US ETFs no longer purchasable in Europe

The Notorious B.I.G. · 09-09-2018 5:22pm

blorg wrote: »

Almost all US brokers will reject transfers from TransferWise as third party, the problem is they don't come from your account but from TW's account, and brokers usually require any incoming transfers to come from a bank account in YOUR name. Transfers with TW in the US, even if you have their Borderless account, do not appear to come from your account but from TW. I believe in Europe they may work, as first party with your name on it, but they don't in the US.

FirstTrade like most brokers will reject attempted third party transfers, they say this on their site.

It's nothing to do with TW being illegal, it's just the technical way that their system is implemented, a broker does not see the transfer as coming from your account and the default position is to reject any third party transfers over money laundering concerns. If TW ever manage to fix this so transfers appear to come from an account in YOUR name, they should potentially work with any broker. But that's not how it is right now unfortunately.

One broker I know DOES take transfers via TW is DriveWealth. They are a relatively small broker but specifically target international investors and have a tech platform that they sell to third parties, they power for example Stake in Australia and Freetrade in the UK. They very specifically target international investors, and make an explicit point that they take TransferWise for Europeans.

You are going to lose a lot going the conversion with AIB, on larger amounts it's not the €20, it's the percentage they chop on the bad forex rate. Even TW is not fantastic for very large amounts for investing but it's better than AIB.

Interactive Brokers would have been ideal for this- they have fantastic forex and take SEPA transfers in EUR but I believe they stopped US ETFs to EU residents recently as well.

Hi Blorg,

Would you or anyone else who uses Drivewealth mind sharing more information about your experience of them? Was it difficult to set up an account? Have you seen any unexpected charges? Are their monthly fees for inactivity?

If they accept payments from Transferwise it would seem they are by far the most cost effecient option for investors wishing to get their money into a US brokerage account?

Pussyhands · 09-09-2018 8:47pm

dickface wrote: »

ETF's which do not provide a KID are not allowed to be purchased.So pretty much most US domiciled ETF's(many of the the biggest ETF's). So this does not affect ETF's which provide a KID and track US indices.
https://www.justetf.com/uk/news/etf/us-domiciled-etfs.html

So the problem everyone has is the 8 year deemed disposal is it?

Diarmuid · 10-09-2018 6:48am

Pussyhands wrote: »

So the problem everyone has is the 8 year deemed disposal is it?

That and the different tax regime for EU domiciled ETFs

blorg · 10-09-2018 7:40am

Hi Blorg,

Would you or anyone else who uses Drivewealth mind sharing more information about your experience of them? Was it difficult to set up an account? Have you seen any unexpected charges? Are their monthly fees for inactivity?

If they accept payments from Transferwise it would seem they are by far the most cost effecient option for investors wishing to get their money into a US brokerage account?

I have had no issues. $2.99 trade commission and then the only fee is a $5 opening fee to process your W8-BEN. No monthly minimums or inactivity fees, they are oriented towards smaller international investors.

Note- I am not resident in the EU. So you might want to double check with them that you CAN still buy US ETFs, if you are resident in the EU, if that is what you want to do.

As to "most cost efficient", it depends how much you have and what you want to do. If you don't need to invest in US ETFs specifically, but rather just US stocks in general, and you have over $100,000 to put in, Interactive Brokers would probably be better. They take SEPA transfers (free) and their forex is excellent, much better than TransferWise. But they don't do US ETFs for EU residents any more and they have a monthly minimum commission of $10- if your account is under $100,000.

You should also consider just buying an EU-domiciled UCITS ETF. It does depend on your specific situation but I am not sure that these really are that much worse for most people. It's a trade off between paying full income tax and PRSI and USC on dividends + capital gains at the end on sale vs no tax at all on dividends + the 41% exit tax after 8 years/when you sell. It's not clear that the former is necessarily worse, having zero tax on dividends like you do with an accumulating UCITS ETF is a big benefit.

Pussyhands · 10-09-2018 8:59am

Diarmuid wrote: »

That and the different tax regime for EU domiciled ETFs

Have you got a link where it explains it?

