Taxes on Ireland Domiciled ETFs?
-
- Posts: 11
- Joined: Mon Jan 16, 2023 7:01 am
Taxes on Ireland Domiciled ETFs?
Hi!
So, I'm a non-US investor.
I've seen the golden rule on the forum of investing in Ireland domiciled ETFs (thanks for sharing this with us all btw!).
My country does not have a tax treaty with Ireland. What will this mean for taxes? Will I have to file and pay taxes in Ireland?
There's also a point people make, that by investing in the Ireland domiciled ETFs , you get to take advantage of tax benefits and not pay full US taxes. There are assumptions being made there that I'm not clear on. Why are US taxes even relevant, if I'm investing in a fund in Ireland? lol
I would be using IBKR to buy these ETFs btw. I'm basically a noob to it as well
Thanks for the help!
So, I'm a non-US investor.
I've seen the golden rule on the forum of investing in Ireland domiciled ETFs (thanks for sharing this with us all btw!).
My country does not have a tax treaty with Ireland. What will this mean for taxes? Will I have to file and pay taxes in Ireland?
There's also a point people make, that by investing in the Ireland domiciled ETFs , you get to take advantage of tax benefits and not pay full US taxes. There are assumptions being made there that I'm not clear on. Why are US taxes even relevant, if I'm investing in a fund in Ireland? lol
I would be using IBKR to buy these ETFs btw. I'm basically a noob to it as well
Thanks for the help!
-
- Posts: 5181
- Joined: Mon Jun 04, 2007 4:19 pm
- Location: UK
Re: Taxes on Ireland Domiciled ETFs?
Welcome.
Full details in the wiki:
Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
No Irish tax entanglements. Ireland does not tax dividends or gains paid by Ireland domiciled ETFs to non-Irish residents, and does not apply its inheritance or estate taxes to non-Irish residents who hold these ETFs.Shinebright wrote: ↑Fri Mar 10, 2023 4:36 pm My country does not have a tax treaty with Ireland. What will this mean for taxes? Will I have to file and pay taxes in Ireland?
US taxes are relevant if the ETF holds US stocks. If you hold your US stocks through a US domiciled ETF (and your country lacks a US tax treaty) you will pay 30% to the US in dividend tax. If you hold your US stocks through an Ireland domiciled ETF, the ETF internally pays 15% to the US on the dividends it receives from the stocks it holds (15% is US/Ireland tax treaty rate), but you receive the rest free of any other tax. Win. And a bonus; no danger from confiscatory US estate tax if you hold above $60,000.Shinebright wrote: ↑Fri Mar 10, 2023 4:36 pm There's also a point people make, that by investing in the Ireland domiciled ETFs , you get to take advantage of tax benefits and not pay full US taxes. There are assumptions being made there that I'm not clear on. Why are US taxes even relevant, if I'm investing in a fund in Ireland?
Full details in the wiki:
Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
-
- Posts: 11
- Joined: Mon Jan 16, 2023 7:01 am
Re: Taxes on Ireland Domiciled ETFs?
Thank you! Very helpful. Hadn’t seen that explained clearly anywhere else!
-
- Posts: 224
- Joined: Sun Jul 14, 2019 4:13 am
Re: Taxes on Ireland Domiciled ETFs?
For the taxes, there is for example a $QYLD fund based in US that pays dividends monthly out of covered calls (around 1% per month) and there is a similar version for $QYLD in London stock exchange and based in Ireland that does the same.TedSwippet wrote: ↑Sat Mar 11, 2023 2:20 am Welcome.No Irish tax entanglements. Ireland does not tax dividends or gains paid by Ireland domiciled ETFs to non-Irish residents, and does not apply its inheritance or estate taxes to non-Irish residents who hold these ETFs.Shinebright wrote: ↑Fri Mar 10, 2023 4:36 pm My country does not have a tax treaty with Ireland. What will this mean for taxes? Will I have to file and pay taxes in Ireland?
US taxes are relevant if the ETF holds US stocks. If you hold your US stocks through a US domiciled ETF (and your country lacks a US tax treaty) you will pay 30% to the US in dividend tax. If you hold your US stocks through an Ireland domiciled ETF, the ETF internally pays 15% to the US on the dividends it receives from the stocks it holds (15% is US/Ireland tax treaty rate), but you receive the rest free of any other tax. Win. And a bonus; no danger from confiscatory US estate tax if you hold above $60,000.Shinebright wrote: ↑Fri Mar 10, 2023 4:36 pm There's also a point people make, that by investing in the Ireland domiciled ETFs , you get to take advantage of tax benefits and not pay full US taxes. There are assumptions being made there that I'm not clear on. Why are US taxes even relevant, if I'm investing in a fund in Ireland?
Full details in the wiki:
Nonresident alien investors and Ireland domiciled ETFs - Bogleheads
For the QYLD based in US, while the announced dividend is lets say 100$ in dividends, i actually 70$ hits the account due to the 30% tax.
For the QYLD based in Ireland, if the announced dividend is 100$, do i get the 100$ or less? Because in the case of $VWRD (Vanguard total world domiciled in Ireland) for example, the announced amount of dividend is what i get, without any deductions.
60% VWRD 40% AGGG until further notice
-
- Posts: 5181
- Joined: Mon Jun 04, 2007 4:19 pm
- Location: UK
Re: Taxes on Ireland Domiciled ETFs?
For Ireland domiciled QYLD, ISIN IE00BM8R0J59, you should get the full dividend declared by this ETF. There is no Irish or US tax withholding to you on dividends paid by Ireland domiciled ETFs.michoco911 wrote: ↑Wed Mar 29, 2023 12:23 am For the QYLD based in US, while the announced dividend is lets say 100$ in dividends, i actually 70$ hits the account due to the 30% tax.
