05 May 2020
Just wondering if they are subjected to the same 30% dividend withholding tax, such as if I buy directly through brokerages?
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Shengshi Chiam, CFA
04 May 2020
Personal Finance Lead at Endowus
04 May 2020
Content & Community Lead at Syfe
Hi Zhi Xuan, for non-U.S. tax residents, dividends will be subjected to a withholding tax of 30%. This amount would be withheld by our broker at source while the rest of your dividends will be automatically reinvested in your portfolio.
However, please note that not all the assets in the Global Portfolio pay out dividends. As such, these assets e.g. SPDR Gold Shares (GLD) will not be subject to the dividend withholding tax.
In addition, certain investments made into U.S. Treasury bonds qualify for exemptions under the Qualified Interest Income (QII) rule. The iShares 20+ Year Treasury Bond ETF (TLT) is one example. This means that TLT dividends can be reclaimed from our broker.
We will liaise with our broker for this process. No action is required on our customers’ part and the amount reclaimed will be allocated into your portfolio and reinvested automatically.
02 May 2020
Country Manager, Singapore at StashAway
Hi Zhi Xuan, great question! The short answer is yes.
In fact, all dividends of US-listed securitie...
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To share a more complete picture, US ETFs is the most inefficient when the underlying investments are non-US securities. You are effectively paying 2 layers of dividend withholding taxes. Kyith from Investmentmoats put it very clearly in this chart:
If you look at the chart, for the China/German domiciled stock, there is 1 layer of DWT paid at the portfolio level, and another layer paid at the fund level.
Irish Domiciled Funds only pay dividend withholding taxes at the portfolio level.
Just to share, as long term investors, we are should be less concerned about the slightly wider bid-ask spread, slightly higher transaction costs, and slightly lower liquidity of popular Irish domiciled funds. In exchange of these costs, you get a much cleaner tax structure that over a long period of time, has a all in cost is lower.
If you trade frequently then US ETFs can be more efficient, but if you are truly passive, irish domiciled funds should be superior.