Due to the complex deemed disposal rules, for a regular monthly Irish investor does buying US domiciled ETFs via a us broker make the most sense?
There are a number of us discount brokers (firsttrade/tradestation/tasty works) still accepting Irish customers, without any ETF purchase restrictions.
These brokers are US based and don't market to EU citizens so they believe they are compliant with PRIIPs legislation (rightly or wrongly)
Disadvantages
1) currency conversion/transfer fees,but some brokers support USD via currencyfair + $20 handling fee, which is fine with bigger amounts
2) US estate tax for portfolios >$60,000 on death. You can double this for joint accounts, but this would complicate annual Irish tax reporting. There is obviously still a risk if you breach this limit and the worst happens. There are some options in avoiding this, but would add complexity/costs.
3) Potentially marginally higher tax if most of your gains come from dividends, which is unlikely if your investing in an allworld/s&p etf as it will be mostly capital gains.
4) yearly tax returns for dividends required, which is a straight forward process, but would be more costly as a higher income earner
5) increased currency risk due to unhedged USD holdings , which in theory you could hedge against that if you wanted to, but I would ignore the risk for simplicity sake
6) broker could stop allowing me to purchase us ETFs
7) US dividend withhold tax, fill out w8 form and us against Irish tax, which is going to be higher as a higher rate tax payer
Advantages
1) less complex tax reporting i.e deemed disposal rules for monthly investor Vs annual income tax + CGT on disposal
2) able to offset losses against investments and make use of €1250 CGT exemption
3) able to invest monthly in multiple ETFs if desired, as tax reporting is simplified and offsetting is allowed
4) lower tax for gains
5) marginally lower charges on us etfs & no UK stamp duty/higher charges as you would have on UK investment trusts (which seem to be the next best alternative)
6) potential to us loss harvesting to avail of yearly CGT exemption, I won't be doing this to keep things simple
The above process can be fairly automated with a standing order to currency fair + automated convert& transfer to US broker from currency fair and manual purchase once a month (which could also be automated via broker API, if desired)
In my mind this seems to make the most sense for a younger monthly Irish investor and removes the downsides of deemed disposal, if the above risks are acceptable. Which in my situation they are.
So am I missing anything in the above summary of this?
There are a number of us discount brokers (firsttrade/tradestation/tasty works) still accepting Irish customers, without any ETF purchase restrictions.
These brokers are US based and don't market to EU citizens so they believe they are compliant with PRIIPs legislation (rightly or wrongly)
Disadvantages
1) currency conversion/transfer fees,but some brokers support USD via currencyfair + $20 handling fee, which is fine with bigger amounts
2) US estate tax for portfolios >$60,000 on death. You can double this for joint accounts, but this would complicate annual Irish tax reporting. There is obviously still a risk if you breach this limit and the worst happens. There are some options in avoiding this, but would add complexity/costs.
3) Potentially marginally higher tax if most of your gains come from dividends, which is unlikely if your investing in an allworld/s&p etf as it will be mostly capital gains.
4) yearly tax returns for dividends required, which is a straight forward process, but would be more costly as a higher income earner
5) increased currency risk due to unhedged USD holdings , which in theory you could hedge against that if you wanted to, but I would ignore the risk for simplicity sake
6) broker could stop allowing me to purchase us ETFs
7) US dividend withhold tax, fill out w8 form and us against Irish tax, which is going to be higher as a higher rate tax payer
Advantages
1) less complex tax reporting i.e deemed disposal rules for monthly investor Vs annual income tax + CGT on disposal
2) able to offset losses against investments and make use of €1250 CGT exemption
3) able to invest monthly in multiple ETFs if desired, as tax reporting is simplified and offsetting is allowed
4) lower tax for gains
5) marginally lower charges on us etfs & no UK stamp duty/higher charges as you would have on UK investment trusts (which seem to be the next best alternative)
6) potential to us loss harvesting to avail of yearly CGT exemption, I won't be doing this to keep things simple
The above process can be fairly automated with a standing order to currency fair + automated convert& transfer to US broker from currency fair and manual purchase once a month (which could also be automated via broker API, if desired)
In my mind this seems to make the most sense for a younger monthly Irish investor and removes the downsides of deemed disposal, if the above risks are acceptable. Which in my situation they are.
So am I missing anything in the above summary of this?
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