For the QYLD based in Ireland, if the announced dividend is 100$, do i get the 100$ or less? Because in the case of $VWRD (Vanguard total world domiciled in Ireland) for example, the announced amount of dividend is what i get, without any deductions.
What might differ though is the amount of the dividend declared by Ireland domiciled QYLD, compared with the dividend declared by its US domiciled equivalent. Ireland domiciled ETFs have to pay 15% US withholding tax internally on dividends (and some "dividend-equivalent" payments) the receive from US stock.
That said, I have not looked into the details of how Ireland domiciled QYLD works. Perhaps its structure allows it to avoid directly receiving US dividends or "dividend-equivalents", so that there is no US tax withholding? In that case, its dividend should be more or less the same as its US domiciled counterpart, which would be a good result. Either way though, even if Ireland domiciled QYLD leaks 15% internally to US tax, that still beats the 30% you would lose if you held US domiciled QYLD.
-
- Posts: 224
- Joined: Sun Jul 14, 2019 4:13 am
Re: Taxes on Ireland Domiciled ETFs?
Thanks a lot TedSwippet for the clarifications.TedSwippet wrote: ↑Wed Mar 29, 2023 2:54 am For Ireland domiciled QYLD, ISIN IE00BM8R0J59, you should get the full dividend declared by this ETF. There is no Irish or US tax withholding to you on dividends paid by Ireland domiciled ETFs.
What might differ though is the amount of the dividend declared by Ireland domiciled QYLD, compared with the dividend declared by its US domiciled equivalent. Ireland domiciled ETFs have to pay 15% US withholding tax internally on dividends (and some "dividend-equivalent" payments) the receive from US stock.
That said, I have not looked into the details of how Ireland domiciled QYLD works. Perhaps its structure allows it to avoid directly receiving US dividends or "dividend-equivalents", so that there is no US tax withholding? In that case, its dividend should be more or less the same as its US domiciled counterpart, which would be a good result. Either way though, even if Ireland domiciled QYLD leaks 15% internally to US tax, that still beats the 30% you would lose if you held US domiciled QYLD.
For the past 3 months, the dividend declared on a monthly basis is exactly 1% of the ETF value at that time, and if you are stating that the full dividend declared should be received, then yes it makes an additional 30% of dividends savings.
The only concern that remains then would be:
- Very new ETF since November 2022, so does not have a good track record
- Fund current amount of 7M$ compared to the several billion dollars of the US based QYLD so not sure if this will affect liquidity/price spreads/etc..
Thank you.
60% VWRD 40% AGGG until further notice
Re: Taxes on Ireland Domiciled ETFs?
I do not mean to hijack the OP's question but I have a query somewhat related to it.
Is the ETF domicile the only thing that determines the amount of w/h tax I have to pay? I.e. if I buy an ETF domiciled in Ireland, does it matter which exchange I buy the holding at? That is, if I buy the same ETF at the LSE as well as, say, Euronext NL is my w/h tax determined based solely on the fact it's a Irish domiciled ETF or does the country where the holding 'sits' matter?
If it helps, I'm a tax resident of Singapore.
Is the ETF domicile the only thing that determines the amount of w/h tax I have to pay? I.e. if I buy an ETF domiciled in Ireland, does it matter which exchange I buy the holding at? That is, if I buy the same ETF at the LSE as well as, say, Euronext NL is my w/h tax determined based solely on the fact it's a Irish domiciled ETF or does the country where the holding 'sits' matter?
If it helps, I'm a tax resident of Singapore.
-
- Posts: 5181
- Joined: Mon Jun 04, 2007 4:19 pm
- Location: UK
Re: Taxes on Ireland Domiciled ETFs?
Welcome to the forum.
Although, as already mentioned above, an Ireland domiciled ETF will internally have to pay 15% US dividend withholding tax on dividends it receives from any US stocks it hold. An annoying tax drag, but still a vast improvement on the 30% you would otherwise lose to US tax if you held US domiciled ETFs. US domiciled ETFs holding non-US stocks are especially poor choices for many non-US investors. Here, you could pay 30% US dividend tax on dividends that arose from non-US company stocks; by contrast, hold these exact same company stocks in an Ireland domiciled ETF and you lose nothing to either US or Irish tax.
Yes. Which exchange you use is irrelevant. No matter which you choose, you would pay 30% US dividend withholding tax on a US domiciled ETF, and no US or Irish or any other dividend withholding tax on an equivalent Ireland domiciled ETF.
Although, as already mentioned above, an Ireland domiciled ETF will internally have to pay 15% US dividend withholding tax on dividends it receives from any US stocks it hold. An annoying tax drag, but still a vast improvement on the 30% you would otherwise lose to US tax if you held US domiciled ETFs. US domiciled ETFs holding non-US stocks are especially poor choices for many non-US investors. Here, you could pay 30% US dividend tax on dividends that arose from non-US company stocks; by contrast, hold these exact same company stocks in an Ireland domiciled ETF and you lose nothing to either US or Irish tax.
Re: Taxes on Ireland Domiciled ETFs?
Terrific. Thank you.
Re: Taxes on Ireland Domiciled ETFs?
Sorry to resurrect this thread, but I read on reddit (https://www.reddit.com/r/phinvest/comme ... investors/) that Ireland does not automatically exempt you from Irish DWT. You have to file a form V2A. Is this true? Can anyone confirm if Irish Domiciled ETFs really don't get taxed for NRAs of Ireland?