tax expectations.

    Purchasing €1100 per month of VUSA on Euronext Amsterdam / EAM - No fee payable except €2.50 annual exchange connection fee so very low cost tracker.

    Now have approx 11k invested and until last week this had gained approx €2k -obviously S&P has dropped and risen- but am in this for long term so have continued to buy on the price drop.

    Am saving for kids college and face deemed disposal at 8 years but expect I'll need to start selling in 5-6 years time so expect to pay following tax:

    1. Dividends are income tax 41% payable each year by self assessment
    2. When I sell in 5-6 years, current rules = income tax at 41% on the gain by self assessment

    I have investigated adding the funds in the kids name but not got too far yet - that is my next step!


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    #3
    RedRochey
    Registered Users Posts: 1,298 ✭✭✭RedRochey


    russtini wrote: »

    2. When I sell in 5-6 years, current rules = income tax at 41% on the gain by self assessment

    Just to be clear, you don't pay income tax when you dispose, it's Exit Tax which is currently at 41%.

    Also if you are buying these ETF's monthly then in 8 years time you will have to pay Exit Tax each month, i.e. 8 years after each purchase, so to reduce the workload it might be better to buy ETFs every quarter instead


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    #4
    Becks610
    Registered Users Posts: 144 ✭✭Becks610


    russtini wrote: »
    Patsy,

    Am in a similar situation but 1 year ahead - let me give you a little readout on my experience to date and personal tax expectations.

    Purchasing €1100 per month of VUSA on Euronext Amsterdam /!

    That is a distributing etf- do you get dividends every year and have to file a tax return or why haven’t you gone for an accumulating etf?


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    #5
    russtini
    Registered Users Posts: 36 ✭russtini


    As a health warning- am relatively new to ETFs so finding my feet as I said.

    Dividends are paid each quarter with VUSA- am sure there are better ETFs (please advise!) but a simple excel spreadsheet and I cover the tax in my self-assessment each year currently.

    Interesting though is that 11k invested is paying around €40 a quarter = €160 year which is around the same level that a fixed interest bank account would pay, and then you get the S&P gains (or losses) on top.

    Am working on simple model of 8-12% average gain over 5 years; fortunately its money I do not need immediately so hope to ride out any price drops and keep buying in to gain on the bounce backs plus keep the tax man honest on the way.


  • Options
    #6
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    VWCE - XET - is the accumulating Vanguard ETF on the Amsterdam stock exchange.


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    #7
    jimmy456
    Registered Users Posts: 90 ✭✭jimmy456


    The compliance may be a hassle too. Does purchasing this ETF make you a chargeable person and therefore you have to file a Form 11?


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    #8
    russtini
    Registered Users Posts: 36 ✭russtini


    Best free guidance I could find :confused: - exit tax on dividends 41%.

    "And remember, with ETFs, investors have an extra year to settle their tax bill, given the way self-assessed tax returns work. "

    https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331

    Current Plan:

    For dividends- Ill pay the tax on form 11 in following year.

    When I sell the ETFs, Ill pay the tax on form 11 in following year.


  • Options
    #9
    bcklschaps
    Registered Users Posts: 1,059 ✭✭✭bcklschaps


    Static M.e. wrote: »
    VWCE - XET - is the accumulating Vanguard ETF on the Amsterdam stock exchange.

    XET is the Frankfurt stock Exchange. I don't trade anything there as it appears to have very low volumes. Might be ok for an ETF but for individual stocks its a pure worthless


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    #10
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    Thank you, good to know.


  • Options
    #11
    bcklschaps
    Registered Users Posts: 1,059 ✭✭✭bcklschaps


    A question for the guru's. I notice Vangaurd S&P 500 (VUSA) is down nearly 8% today whereas the actual s&p 500 is only down about 3.5% ...anybody know why this is ?


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    #12
    Jim2007
    Moderators, Business & Finance Moderators Posts: 9,988 Mod ✭✭✭✭Jim2007


    bcklschaps wrote: »
    A question for the guru's. I notice Vangaurd S&P 500 (VUSA) is down nearly 8% today whereas the actual s&p 500 is only down about 3.5% ...anybody know why this is ?

