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ADIDAS AG Buying European domiciled shares in my ISA

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TheMotorcycleBoy
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ADIDAS AG Buying European domiciled shares in my ISA

#249449

Postby TheMotorcycleBoy » September 5th, 2019, 6:30 am

Hi Folks

I have been researching making an investment into one of the foreign footwear/sportswear manufacturers such as Nike or Adidas. I'm still weighing up which is the best bet for me.

However, if I bought Adidas AG shares does anyone know how my dividends are taxed? I did contact my broker last night but the web chat assistant didn't seem to be particularly au fait with European shares.

My research into the share so far indicates that they are traded on an Exchange called "Xetra" (ETR)
https://www.investopedia.com/terms/x/xetra.asp

on the Frankfurt Stock Market:
https://www.boerse-frankfurt.de/equity/DE000A1EWWW0

I wondered if a standard withholding tax is applied to the dividend from the share, similar to the 15% tax applied to US divs held in a UK ISA.

Many thanks,
Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249452

Postby flyer61 » September 5th, 2019, 7:22 am

29 ADIDAS AG shares held in my ISA. 14 May 19 £61.64 received.

Sorry Matt in bed, it is the best I can do at the moment!

TheMotorcycleBoy
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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249455

Postby TheMotorcycleBoy » September 5th, 2019, 7:42 am

flyer61 wrote:29 ADIDAS AG shares held in my ISA. 14 May 19 £61.64 received.

Sorry Matt in bed, it is the best I can do at the moment!

:lol:

No probs. I'll try my brokers again later if I remember.

My girls are telling me to buy to Nike, but my internet research is telling me that Adidas are considered "more hip" this days. I found a site somewhere, which counted Instagram posts with images of these footwear etc.

thanks again,
Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249462

Postby SalvorHardin » September 5th, 2019, 8:32 am

TheMotorcycleBoy wrote:I wondered if a standard withholding tax is applied to the dividend from the share, similar to the 15% tax applied to US divs held in a UK ISA.

Yes, 26.375% of dividends (25% withholding tax plus a "solidarity surcharge" of 5.5% of the tax).

http://taxsummaries.pwc.com/ID/Germany- ... ding-taxes

Now in theory part of this can be reclaimed (the 11.375% bit leaving a deduction of 15%). Unfortunately Germany doesn't have an equivalent of America's W-8BEN form to reduce withholding tax before it is deducted. I gather that this can be quite difficult, time consuming and the cost of doing so can easily end up costing more than the tax refund (especially if your German isn't good enough to deal with the paperwork). Whilst most brokers are happy dealing with W-8BEN forms when it comes to non-English speaking nations, many will refuse to deal with the foreign tax authorities on your behalf (or charge a lot for doing so).

Some posters on TMF and TLF have had dealings with the Swiss authorities when it comes to getting tax rebates from their holdings in Nestle.

I've had fun and games in the past with my holdings of Brookfield Asset Management and Canadian Pacific with various brokers (New York listed shares). Some deduct 25% Canadian withholding tax and refuse to refund the 10%, some deduct 25% then eventually get a refund to reduce it to 15% whilst one deducts just 15% (I don't worry too much about this as I can offset the withholding tax against my UK tax liability and I'm happy to contribute a bit extra to the Canadian Treasury).

BTW - I quit my new job. It turns out that it wasn't quite what was promised (I didn't sign up to commute to Central London every day, sod that for a game of soldiers) and since I could easily afford to walk away I did.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249481

Postby TheMotorcycleBoy » September 5th, 2019, 9:56 am

Many thanks for this Salvor,

I clearly need to consider this very carefully. I haven't "run the numbers" yet against Adidas, I have the last 6 ARs downloaded, and I have had a quick look at them, and they will fit into my standard spreadsheets. However the comparison of 26.375% tax on AG vs 15% on NKE is upsetting for me as an ISA holder, so I'll need to sell AG strongly to myself. (By comparison I have put NKE through my sheets and they look good, I believe $80-85 / share is reasonable, though I'm wanting to wait and see if they go to $77 since that gives me about PE=30).

SalvorHardin wrote:Now in theory part of this can be reclaimed (the 11.375% bit leaving a deduction of 15%). Unfortunately Germany doesn't have an equivalent of America's W-8BEN form to reduce withholding tax before it is deducted. I gather that this can be quite difficult, time consuming and the cost of doing so can easily end up costing more than the tax refund (especially if your German isn't good enough to deal with the paperwork). Whilst most brokers are happy dealing with W-8BEN forms when it comes to non-English speaking nations, many will refuse to deal with the foreign tax authorities on your behalf (or charge a lot for doing so).

The lady on last night's web chat, did mention a w8ben. I thought that she was getting confused with US shares TBH. So in what I've quoted of you above, are you suggesting that *some* brokers can refund the 11.375% bit?

