UCITS funds discussion

For residents of the United Arab Emirates.
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NOTonA380
Posts: 16
Joined: Sat Jan 15, 2022 12:39 pm

UCITS funds discussion

Post by NOTonA380 »

Hi,

I believe a few of few read this article which discusses UCITS ETFs (Ireland domicile): https://mrsmoneyhacker.com/my-irish-etf-portfolio/
I think it gives good insights, useful for us non-US citizens living in UAE and having US broker accounts at IBKRs / Charles Schwab etc.
Now, a few questions:
1) Has anyone come across a good UCITS proxy for the famous US-domiciled VXUS ETF (Vanguard Ex US)?
2) Any strong thoughts on the above article? It suggests a four ETF portfolio (100% equities) and shows accumulating ETF options which have a weighted average total expense ratio of 16bp (pretty good). Four ETF funds sounds a bit complicated to me. I prefer one USA ETF, one ex-USA All World and maybe a Global Bond EFT (big maybe)
3) I was never able to find a portfolio X-RAY tool for UCITS ETFs. I must be blind! But please help if you can. Very important to check geographical and industry / sector overlap of the ETF holdings

If you have a bespoke ETF UCITS selection, please feel free to post here. Many thanks.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UCITS funds discussion

Post by TedSwippet »

NOTonA380 wrote: Sat Feb 12, 2022 2:01 am 1) Has anyone come across a good UCITS proxy for the famous US-domiciled VXUS ETF (Vanguard Ex US)?
Not as far as I know. Recent discussion here: Developed World ex USA - product choice [Europe] - Bogleheads.org
NOTonA380 wrote: Sat Feb 12, 2022 2:01 am 2) Any strong thoughts on the above article? It suggests a four ETF portfolio (100% equities) and shows accumulating ETF options which have a weighted average total expense ratio of 16bp (pretty good). Four ETF funds sounds a bit complicated to me. I prefer one USA ETF, one ex-USA All World and maybe a Global Bond EFT (big maybe)
Worth noting that the article writes about Ireland domiciled ETFs, but is also written by an Irish resident, for Irish residents. All of the specific tax stuff mentioned, such as the eight-year 41% deemed distribution tax, applies only to Irish residents. Non-Irish residents will have no Irish tax interference in their investments through Ireland domiciled ETFs.

One likely reason why the article you quoted does not use your preferred US/ex-US ETF split is that there is no UCITS ex-US ETF. If you want a country allocation that is different to that of an all-world ETF then, you may have to use more than just two equity ETFs.
DJN
Posts: 996
Joined: Sun Nov 19, 2017 11:30 pm

Re: UCITS funds discussion

Post by DJN »

Hi,
beware articles on the internet about somewhat complex subjects.
For the non Irish resident there is nothing there of interest apart from very basic advice that is better sourced from the Bogleheads Wiki:
https://www.bogleheads.org/wiki/Outline ... _domiciles
For the Irish resident tax payer there are whole swathes of possible solutions that are not even mentioned in what is a difficult area to navigate.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
NOTonA380
Posts: 16
Joined: Sat Jan 15, 2022 12:39 pm

x

Post by NOTonA380 »

xxxxxx
Last edited by NOTonA380 on Sat Feb 12, 2022 6:28 am, edited 1 time in total.
Topic Author
NOTonA380
Posts: 16
Joined: Sat Jan 15, 2022 12:39 pm

Re: UCITS funds discussion

Post by NOTonA380 »

DJN wrote: Sat Feb 12, 2022 2:49 am Hi,
beware articles on the internet about somewhat complex subjects.
For the non Irish resident there is nothing there of interest apart from very basic advice that is better sourced from the Bogleheads Wiki:
https://www.bogleheads.org/wiki/Outline ... _domiciles
For the Irish resident tax payer there are whole swathes of possible solutions that are not even mentioned in what is a difficult area to navigate.
DJN
Thanks! I am a UK expat, living in UAE. Will take a look at the link you sent me. Generally I thought UCITS have a major tax advantage for UK expats in UAE but there may be variations depending on UCITS country domicile? The link you provided has a section on investing from outside the US and European Union member countries for non-US citizens. UAE is not on the list though. I will give it a proper read.
Topic Author
NOTonA380
Posts: 16
Joined: Sat Jan 15, 2022 12:39 pm

Re: UCITS funds discussion

Post by NOTonA380 »

