How to start with Vanguard index funds for Irish citizen in Switzerland

Discussion in 'Exchange Traded Funds (ETFs)' started by Liam Printer, Sep 11, 2016.

  1. Liam Printer

    Liam Printer New Member

    Posts:
    2
    Hi all

    I am an international teacher in Switzerland for the last 3 years. I am an Irish citizen and am looking to try and start to invest in broad based index funds with Vanguard but I am not sure how to start.

    As an Irish citizen does it make sense for me to buy Irish domiciled funds or will this make no difference to me since I do not live in Ireland at the moment and therefore pay no income tax there right now?

    Is Vanguard the best option? If so, do Irish citizens have to go through a UK broker in order to buy the Vanguard index funds?

    I am a complete beginner to this so just looking for initial help to get started..
     
  2. Jim2007

    Jim2007 Frequent Poster

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    1,766
    I'm assuming you have at least a B permit, right? In which case your Irish citizenship does not matter.

    Go through any of the usual Swiss brokers and buy on whichever exchange you like, it will be easier to do your tax return (if required to submit one). Remember that all capital gains are tax free so pick accumulating ETFs rather than distributers. You will of course be subject to wealth tax, but unless you have already accumulated several million since you arrived it will only amount to a couple of Francs.

    If you are not paying income taxes in arrears and you want to or have to select distributing ETFs then go for SICAV funds as distributions are gross in Switzerland and since you are not required to submit an income tax return, they are in fact tax free.

    Best Regards,

    Jim2007 (in Kt. Bern)
     
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  3. Liam Printer

    Liam Printer New Member

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    2
    Thank you @Jim2007

    1. "I'm assuming you have at least a B permit, right? In which case your Irish citizenship does not matter."
    Yes I have.

    2. "Go through any of the usual Swiss brokers"
    Which ones? Are they all the same or is there any you recommend?

    3. "and buy on whichever exchange you like"
    What does this mean?

    4. "it will be easier to do your tax return (if required to submit one). Remember that all capital gains are tax free so pick accumulating ETFs rather than distributers. You will of course be subject to wealth tax, but unless you have already accumulated several million since you arrived it will only amount to a couple of Francs."
    I don't do a tax return yet as I have not got a C permit. I am taxed at source. What is an "acculumating ETF"? Can you give me some examples?

    5. "If you are not paying income taxes in arrears and you want to or have to select distributing ETFs then go for SICAV funds as distributions are gross in Switzerland and since you are not required to submit an income tax return, they are in fact tax free."
    I'm afraid I don't understand... what is a "distributing ETF"?
     
  4. He-Man

    He-Man Frequent Poster

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    84
    Last edited: Sep 25, 2016
    Liam

    Before you invest in anything you need to find out what an exchange is and what distributions are!
    Exchange = stock exchange. Vanguard ETFs in Europe (for example VEUR) can be bought off the Amsterdam exchange in euros, the London stock exchange in pounds, or the Swiss exchange in francs. Same basket of stocks, just a different trading currency.

    Distributing ETFs distribute dividends. If the price of a VEUR share on Monday is 27.50 euro and on Tuesday it distributes a 50 cent dividend, the share price will fall to 27 euro but you will receive the 50 cents as a cash dividend, which may be subject to tax.

    An accumulating ETF doesn't distribute dividends, so your 27.50 will remain as 27.50. This may be tax-advantageous.
     
    Last edited: Sep 25, 2016
  5. Jim2007

    Jim2007 Frequent Poster

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    1,766
    Sorry Liam, Just saw this now....

    As already explained by He-Man, there are two types of ETF, one that distributes dividends and one that reinvests dividends.

    Since you are not required to submit a tax return, you can decide which option suits you best - receive dividends or not. If you wish to receive dividends then you are better to choose funds that have the SICAV on the Swiss exchange as distributions will be paid gross and are for all practical purposes tax free.

    Once you have a C permit or are required to submit a tax return it will not matter which type of fund you select as all dividends, whether paid out or not are taxable.