Vanguard Irish-domiciled ETFs and non-tax-residency

H

He-Man

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Hi All,

A number of Vanguard ETFs are domiciled in Ireland and traded off of various exchanges such as London and Amsterdam. Here's a scenario followed by a question:

  • I am an Irish citizen but am non-resident for tax purposes.
  • I reside in a non-EU country like Singapore or the UAE and open a Saxo trading account. The Saxo account is domiciled in Denmark.
  • I use the Saxo account to buy Vanguard ETFs off the Amsterdam stock exchange.
  • The Vanguard ETFs are domiciled in Ireland.

By purchasing an Irish-domiciled ETF from the Amsterdam exchange, am I jeopardizing my non-resident status in Ireland?
 
To answer my own question, see the Revenue.ie website and search for "CGT1". It's a PDF and the first section makes clear who is liable and who is not.

Based on the scenario I outlined above, someone so described would not be taxable.
 
I have another question on this note that needs answering...

What about dividend tax?

Say you bought the Vanguard ETF on the Amsterdam Euronext.

The dutch apparently impose a 15% withholding tax. I'm still not clear on whether this applies to Ireland domiciled ETFs.. it's all very confusing :( I'm also not clear on whether it relates to where YOU as an investor are resident.

I haven't been able to find a good answer to this. Say I live in Singapore and buy VEUR.AS (Amsterdam exchange). When the ETF declares dividends am I subject to any dividend withholding tax?


EDIT:

I just want to add that based on what He-Man posted above, the gains from ETFs domiciled in Ireland are not subject to Capital Gains Tax in Ireland - at least if you don't live in Ireland.
 
hi this is from fidelity-
Irish domiciled funds
In general, funds are not subject to Irish tax on their relevant income
or gains. Payments to Irish resident or ordinarily tax resident,
investors are subject to Irish dividend withholding tax.
Payments from Irish domiciled ETFs are not subject to Irish dividends
withholding tax, but Irish resident, or ordinary resident, investors are
required to pay Irish taxes in lieu of the withholding tax they would
otherwise have suffered.

The crunch thing there is ordinary resident which only happens after you have been non-resident for tax purposes for 3 tax years

and the next thing is they are talking about DWT not CGT- very confusing
 
DWTax from revenue.ie


Non-residence & exemption

In the case of those non-resident individuals who are eligible for exemption from DWT, entitlement to the exemption is established by the making of a declaration of non-residence which must be supported by a certification procedure (i.e. a certificate of tax residence from the tax authorities of the country in which the individual is resident for tax purposes.

In the case of qualifying non-resident companies, entitlement to the exemption is established by means of a declaration.

how do you get a tax certificate from the middle east where there is no tax???
 
Have you tried contacting revenue directly to explain your situation?
I rang them to try to become DIRT exempt as I'm non-resident but they hadn't set up a way to deal with this before.
Perhaps if you just sign a hand written declaration that you're non-resident they'll accept it?
Let me know how you get on as I'll probably have to do something similar.
 
Avoid Irish domiciled ETFs like the plague. Under Irish Revenue rules they are taxed like unit-linked funds: gains taxed at 41% currently and no loss relief. I'd love to see someone challenge this draconian tax treatment in court as I'm pretty sure it would be seen as unconstitutional. A basic right surely is that a loss on one instrument should be offsettable against a gain in that same instrument!

On the other hand, it would be hard for the Revenue to claim that Non-Irish domiciled ETFs should be treated as unit-linked funds. Most non-Irish ETFs are securities. In the US, for example, an ETF is regulated under the 'Securities' act, not the Mutual Funds act. An attempt by the Irish Revenue to claim that a US ETF was not a 'share' would be difficult to gain a hearing, I'd suspect. I do wish the Irish Stock Exchange would take professional legal advice on this (on behalf of the stockbroking community) and get a clear ruling on it. We would all benefit from clarity and fairness around the rules regarding the tax treatment of the various fund types (ETFs, Investment Trusts, Unit-linked funds, offshore funds etc).

Rory Gillen
 
Rory Gillen said:
Avoid Irish domiciled ETFs like the plague. Under Irish Revenue rules they are taxed like unit-linked funds: gains taxed at 41% currently and no loss relief.
Click to expand...

