Foreign investments are usually subject to some withholding tax or capital gains tax. How does that flow through into the fees? - Seedly

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Asked by Takingstock @

Asked on 02 Mar 2019

Foreign investments are usually subject to some withholding tax or capital gains tax. How does that flow through into the fees?

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Tai Zhi
Tai Zhi, Chief Investment Officer at Autowealth
Level 4. Prodigy
Updated on 16 Jun 2019

Dividends and bond coupons of U.S.-listed ETFs will be subject to a 30% U.S. federal withholding tax in line with tax regulations of the U.S. Internal Revenue Service.

Nevertheless, U.S.listed ETFs are still preferred over ETFs listed in other countries like the U.K. after taking into consideration factors including liquidity, bid-ask spread, expense ratio, ETF fund size amongst other factors.

You may want to consider investing through a robo-advisor for better tax efficiency. For example, AutoWealth works with our partnering custodian to seek partial reimbursement of the withholding taxes from the U.S. Internal Revenue Service. This would reduce the withholding taxes applicable.

You may check out this url to learn more from frequently asked questions by other investors: https://www.autowealth.sg/faq.php

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Takingstock @
Takingstock @

16 Jun 2019

Thanks Tai Zhi. After considering for a very long while, I believe the tax impact of overseas investments is quite large, and I might probably be dividends via local stocks and reits which are tax free (only taxed once in the company). Will come back to this topic when I run out of places to put my $$

One example is the US withholding tax. You have to pay 30% withholding tax on the US stocks/ETFs dividends. So the higher dividends you get from the investments, the more tax (fees) you will incur. Alternatively, you can invest in an Ireland domiciled ETF from the london stock exchange which will reduce the tax from 30% to 15%. However, there are lesser Ireland domiciled ETF compared to the US ones and may have lower trading volume.

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