TedSwippet wrote: Sat Feb 12, 2022 2:29 am
NOTonA380 wrote: Sat Feb 12, 2022 2:01 am 1) Has anyone come across a good UCITS proxy for the famous US-domiciled VXUS ETF (Vanguard Ex US)?
Not as far as I know. Recent discussion here: Developed World ex USA - product choice [Europe] - Bogleheads.org
NOTonA380 wrote: Sat Feb 12, 2022 2:01 am 2) Any strong thoughts on the above article? It suggests a four ETF portfolio (100% equities) and shows accumulating ETF options which have a weighted average total expense ratio of 16bp (pretty good). Four ETF funds sounds a bit complicated to me. I prefer one USA ETF, one ex-USA All World and maybe a Global Bond EFT (big maybe)
Worth noting that the article writes about Ireland domiciled ETFs, but is also written by an Irish resident, for Irish residents. All of the specific tax stuff mentioned, such as the eight-year 41% deemed distribution tax, applies only to Irish residents. Non-Irish residents will have no Irish tax interference in their investments through Ireland domiciled ETFs.

One likely reason why the article you quoted does not use your preferred US/ex-US ETF split is that there is no UCITS ex-US ETF. If you want a country allocation that is different to that of an all-world ETF then, you may have to use more than just two equity ETFs.
Interesting discussion that explains why there's a lack of ex-US UCITS. Sounds like an opportunity for the European asset managers. On another note, if you are a UK tax resident or a UK expat living in UAE (and planning to return to UK in 4-5 years) which non-US domiciles for ETFs do you think would be tax efficient?
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UCITS funds discussion

Post by TedSwippet »

NOTonA380 wrote: Sat Feb 12, 2022 6:36 am On another note, if you are a UK tax resident or a UK expat living in UAE (and planning to return to UK in 4-5 years) which non-US domiciles for ETFs do you think would be tax efficient?
Ireland domiciled ETFs are both the most common and also usually the most tax efficient. In particular, note that Ireland domiciled ETFs can use the US/Ireland tax treaty for a 15% US tax rate on dividends paid to the ETF by US stock. In comparison, Luxembourg domiciled ETFs have to pay 30% in US tax withholding on these same dividends, because the US/Luxembourg tax treaty is not as good. ETFs can sometimes get round this by using swaps/futures rather than holding actual stocks (synthetic rather than physical replication), but that raised the spectre of potential added counterparty risk.

If resident in the UAE and a UK tax nonresident, you would very much want to sell and then repurchase anything you hold with a built-in capital gain before becoming a UK resident again (also, maybe watch out for the UK's silly 'bed and breakfast' 30-day repurchase rules). That way, you reset its cost basis. Otherwise, you would be on the hook for UK capital gains tax on the entire holding period, even if most or all of the gain accrued while not a UK resident or UK taxpayer.
Topic Author
NOTonA380
Posts: 16
Joined: Sat Jan 15, 2022 12:39 pm

Re: UCITS funds discussion

Post by NOTonA380 »

TedSwippet wrote: Sat Feb 12, 2022 7:48 am
NOTonA380 wrote: Sat Feb 12, 2022 6:36 am On another note, if you are a UK tax resident or a UK expat living in UAE (and planning to return to UK in 4-5 years) which non-US domiciles for ETFs do you think would be tax efficient?
Ireland domiciled ETFs are both the most common and also usually the most tax efficient. In particular, note that Ireland domiciled ETFs can use the US/Ireland tax treaty for a 15% US tax rate on dividends paid to the ETF by US stock. In comparison, Luxembourg domiciled ETFs have to pay 30% in US tax withholding on these same dividends, because the US/Luxembourg tax treaty is not as good. ETFs can sometimes get round this by using swaps/futures rather than holding actual stocks (synthetic rather than physical replication), but that raised the spectre of potential added counterparty risk.

If resident in the UAE and a UK tax nonresident, you would very much want to sell and then repurchase anything you hold with a built-in capital gain before becoming a UK resident again (also, maybe watch out for the UK's silly 'bed and breakfast' 30-day repurchase rules). That way, you reset its cost basis. Otherwise, you would be on the hook for UK capital gains tax on the entire holding period, even if most or all of the gain accrued while not a UK resident or UK taxpayer.
very helpful. thanks! Re UCITS ETF Portfolio x-ray, I presume you have not seen much either?
DJN
Posts: 996
Joined: Sun Nov 19, 2017 11:30 pm

Re: UCITS funds discussion

Post by DJN »

Hi,
there is sub forum or series of posts for UAE residents, which is very useful:
viewforum.php?f=26
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
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