I thought it was just normal tax rules for EU ones + deemed disposal

Skelet0n · 10-09-2018 9:45am

Pussyhands wrote: »

Have you got a link where it explains it?

I thought it was just normal tax rules for EU ones + deemed disposal

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

Pussyhands · 10-09-2018 1:11pm

Skelet0n wrote: »

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

And how does signing up with firsttrade etc. mean you pay less tax?

Skelet0n · 10-09-2018 1:31pm

Pussyhands wrote: »

And how does signing up with firsttrade etc. mean you pay less tax?

Did you read it?

"While the Revenue says it can only give “general guidance” on US domiciled ETFs, it does accept that such ETFs are outside the normal regime of investment funds, and are thus subject to capital gains tax at 33 per cent on gains. Any income is taxed under income tax at your marginal rate.
Remember, income tax also means PRSI and USC, which could mean a deduction of as much as 55 per cent on any dividends you benefit from. This is also the case for ETFs domiciled in other European Economic Area (outside the EU) and OECD countries.
On the plus side, there is a tax-free allowance of €1,270 a year on gains subject to CGT, while, if you have losses, these can be used to offset taxes on other gains.
Irish investors have, however, been restricted from purchasing US domiciled ETFs since the introduction of the new PRIIPs regime on January 3rd of this year.
Both Blackrock and Vanguard, for example, say they won’t be able to provide the documentation required under PRIIPs, ie KIDs [Key Informaiton Documents] – for US domiciled funds as they don’t actively market these to retail investors in Europe.
Tax on gains: Capital gains tax at 33 per cent
Tax on income: Income tax + PRSI + USC"

blorg · 10-09-2018 1:50pm

Pussyhands wrote: »

Skelet0n wrote: »

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

And how does signing up with firsttrade etc. mean you pay less tax?

It's a different tax treatment. You pay more tax (a lot more- as much as 50% or more vs zero) on dividends, but less tax on capital gains (33% vs 41% exit tax).

It may work out as more, or it may work out as less, it depends on your exact personal situation and also what you are investing in. In general:

- lower dividend yield will favour the US option, higher dividend yield the UCITS option
- your personal marginal income tax rate- if low, the US option, if higher rate, the UCITS option
- another quirk is that if you have capital losses you can offset them with the US option but not the UCITS
- capital gains are forced to be realized and taxed with the UCITS option after eight years while with the US ETF option you are not taxed until you sell, even decades later- so if you want to hold forever, then the US option may be preferable (but if you want to hold that long, a tax sheltered retirement account might make more sense anyway)

It's not just a simple, one or the other is more or less tax, it's highly dependent on the specifics of your personal income tax situation and also what exactly you are investing in. It's remarkably complicated, why I have no idea.

Pussyhands · 10-09-2018 2:26pm

blorg wrote: »

It's a different tax treatment. You pay more tax (a lot more- as much as 50% or more vs zero) on dividends, but less tax on capital gains (33% vs 41% exit tax).

It may work out as more, or it may work out as less, it depends on your exact personal situation and also what you are investing in. In general:

- lower dividend yield will favour the US option, higher dividend yield the UCITS option
- your personal marginal income tax rate- if low, the US option, if higher rate, the UCITS option
- another quirk is that if you have capital losses you can offset them with the US option but not the UCITS
- capital gains are forced to be realized and taxed with the UCITS option after eight years while with the US ETF option you are not taxed until you sell, even decades later- so if you want to hold forever, then the US option may be preferable (but if you want to hold that long, a tax sheltered retirement account might make more sense anyway)

It's not just a simple, one or the other is more or less tax, it's highly dependent on the specifics of your personal income tax situation and also what exactly you are investing in. It's remarkably complicated, why I have no idea.

US option would be like SPY while UCITS would be VUSA am I right?

blorg · 10-09-2018 3:00pm

Pussyhands wrote: »

US option would be like SPY while UCITS would be VUSA am I right?

