US ETFs no longer purchasable in Europe

TripleAce · 13-02-2018 3:50pm

Stevie777 wrote: »

Another issue to consider is that investing in US ETFs will create a significant liability to US Estates Tax.

Could you please elaborate? I am not sure I understand the impact on myself?

I checked the definition on wikipedia:
The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. The estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a person's life.

JungleMartin · 14-02-2018 3:30pm

I'm no expert but, as I understand it: inheritance tax

i.e. If you have a large enough holding in US ETFs and you die, it may/will be liable to US Estate Tax.

I hope someone more knowledgeable on the subject than me elaborate.

Cute Hoor · 14-02-2018 4:13pm

Absolutely no expert on this either but this is my tuppence.

If you die and you have US assets (including shares) then you are liable for US Estates Tax, I don't know about exemptions and rates. However, imo, this is virtually uncollectible by the US authorities for non-US citizens. If I die (hopefully not in the near future) my co-owner of these US assets can simply liquidate the assets and repatriate the money to our Irish bank account. How would the US authorities be/become aware that I had kicked the bucket. If both co-owners are gone to the great trading home in the sky then the next of kin could simply liquidate the assets and repatriate the money to our Irish bank account.

Not sure if this stands up and would be happy to have this position challenged

Taylor365 · 20-02-2018 2:39pm

"Based on the information you provided, you're not eligible to open a TD Ameritrade account. If you have any questions or would like to speak to a New Client Consultant, call us at 800-454-9272."

Well, i guess that's that.

Cute Hoor · 20-02-2018 3:24pm

Taylor365 wrote: »

"Based on the information you provided, you're not eligible to open a TD Ameritrade account. If you have any questions or would like to speak to a New Client Consultant, call us at 800-454-9272."

Well, i guess that's that.

What did you tell them?
I presume it's not because you are based in Ireland.

Shai · 20-02-2018 5:39pm

https://www.firstrade.com

excitementcity · 20-02-2018 9:40pm

Dardania wrote: »

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.

Dardania just wondering if you have a downloadable version of this spreadsheet? Many thanks

Dardania · 21-02-2018 8:14am

excitementcity wrote: »

Dardania wrote: »

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.

Dardania just wondering if you have a downloadable version of this spreadsheet? Many thanks

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

pan · 21-02-2018 10:15am

Dardania wrote: »

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

Hi Dardania,
thanks for the spreadsheet, I also want too rework the numbers a bit. But when I click on the link I had to request access to it (probably with you now). Alternatively, maybe you can make a copy of it on google drive - public permissions.
Cheers

excitementcity · 21-02-2018 10:55am

Dardania wrote: »

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

Hi Dardania, many thanks as pan said had to request permissions to access the document so I have sent that through to you. You might accept when you have a moment or as Pan said make public access. Many thanks

Separately: maybe you someone has the answer to the following?

With the UCITS funds:

1. What's the starting point for year 9 after you have paid over your tax in year 8? From your spreadsheet Dardania it seems to be the value of the fund in year 8 minus the tax paid? Is that right?

2. I rang revenue re losses but the guy I spoke with didn't have a clue. I have found conflicting advice online. If you are buying monthly and have a gain in year 8 in one month and a loss in the next month. Are the gains and losses offsetable as long as they are in the same fund and the same tax year? Or is it the case that the losses would just be 0 and you just pay the gains. I understand if they are in different tax years or different funds they're not offsetable.

3. If you choose a distributing fund, it would seem that the dividends are taxable at 41% also? Is this just paid on 8 years or is this paid in your tax return every year? Or how does the tax work on the distributions? I assume an accumulating ETF is the only way to go with a UCITS fund?

Thanks as always in advance

Dardania · 21-02-2018 10:57am

pan wrote: »

Dardania wrote: »

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

Hi Dardania,
thanks for the spreadsheet, I also want too rework the numbers a bit. But when I click on the link I had to request access to it (probably with you now). Alternatively, maybe you can make a copy of it on google drive - public permissions.
Cheers

I clicked to share, but after you mentioned there's a way to make it public, I think I have set that - download and tweak away! Let me know what improvements you make - I'm really trying to understand this topic myself for the same reasons as everyone else...