    It depends on where you were looking... do you have real time pricing or delayed? There may also be some time delays that will be corrected after the market closes.


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    #13
    bcklschaps
    Registered Users Posts: 1,059 ✭✭✭bcklschaps


    Jim2007 wrote: »
    It depends on where you were looking... do you have real time pricing or delayed? There may also be some time delays that will be corrected after the market closes.

    Looking at both (Vanguard & S&P index through DeGiro) soo you would imagine delays would be the same for both?


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    #14
    Shedite27
    Registered Users Posts: 9,363 ✭✭✭Shedite27


    bcklschaps wrote: »
    Looking at both (Vanguard & S&P index through DeGiro) soo you would imagine delays would be the same for both?

    Looks like they both ended down 2.93%
    https://finance.yahoo.com/quote/VOO?p=VOO&.tsrc=fin-srch
    https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC

    I can never fidn the right Vanguard index on DEgiro so might ave been a different one you're looking at.


  • Options
    #15
    bcklschaps
    Registered Users Posts: 1,059 ✭✭✭bcklschaps


    This is my fella.

    https://finance.yahoo.com/quote/VUSA.AS?p=VUSA.AS&.tsrc=fin-srch

    Down -6.56 % today


    whereas the actual S&P 500 index only fell 2.93%


  • Options
    #16
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,046 Mod ✭✭✭✭AlmightyCushion


    bcklschaps wrote: »
    This is my fella.

    https://finance.yahoo.com/quote/VUSA.AS?p=VUSA.AS&.tsrc=fin-srch

    Down -6.56 % today


    whereas the actual S&P 500 index only fell 2.93%

    VOO on the NYSE was only down 3%. If you look at their charts they both bottomed out just before 16:00 and then started increasing. VOO had a few extra hours as the NYSE closes later and so it continued increasing.


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    #17
    Jim2007
    Moderators, Business & Finance Moderators Posts: 9,988 Mod ✭✭✭✭Jim2007


    bcklschaps wrote: »
    This is my fella.

    https://finance.yahoo.com/quote/VUSA.AS?p=VUSA.AS&.tsrc=fin-srch

    Down -6.56 % today


    whereas the actual S&P 500 index only fell 2.93%

    One is a weighted index and the other one isn’t, so what is your point?


  • Options
    #18
    Jim2007
    Moderators, Business & Finance Moderators Posts: 9,988 Mod ✭✭✭✭Jim2007


    bcklschaps wrote: »
    Looking at both (Vanguard & S&P index through DeGiro) soo you would imagine delays would be the same for both?

    Delays depend on how much you are willing to pay for the information, if you are looking at a free service on an ETF it is already out of data.


  • Options
    #19
    Shedite27
    Registered Users Posts: 9,363 ✭✭✭Shedite27


    bcklschaps wrote: »
    This is my fella.

    https://finance.yahoo.com/quote/VUSA.AS?p=VUSA.AS&.tsrc=fin-srch

    Down -6.56 % today


    whereas the actual S&P 500 index only fell 2.93%
    Well the amrket you're trading on (Amsterdam) closed at 4pm, which was only halfway through the US day. As you see the S&P recovered later in the day while your fund was closed. So I suspect they should correct themselves when they open this morning


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    #20
    sk8board
    Registered Users Posts: 3,183 ✭✭✭sk8board


    Shedite27 wrote: »
    Well the amrket you're trading on (Amsterdam) closed at 4pm, which was only halfway through the US day. As you see the S&P recovered later in the day while your fund was closed. So I suspect they should correct themselves when they open this morning

    This happens every day, but with the recent swings it’s more apparent.
    the S&P trades for 4 hours after Dublin/Irish ETFs close and 5 hours after mainland Europe.

    Conversely, at 9am tomorrow your S&P etf will show a gain or fall, but the index itself wont open for a few hours


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    #21
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    Following up on an earlier comment.

    Does it actually matter on which exchange you purchase an EFT on? I have been trying to look at the volumes traded over the last couple of days in but I can't make sense of it. I dont know what the right amount of volume is so it is hard to compare if it is big or small. I imagine that the size of the market is very important for individual stocks but is it the same for EFTs.


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