VUSA is a S&P500 tracker like SPY, but if going UCITS you would probably be better off with something like CSPX from iShares. Both VUSA and CSPX track the S&P500 but VUSA is a distributing fund (it pays out dividends) while CSPX is accumulating (it accumulates dividends in the fund). One of the key advantages of a UCITS fund is that if you go for accumulating, you do not have to pay taxes on reinvested dividends for eight years. You do eventually, but the whole point of this benefit is that if income is reinvested before tax, it will grow more than if you pay tax along the way.

I THINK with a distributing one, you have to pay the tax as you get the dividend. So going with a distributing UCITS ETF you would be throwing away the one big tax advantage of a UCITS ETF in the first place, while still subjecting yourself to the larger capital gains rate. Worst of both worlds.

Distributing ETFs can make sense for certain people in certain countries- I believe in the UK for example they historically had quite a generous tax-free allowance on dividend payments, so that it could make sense if you were UK resident to pick something that paid out dividends. It is really dependent on your exact situation.

CSPX is the largest ETF in Europe.

Pussyhands · 10-09-2018 4:39pm

Thanks for the info.

Irish government don't want us to make money

Dardania · 10-09-2018 5:32pm

Pussyhands wrote: »

Thanks for the info.

Irish government don't want us to make money

They certainly don’t. Or at lest they want to discourage it. Unless it’s via property.

Taylor365 · 10-09-2018 6:51pm

Dardania wrote: »

They certainly don’t. Or at lest they want to discourage it. Unless it’s via property.

And even at that, it's only viable through buy and hold!

:pac::pac::pac: what a shower!

The Notorious B.I.G. · 10-09-2018 8:30pm

blorg wrote: »

I have had no issues. $2.99 trade commission and then the only fee is a $5 opening fee to process your W8-BEN. No monthly minimums or inactivity fees, they are oriented towards smaller international investors.

Note- I am not resident in the EU. So you might want to double check with them that you CAN still buy US ETFs, if you are resident in the EU, if that is what you want to do.

As to "most cost efficient", it depends how much you have and what you want to do. If you don't need to invest in US ETFs specifically, but rather just US stocks in general, and you have over $100,000 to put in, Interactive Brokers would probably be better. They take SEPA transfers (free) and their forex is excellent, much better than TransferWise. But they don't do US ETFs for EU residents any more and they have a monthly minimum commission of $10- if your account is under $100,000.

You should also consider just buying an EU-domiciled UCITS ETF. It does depend on your specific situation but I am not sure that these really are that much worse for most people. It's a trade off between paying full income tax and PRSI and USC on dividends + capital gains at the end on sale vs no tax at all on dividends + the 41% exit tax after 8 years/when you sell. It's not clear that the former is necessarily worse, having zero tax on dividends like you do with an accumulating UCITS ETF is a big benefit.

Thank you for the detailed response. I will confirm with Drivewealth if they still offer the non UCITs ETF to EU citizens and go from there.

Cute Hoor · 12-10-2018 8:52am

Not sure what's the story with other brokers but with Firstrade there appears to be no settlement delay (T+2, T+3, etc) any longer, so as soon as a sell order is executed the funds are in your account and available to trade. Having your funds available to trade immediately along with 0% fees makes it a very attractive proposition. Very useful in the bloodbath that has been this week.

Eman_321 · 12-10-2018 9:12am

Is there any news on this? Are US ETFs still puchasable? Otherwise what alternative EU ETFs exist?

Momento Mori · 18-10-2018 6:48am

This is taking far too long and I'm starting to doubt US ETF's will become an attractive investment option again.

Also, why must this country make it so hard for people who want to invest in the best performing asset class in history? I don't want to buy property.

Skelet0n · 18-10-2018 8:26am

Momento Mori wrote: »

This is taking far too long and I'm starting to doubt US ETF's will become an attractive investment option again.

Also, why must this country make it so hard for people who want to invest in the best performing asset class in history? I don't want to buy property.

US ETFs aren’t an asset class.

Taylor365 · 18-10-2018 7:25pm

Momento Mori wrote: »

This is taking far too long and I'm starting to doubt US ETF's will become an attractive investment option again.

Also, why must this country make it so hard for people who want to invest in the best performing asset class in history? I don't want to buy property.

And its EU wide, not just Ireland.