I'd also love to start considering the impact of higher TERs in UCITS ETFs compared to US domiciled ones

Dardania · 21-02-2018 11:03am

excitementcity wrote: »

Dardania wrote: »

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

Hi Dardania, many thanks as pan said had to request permissions to access the document so I have sent that through to you. You might accept when you have a moment or as Pan said make public access. Many thanks

Separately: maybe you someone has the answer to the following?

With the UCITS funds:

1. What's the starting point for year 9 after you have paid over your tax in year 8? From your spreadsheet Dardania it seems to be the value of the fund in year 8 minus the tax paid? Is that right?

2. I rang revenue re losses but the guy I spoke with didn't have a clue. I have found conflicting advice online. If you are buying monthly and have a gain in year 8 in one month and a loss in the next month. Are the gains and losses offsetable as long as they are in the same fund and the same tax year? Or is it the case that the losses would just be 0 and you just pay the gains. I understand if they are in different tax years or different funds they're not offsetable.

3. If you choose a distributing fund, it would seem that the dividends are taxable at 41% also? Is this just paid on 8 years or is this paid in your tax return every year? Or how does the tax work on the distributions? I assume an accumulating ETF is the only way to go with a UCITS fund?

Thanks as always in advance

Exactly - that's my assumption. I'm advocating selling the entire fund holding in year 8, paying the deemed disposal tax (actual disposal tax in-fact), and re-investing. So the year 9 number shows gains accrued on the post tax year 8 number effectively.

With the distributing fund, I'm working on the assumption that these are taxed as part of normal income (the worst case scenario 61% I showed) each year for both the UCITS and US domiciled case. I really think accumulating is the only reasonable way to go with the UCITS case, as it enables compound interest to occur.

Taylor365 · 21-02-2018 2:32pm

Cute Hoor wrote: »

What did you tell them?
I presume it's not because you are based in Ireland.

Just all my details as is.

Is there some hoop you must jump through that i'm not seeing?

What about tax numbers, etc.?

Help much appreciated!

delta_bravo · 22-02-2018 9:46am

Just wondering now some time has passed what did people do since the ban on purchasing us etfs in europe? Did anyone move to UCITS or as it seems here did most move to a US provider?

q85dw7osi4lebg · 22-02-2018 10:20am

I moved to UCITS. Going to sell all of them before 8 year deemed disposal and buy in again. Moving to UCITS cost a lot less than expected initially.

excitementcity · 22-02-2018 9:54pm

Yup I've decided to take the plunge with UCITS also. Think it's the best of a worst case scenario in the end

dublin2000 · 22-02-2018 10:44pm

would anyone has any suggestions on specific UCITS funds to buy in? Thanks

excitementcity · 22-02-2018 10:58pm

dublin2000 wrote:

would anyone has any suggestions on specific UCITS funds to buy in? Thanks

I've gone with IWDA first. I wanted an accumulating fund so that ruled out the vanguard European ones for me. Its also in the commission free list. I going to add an I shares emerging market (eimi) to that but unfortunately not on commission free list.

I may also add a small cap. I'll need to research that a bit more. For now I'm going to not add bonds but hold that element in cash until I decide what to do. Don't think there's any urgency with that. Think that's how I'll structure things for now.

I have both of the above held in my self directed PRSA with Days too.

dublin2000 · 22-02-2018 11:14pm

Thanks very much excitementcity! Does investing one lump sum rather than monthly investment make any different in choosing which fund to invest? because i see you mentioned that you're doing monthly investment.

