facebookIf US domiciled S&P500 etf such as VOO has 30% dividend withholding tax and people advocate going for Ireland domiciled ones, then why do people still invest in individual US stocks? - Seedly

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Anonymous

04 May 2020

βˆ™

General Investing

If US domiciled S&P500 etf such as VOO has 30% dividend withholding tax and people advocate going for Ireland domiciled ones, then why do people still invest in individual US stocks?

Won't these individual US stocks have 30% WHT too? By this logic, why can't I go for VOO instead? What is the difference?

AMA The Fifth Person

Discussion (8)

What are your thoughts?

That's a very good question, while I don't have the answer I am also perplexed. If buying U.S. shares demands a 30% WHT, while, say, Ireland domiciled ETF only have 15% WHT, the WHT safed is more than enough to offset the expense ratios of ETFs.​​​

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Amanda Ong

Amanda Ong

03 May 2020

Country Manager, Singapore at StashAway

Hi there,

Thank you for this question!

I've answered a similar one above but here is my answer to this:

The short answer is yes.

In fact, all dividends of US-listed securities are subject to 30% dividend withholding tax (WHT). These taxes are applicable as long as you own US listed assets, regardless of whether the assets were bought through StashAway, or via your own broker. The WHT is held at source and the rest of the dividends are redistributed back to your portfolio(s) and reinvested automatically.

The dividends you see in the "Transactions" tab of your StashAway app would be the amount after deducting the WHT.

Under the QII (Qualified Interest Income) rule, some of the dividend WHT from US domiciled funds (e.g. US government bonds) can be claimed back. Our broker will do this on your behalf and there is no involvement on the customer's part. We will do this once a year, and will notify you via email if you have any claimable WHT, which would be redistributed to your portfolio and automatically reinvested.

For further illustration, you may like to view the iShares 2020 report on the QII percentages for their funds. Some examples of QII ETFs that StashAway invests in are 20+ Year Treasury Bond (TLT) and 10-20 Year Treasury Bond (TLH).

Our investment team has given serious consideration to the 30% WHT and have considered other exchanges that have lower or no withholding tax. However, at the end of the day, we have decided to stay with US-listed securities despite the tax implications due to the its deep liquidity, reputable fund management and most importantly, the lower tracking error. If you're interested to see a comparison between US-listed securities and foreign securities, here is an article that presents its case.​​​

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U.S. residents (mostly) are not allowed to buy european ETFs,

as it is almost impossible for some y...

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