Skelet0n · 18-10-2018 8:03pm

Taylor365 wrote: »

And its EU wide, not just Ireland.

I think other EU nations tax them normally though, not this exit tax plus deemed disposal thing.

Diarmuid · 19-10-2018 10:02am

Might be time to start ringing/sending letters to your TD. That's the only way things will change

Taylor365 · 19-10-2018 10:01pm

Skelet0n wrote: »

I think other EU nations tax them normally though, not this exit tax plus deemed disposal thing.

He was talking about US ETFs, which can't be bought directly Europe wide.

Which are treated as CGT.

hog_farmer · 20-10-2018 8:50pm

Momento Mori wrote: »

This is taking far too long and I'm starting to doubt US ETF's will become an attractive investment option again.

Also, why must this country make it so hard for people who want to invest in the best performing asset class in history? I don't want to buy property.

equities are only a good performing asset if you exclusively buy the american market , the overall european market is no higher today than it was in the year 1999 if you exclude dividends .

dumb_parade · 24-10-2018 5:12pm

Buying these etfs seems to have gotten even harder now. I have tried to open an account with firstrade and td ameritrade in the last few days and neither now allow accounts to be opened by Irish residents.

Jim2007 · 24-10-2018 8:49pm

hog_farmer wrote: »

equities are only a good performing asset if you exclusively buy the american market , the overall european market is no higher today than it was in the year 1999 if you exclude dividends .

Absolute twaddle! There are plenty of well performing European equities. You are not buying the market, you are buying individual stocks for heavens sake.

Jim2007 · 24-10-2018 8:51pm

Diarmuid wrote: »

Might be time to start ringing/sending letters to your TD. That's the only way things will change

It is an EU wide requirement that funds provide adequate information to the general public. These funds have chosen not to comply with those standards. They and they alone will have to change their minds. End of.

jive · 25-10-2018 4:08pm

Jim2007 wrote: »

It is an EU wide requirement that funds provide adequate information to the general public. These funds have chosen not to comply with those standards. They and they alone will have to change their minds. End of.

Other countries don’t apply the ‘deemed disposal’ rule which is the biggest issue with these funds in Ireland.

Jim2007 · 25-10-2018 4:10pm

jive wrote: »

Other countries don’t apply the ‘deemed disposal’ rule which is the biggest issue with these funds in Ireland.

That is neither here nor there, it will not change the fact that the funds are required to provide a certain level of information in the EU and rather than doing so, they have decided not to offer their funds in Europe instead.

jive · 25-10-2018 10:44pm

Jim2007 wrote: »

That is neither here nor there, it will not change the fact that the funds are required to provide a certain level of information in the EU and rather than doing so, they have decided not to offer their funds in Europe instead.

In what way is it neither here nor there? It's the entire reason for the thread. Other countries in the EU can buy and hold, Irish investors can't because of deemed disposal. Many of the funds offered are basically mirror images of those offered in the US, although with the US ETFs Irish investors could buy and hold.

Jim2007 · 26-10-2018 1:10am

jive wrote: »

In what way is it neither here nor there? It's the entire reason for the thread. Other countries in the EU can buy and hold, Irish investors can't because of deemed disposal. Many of the funds offered are basically mirror images of those offered in the US, although with the US ETFs Irish investors could buy and hold.

Go back and read what I responded to!

These funds are not offered anywhere in the EU legally. These funds are not mirrored funds because there are hidden retros in the US that must be disclosed and paid over to the holders in the EU. This is the reason why those providers have decided not to offer the funds in Europe - US investors would also become aware of the retros!

Diarmuid · 26-10-2018 6:42pm

Jim2007 wrote: »

Go back and read what I responded to!

These funds are not offered anywhere in the EU legally. These funds are not mirrored funds because there are hidden retros in the US that must be disclosed and paid over to the holders in the EU. This is the reason why those providers have decided not to offer the funds in Europe - US investors would also become aware of the retros!

You're completely missing the point of this whole thread. Irish investors are buying US based ETFs because of the Irish taxation rules. Otherwise we would all be happily buying the EU based equivalents.