Also, can you actually buy bond directly in Degiro?

excitementcity · 23-02-2018 9:49am

I don't think so in the sense that as long as its a ucits fund you're going to be caught for the deemed disposal. If you invest in one lump sum and never add to it you'll have one deemed disposal. However adding monthly you will have the issue every month after 8 years. Saying that I want to invest on a regular basis so I'll probably just out up with it or hope things change in the meantime. That or might reduce to investing lump sums in a quarterly basis

TripleAce · 23-02-2018 3:56pm

I may be missing something here, please confirm if I am correct: on year 8 with UCITS you pay 41% on profits (I guess if you sell the fund earlier you pay earlier?). With US-ETFs the tax on profit (capital gain) is only 33% . 8% difference seems pretty significant to me, am I missing something?

dickface · 23-02-2018 8:18pm

TripleAce wrote: »

I may be missing something here, please confirm if I am correct: on year 8 with UCITS you pay 41% on profits (I guess if you sell the fund earlier you pay earlier?). With US-ETFs the tax on profit (capital gain) is only 33% . 8% difference seems pretty significant to me, am I missing something?

On US ETF's you do not have the option of accumulating ETF's and you must pay an extra witholding tax on dividends earned. You are probably exposed to currency fluctuations (not necessarily bad) and currency conversion costs.

ronivek · 23-02-2018 8:54pm

TripleAce wrote: »

I may be missing something here, please confirm if I am correct: on year 8 with UCITS you pay 41% on profits (I guess if you sell the fund earlier you pay earlier?). With US-ETFs the tax on profit (capital gain) is only 33% . 8% difference seems pretty significant to me, am I missing something?

I believe it's more like:

Irish Domiciled ETF: You pay the 41% exit tax on both dividends received and on capital gains. There is no PRSI+USC.
US Domiciled ETF: You pay the 33% on any capital gains and (assuming you're declaring your income) you pay your marginal rate of tax plus PRSI+USC on any dividend income.

Then you add the currency conversion and wire transfer costs on top of whatever broker and other fees when considering US Domiciled ETFs etc.

ronivek · 23-02-2018 8:57pm

dickface wrote: »

On US ETF's you do not have the option of accumulating ETF's and you must pay an extra witholding tax on dividends earned. You are probably exposed to currency fluctuations (not necessarily bad) and currency conversion costs.

I believe the withholding tax is only relevant if you're avoiding your tax liabilities to the Revenue: they will count the 15% against your total tax liability in Ireland so your net should still be the same.

excitementcity · 23-02-2018 10:56pm

TripleAce wrote: »

I may be missing something here, please confirm if I am correct: on year 8 with UCITS you pay 41% on profits (I guess if you sell the fund earlier you pay earlier?). With US-ETFs the tax on profit (capital gain) is only 33% . 8% difference seems pretty significant to me, am I missing something?

Yes, as the others have said it's 33% plus the tax on the dividends. So it's not just the 33% tax. But the major problem about the US-ETFs (apart from the fact that there are no accumulating US funds) is that it's not possible to invest in the US funds at the moment due to the new PRIIP's rules and god know when this is going to be fixed.

So unless you go through a US broker (and according to this thread it's not that simple to get them to take you on) it's not possible to do it at the moment. So the options are wait until it's fixed, invest in ucits, somehow invest through a US broker.....unfortunately, investing in Ireland is a massive headache. God bless the US where it's easy. But saying all that I'd rather have 59% of something than no gain at all.

ronivek · 23-02-2018 11:20pm

excitementcity wrote: »

So unless you go through a US broker (and according to this thread it's not that simple to get them to take you on) it's not possible to do it at the moment. So the options are wait until it's fixed, invest in ucits, somehow invest through a US broker.....unfortunately, investing in Ireland is a massive headache. God bless the US where it's easy. But saying all that I'd rather have 59% of something than no gain at all.

I just opened one through Firstrade fairly easily; my only concern right now is how to withdraw moneys without incurring fees which would somewhat defeat the purpose of going to all the trouble in the first place.

Gordon Gekko · 24-02-2018 10:30am

Does anyone know how the 8 year deemed disposal rule works if at the end of the 8 years you're showing a loss on your UCITS ETF?

