facebookI am keen on investing in US ETF. Many recommend Ireland-domiciled US-ETF instead of US-listed US-ETF due to lower withholding tax. Is it really better? - Seedly

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Anonymous

29 Oct 2020

βˆ™

General Investing

I am keen on investing in US ETF. Many recommend Ireland-domiciled US-ETF instead of US-listed US-ETF due to lower withholding tax. Is it really better?

What is withholding tax and when is it payable? Is this the only factor to look out for? What if I would like to buy and hold rather than make short term trades?

Discussion (1)

What are your thoughts?

Joel Koh

Joel Koh

29 Oct 2020

Level 6Β·Writer at Seedly

Hello Anon,

Thanks for the question!

If you have the time please take a look at this article which I will be referring to:

Singaporeans investing in the American market are taxed 30% on our dividends as the U.S does not have a tax treaty with Singapore. For example, if the company declares a dividend that amounts to $100 to you, you will essentially only receive $70. We are exempt from capital gains (when the share price of our shares increase).

One way to go around this is to invest in Ireland-Domiciled ETFs. These Irish-Domiciled ETFs benefit from the U.S./Ireland tax treaty rate of 15% on dividends.

And while this is not perfect, it certainly is more pocket-friendly than 30%.

Also there is the US estate tax to contend with. When you pass away, your US ETF holdings may be liable for US estate tax. This is an even bigger charge as you are liable to pay a tax of up to 40 per cent on sums above US$60,000. You can avoid this if you are buying an Ireland-Domiciled ETF.

Ireland-Domiciled ETFs are generally cheaper, as such to reduce fees, you should look for this version of the ETF you would want to buy.

Also, this dividend withholding tax deducted at the fund level and does not affect your buying and selling of the ETF. Even if you buy and hold rather than make short term trades you will still have to pay the dividend withholding tax.

Hope this helps :)​​​

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