Jim2007 · 26-10-2018 8:54pm

Diarmuid wrote: »

You're completely missing the point of this whole thread. Irish investors are buying US based ETFs because of the Irish taxation rules. Otherwise we would all be happily buying the EU based equivalents.

I understand exactly how it works! And my point was and is that it does not matter what the Irish tax situation is, this will not change! It is an EU requirement with far reaching impact and is here to stay.

gavmcg92 · 28-10-2018 2:05am

Jim2007 wrote: »

I understand exactly how it works! And my point was and is that it does not matter what the Irish tax situation is, this will not change! It is an EU requirement with far reaching impact and is here to stay.

The Irish taxation point is the fundamental issue. The only reason why Irish funds were being invested in US domiciled ETFs was because of this taxation issue. The fact that this avenue has been closed off to us, brings the fundamental issue back into the limelight.

Cute Hoor · 29-10-2018 9:30am

dumb_parade wrote: »

Buying these etfs seems to have gotten even harder now. I have tried to open an account with firstrade and td ameritrade in the last few days and neither now allow accounts to be opened by Irish residents.

I don't see why you wouldn't be able to open an account with Firstrade, what message did you get, did you email them.
https://www.firstrade.com/content/en-us/customerservice/faqs/international/

dumb_parade · 29-10-2018 5:35pm

Cute Hoor wrote: »

I don't see why you wouldn't be able to open an account with Firstrade, what message did you get, did you email them.
https://www.firstrade.com/content/en-us/customerservice/faqs/international/

For non us residents, they send you a verification code. Which you need a valid phone number for. Ireland is not in the list of country codes.

https://signup.firstrade.com/create/www/?lc=en-us#/intro

I contacted them via email and they confirmed that their policy changed re. Ireland last week.

If you see a way around this let me know. I nearly opened the account last month, but held off at the time. Pretty frustrated now.

robp · 30-10-2018 12:48am

dumb_parade wrote: »

Cute Hoor wrote: »

I don't see why you wouldn't be able to open an account with Firstrade, what message did you get, did you email them.
https://www.firstrade.com/content/en-us/customerservice/faqs/international/

For non us residents, they send you a verification code. Which you need a valid phone number for. Ireland is not in the list of country codes.

https://signup.firstrade.com/create/www/?lc=en-us#/intro

I contacted them via email and they confirmed that their policy changed re. Ireland last week.

If you see a way around this let me know. I nearly opened the account last month, but held off at the time. Pretty frustrated now.

Any way to make a fake number online as a once off?

Cute Hoor · 30-10-2018 1:13pm

dumb_parade wrote: »

For non us residents, they send you a verification code. Which you need a valid phone number for. Ireland is not in the list of country codes.

https://signup.firstrade.com/create/www/?lc=en-us#/intro

I contacted them via email and they confirmed that their policy changed re. Ireland last week.

If you see a way around this let me know. I nearly opened the account last month, but held off at the time. Pretty frustrated now.

That's a real bummer, they haven't been in contact re this so I'm presuming existing customers are OK. So it looks like none of the US brokers will accept Irish clients? I also have an account with IB but you cannot buy the US ETF's with them now either.

Cute Hoor · 30-10-2018 1:16pm

robp wrote: »

Any way to make a fake number online as a once off?

Doubt it, you would probably have to falsify address as well, which wouldn't work with verification documentation etc.

dumb_parade · 30-10-2018 1:31pm

Cute Hoor wrote: »

That's a real bummer, they haven't been in contact re this so I'm presuming existing customers are OK. So it looks like none of the US brokers will accept Irish clients? I also have an account with IB but you cannot buy the US ETF's with them now either.

Yeah, It is a bummer. I could go down the the fake number, fake address route, but that would fail when they look for photo id, i'd say. It will be interesting to see how existing irish firstrade clients will get on with this change. I know with Degiro, i can continue to hold any US etfs, but cant buy anymore units. Hope its not the same here.