An example will probably explain my question more clearly:

I invest €10,000 at the start of year 1. The market does it's thing over the 8 years with the usual ups and downs. It happens that year 8 coincides with a bear market and I'm down 20% on my initial investment, so that at the 8 year anniversary my UCITS ETF investment is now worth €8,000. Clearly, I owe no deemed disposal tax, so I simply leave the UCITS ETF as is, and thereby it automatically rolls into a 'new' 8 year period.

My question is: does Revenue deem my investment to have started afresh at the start of the second 8 year period - and therefore do they rebase my 'acquisition cost' as being €8,000 for the purpose of calculating any gain in the second 8 year period?

So if for example we go through a phase of anaemic growth in the second 8 year term, at the end of which my UCITS ETF is worth €10,000 - do Revenue deem me to have made a 'gain' of €2,000 over the second 8-year term, and therefore hit me with 41% of the 'gain' made over the second 8-year term? Meaning I'm at a loss in real terms. Or do they look back to the original acquisition cost of €10,000 at the start of the first 8-year period, and therefore (correctly IMO) view me as having made no gain so far over the life of my holding with that particular UCITS ETF?

I can't seem to find a firm answer on this.

Dardania · 24-02-2018 10:37am

Gordon Gekko wrote: »

Does anyone know how the 8 year deemed disposal rule works if at the end of the 8 years you're showing a loss on your UCITS ETF?

An example will probably explain my question more clearly:

I invest €10,000 at the start of year 1. The market does it's thing over the 8 years with the usual ups and downs. It happens that year 8 coincides with a bear market and I'm down 20% on my initial investment, so that at the 8 year anniversary my UCITS ETF investment is now worth €8,000. Clearly, I owe no deemed disposal tax, so I simply leave the UCITS ETF as is, and thereby it automatically rolls into a 'new' 8 year period.

My question is: does Revenue deem my investment to have started afresh at the start of the second 8 year period - and therefore do they rebase my 'acquisition cost' as being €8,000 for the purpose of calculating any gain in the second 8 year period?

So if for example we go through a phase of anaemic growth in the second 8 year term, at the end of which my UCITS ETF is worth €10,000 - do Revenue deem me to have made a 'gain' of €2,000 over the second 8-year term, and therefore hit me with 41% of the 'gain' made over the second 8-year term? Meaning I'm at a loss in real terms. Or do they look back to the original acquisition cost of €10,000 at the start of the first 8-year period, and therefore (correctly IMO) view me as having made no gain so far over the life of my holding with that particular UCITS ETF?

I can't seem to find a firm answer on this.

No firm answer myself, but my opinion is your second option holds true.
I understand the intent of the 8 year deemed disposal is for the government to get their hands earlier on the tax they will be due at the end. So it stands the reason that it is calc'd against the original 10k

excitementcity · 24-02-2018 10:42am

Ron I've. Didn't know it was that easy to open the first trade account. That's interesting.

Gordon Gekko I have the exact same question and have been unable to find an answer to the question.

ronivek · 24-02-2018 9:41pm

Dardania wrote: »

No firm answer myself, but my opinion is your second option holds true.
I understand the intent of the 8 year deemed disposal is for the government to get their hands earlier on the tax they will be due at the end. So it stands the reason that it is calc'd against the original 10k

I believe it works something like the following:

Initial purchase of unit for €10000.
8 year anniversary; unit is now worth €9000 and zero tax is due but you must still declare it and cannot use the loss for any kind of offset.
2nd 8 year anniversary but now it's worth €12000 so you're liable for the same taxes ignoring any previous 8 year anniversary (i.e. 41% of the €2000 gain).
Before the next 8 year anniversary you actually sell at a price of €11000: you declare to the revenue and your tax liability is based on all previous 8 year anniversary events (i.e. your liability is 41% of the actual realised gain of €1000 so €410 euros. Since you've already paid €820 to the revenue for this investment your total liability becomes (€410 - €820) = €-410 and you can claim the 410 back from the Revenue)

TL;DR: The deemed disposals can be ignored when calculating the final tax liability when you actually sell: but you can offset any moneys paid to the Revenue for the current investment fund against your final tax liability and claim back any negative total.

US ETFs no longer purchasable in Europe

Comments