The OP is non resident for tax purposes and like myself appears to live in a country where gains are not taxed in any case.
 
but here is the problem

Non-residence & exemption

In the case of those non-resident individuals who are eligible for exemption from DWT, entitlement to the exemption is established by the making of a declaration of non-residence which must be supported by a certification procedure (i.e. a certificate of tax residence from the tax authorities of the country in which the individual is resident for tax purposes.

In the case of qualifying non-resident companies, entitlement to the exemption is established by means of a declaration.

how do you get a tax certificate from the middle east where there is no tax???
 
In the UAE at least, there actually is a person who issues tax certificates to individuals for this purpose. I am intrigued as to what the certificate would state. I actually plan to request such a certificate soon just to see what it says.
 
So if I invest in an Irish-domiciled ETF but am not an ordinary tax resident I will still be liable to pay DWT until I declare my non-residence and support it with a certification procedure?
But if I invest in a Luxembourg-domiciled ETF I'm not liable to pay DWT and don't have to declare anything?

I've been advised by a professional that I'm resident of nowhere so obviously can't provide the tax certificate revenue ask for.

drrkpt did you find good advice yet?
 
alwaysonit said:
I've been advised by a professional that I'm resident of nowhere so obviously can't provide the tax certificate revenue ask for.
Click to expand...

Time to get a new professional then... Or at least make sure he has got really good professional indemnity insurance.
 
To take issue with Rory's post on the subject, the tax advice I have received is that some US-domiciled ETFs are taxable under CGT while ohers fall under the funds tax regime.

Those structured as unit investment trusts are taxed under CGT: the bad news is that these are a minority but the good news is that one of them is the Spider.
 
alwaysonit said:
So if I invest in an Irish-domiciled ETF but am not an ordinary tax resident I will still be liable to pay DWT until I declare my non-residence and support it with a certification procedure?
But if I invest in a Luxembourg-domiciled ETF I'm not liable to pay DWT and don't have to declare anything?

I've been advised by a professional that I'm resident of nowhere so obviously can't provide the tax certificate revenue ask for.

drrkpt did you find good advice yet?
Click to expand...

There'll always be some kind of hitch. Look at it from the perspective of saving about 50% on income tax. It's fine to pay a dividend witholding tax (invest in US etfs via etrade) or some other smaller losses in revenue. Cuts your fund gain by about 2-3% per annum but you still make more money each year.

Are you really not resident anywhere and did a tax advisor tell you this in writing?
 
I was told by a highly recommended tax advisor that I'm not resident anywhere, although he came to this conclusion pretty quickly.

He said he'll send me an email summarising what he told me in the meeting, is an email like this enough to cover myself under his professional indemnity insurance in case he's wrong?
 
It's quite unrealistic of you to think that you would get much out of it if he was wrong. The practicalities are quite problematic. The country claiming taxes somehow gets you -> You sue the tax advisor -> Court settles in your favor in you vs him but settles against you in country vs. you.

The above situation itself is very complicated and it's really hard to tell what would happen beforehand. Plus it'll probably take a good few years to get sorted out depending on the country.

I think it's safe to say that you wouldn't run into any issues as long as you don't take up long term residence anywhere. Tourists or PTs fly under the radar most of the time, no one cares about them, most IRS's do not have the resources to deal with them anyway..

Be very careful when it comes to your days of stay in your own country though.
 
Hi He-Man
Where did you get the tax cert from?? I lived in abu dhabi for 2 years and am trying to obtain a cert from the tax authorities in UAE as requested by the Irish Revenue. I contacted the ministry of finance in abu dhabi but they couldn't help me. Irish revenue dept were extremely unhelpful too.

Thank
Rachel
 
Rachel said:
Hi He-Man
Where did you get the tax cert from?? I lived in abu dhabi for 2 years and am trying to obtain a cert from the tax authorities in UAE as requested by the Irish Revenue. I contacted the ministry of finance in abu dhabi but they couldn't help me. Irish revenue dept were extremely unhelpful too.

Thank
Rachel
Click to expand...
Hi Rachel,
Try this and let me know how you get on: [broken link removed]
 
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