Cute Hoor · 30-10-2018 1:38pm

dumb_parade wrote: »

Yeah, It is a bummer. I could go down the the fake number, fake address route, but that would fail when they look for photo id, i'd say. It will be interesting to see how existing irish firstrade clients will get on with this change. I know with Degiro, i can continue to hold any US etfs, but cant buy anymore units. Hope its not the same here.

I've had no problem buying and selling, including ETFs, so far anyway. I'll post up if I hit any brick walls

robp · 30-10-2018 10:20pm

Cute Hoor wrote: »

robp wrote: »

Any way to make a fake number online as a once off?

Doubt it, you would probably have to falsify address as well, which wouldn't work with verification documentation etc.

Itd be handy to have a close relative in the States where you could live for a fortnight or so and get needed proof of addresses.
On another note has anyone looked into non US trading accounts? Any Gulf or Asian companies out there?

gavmcg92 · 01-11-2018 7:58pm

Cute Hoor wrote: »

I've had no problem buying and selling, including ETFs, so far anyway. I'll post up if I hit any brick walls

I'd imagine they will follow the same strat as the rest. Close off new clients and then block buying for Irish customers down the line allowing for a hold/sell.

Cute Hoor · 01-11-2018 11:56pm

gavmcg92 wrote: »

I'd imagine they will follow the same strat as the rest. Close off new clients and then block buying for Irish customers down the line allowing for a hold/sell.

Good call gav, this is the email I got from Ameritrade this evening, expect Firstrade to follow suit.

Dear Valued Client,

Due to changes in the European Commission's regulatory requirements, TD Ameritrade is no longer able to offer certain products categorized as Packaged Retail Investment and Insurance Based Products (PRIIPS) to residents of the European Union and European Economic Area. Unfortunately, this means we will be restricting the trading of certain PRIIPs in your account ending in XXXX.

As of November 12, you will be able to place opening orders in your account only for equities, options, and futures (provided you meet trading requirements).* If you have existing positions in products that will be restricted (such as exchange-traded funds [ETFs] and mutual funds), you may retain or close these positions, but you will no longer be able to open new positions in those products.

We regret any inconvenience these required changes may cause you.

gavmcg92 · 04-11-2018 12:39am

Cute Hoor wrote: »

Good call gav, this is the email I got from Ameritrade this evening, expect Firstrade to follow suit.

Yeah, no surprises there.

Saudades · 13-09-2020 2:38pm

Just speed-read through most of this topic.

To the dozens or so posters here who opened US brokerage accounts in 2018 - First Trade seemingly being the most popular choice on here - how are you guys getting on two years later?

And the million dollar question; Are you still able to purchase US domiciled ETF's?

ronivek · 13-09-2020 6:56pm

Although I haven't manually bought anything in some time; I am still getting my automatic dividend reinvestment purchases from all my US domiciled ETFs as normal (and as recently as this month). I haven't received any communications from FirstTrade that anything has changed either.

Cute Hoor · 14-09-2020 8:22am

ronivek wrote: »

Although I haven't manually bought anything in some time; I am still getting my automatic dividend reinvestment purchases from all my US domiciled ETFs as normal (and as recently as this month). I haven't received any communications from FirstTrade that anything has changed either.

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salmagoo · 09-10-2020 12:57am

Just wondering has anyone been able or tried to invest US, EEA and other OECD domiciled ETFS to avoid this god awful 41% exit tax. Would anyone recommend one? TIA x

https://www.irishexaminer.com/business/arid-30930559.html

LC134 · 18-10-2020 3:36pm

I understand the attraction of US ETFs for Irish residents to avoid the deemed disposal rule, but I was wondering if Irish ETFs are attractive for someone who is non-Irish resident (or does deemed disposal also apply - I didn’t think so though).

I’ve a small amount invested in a US dividend producing ETF but am not tax resident in a treaty country so am taxed 30% withholding on the dividends and I’m not yet sure on gains.

I’ve a little understanding of Irish ETFs and thought as non-Irish resident I might be able to get dividends and gains gross so have started looking for UCITS ETFs on my brokerage account. Anyone who is non-Irish resident and might have looked at or have any experience with source tax deductions for an Irish ETF?

Thanks

US ETFs no longer purchasable in Europe

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