Sorry about the job. But it's good that you quit when you did. That commute daily would be a killer, the worst part of my work, is my A14 commute.

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249501

Postby OLTB » September 5th, 2019, 10:36 am

TheMotorcycleBoy wrote:Many thanks for this Salvor,

I clearly need to consider this very carefully. I haven't "run the numbers" yet against Adidas, I have the last 6 ARs downloaded, and I have had a quick look at them, and they will fit into my standard spreadsheets. However the comparison of 26.375% tax on AG vs 15% on NKE is upsetting for me as an ISA holder, so I'll need to sell AG strongly to myself. (By comparison I have put NKE through my sheets and they look good, I believe $80-85 / share is reasonable, though I'm wanting to wait and see if they go to $77 since that gives me about PE=30).

SalvorHardin wrote:Now in theory part of this can be reclaimed (the 11.375% bit leaving a deduction of 15%). Unfortunately Germany doesn't have an equivalent of America's W-8BEN form to reduce withholding tax before it is deducted. I gather that this can be quite difficult, time consuming and the cost of doing so can easily end up costing more than the tax refund (especially if your German isn't good enough to deal with the paperwork). Whilst most brokers are happy dealing with W-8BEN forms when it comes to non-English speaking nations, many will refuse to deal with the foreign tax authorities on your behalf (or charge a lot for doing so).

The lady on last night's web chat, did mention a w8ben. I thought that she was getting confused with US shares TBH. So in what I've quoted of you above, are you suggesting that *some* brokers can refund the 11.375% bit?

Sorry about the job. But it's good that you quit when you did. That commute daily would be a killer, the worst part of my work, is my A14 commute.

Matt


Hi Matt

I hold TUI in my HYP (another German business) and even though it is in a tax-relieved wrapper (my SIPP in this case) the tax that SalvorHardin refers to above is also deducted. It might be possible to reclaim, but I have also been told that the hassle and possible costs may not be worth the bother.

Cheers, OLTB.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249502

Postby SalvorHardin » September 5th, 2019, 10:38 am

TheMotorcycleBoy wrote:The lady on last night's web chat, did mention a w8ben. I thought that she was getting confused with US shares TBH. So in what I've quoted of you above, are you suggesting that *some* brokers can refund the 11.375% bit?

Sorry about the job. But it's good that you quit when you did. That commute daily would be a killer, the worst part of my work, is my A14 commute

Yes, in theory you can get back the 11.375% bit. I've never done it, but I gather that it is quite difficult to do so (or you have to pay someone with the experience to do it).

W-8BEN is for American shares (and Canadians listed in New York I believe). However, it's entirely possible that the expression "W-8BEN" is being used as shorthand for foreign withholding tax reclaim.

My commute was the best part of ten miles to Taunton railway station then two hours to Paddington. I could do it when I was younger!

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249515

Postby TheMotorcycleBoy » September 5th, 2019, 11:17 am

SalvorHardin wrote:W-8BEN is for American shares (and Canadians listed in New York I believe).

That was my impression, I've had to file two this year, one since my employer grants me US stock, and the other for my US assets purchased in my ISA.

However, it's entirely possible that the expression "W-8BEN" is being used as shorthand for foreign withholding tax reclaim.

You could well be right on that one. I need to actually speak to someone at iWeb. I hope it is the case, I'd like to give the AG stock a play if everything else stacks up.

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249516

Postby TheMotorcycleBoy » September 5th, 2019, 11:19 am

OLTB wrote:Hi Matt

I hold TUI in my HYP (another German business) and even though it is in a tax-relieved wrapper (my SIPP in this case) the tax that SalvorHardin refers to above is also deducted. It might be possible to reclaim, but I have also been told that the hassle and possible costs may not be worth the bother.

Cheers, OLTB.

Thanks mate,

I'll post back and tell you how I get on with iWeb, in case it's worth your while.

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249641

Postby TheMotorcycleBoy » September 5th, 2019, 4:16 pm

Alas I've just come off the blower with iWeb. Got the chap to put me on hold, while he went off to chat to the "Dividend Team".

Apparently the Germans don't do any such simple w8ben equivalent. If I want to reclaim the tax from AG dividends, I'm basically on my own.

I'm still going to see what the operating numbers look like for AG. I'll post them onto "Company Analysis" if folk are interested please shout out if so, but it looks like I'll need a strong value case for me to prefer ETR:Adidas AG against NYSE:NKE.

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#249696

Postby TheMotorcycleBoy » September 5th, 2019, 6:59 pm

Adidas do seem to trade on the US markets, as ADDYY

https://www.adidas-group.com/en/investo ... r-program/

but I'm not sure whether my brokers can deal them.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256028

Postby jaizan » October 5th, 2019, 1:59 pm

With the dividend tax that's difficult to reclaim AND my broker charging a thoroughly unreasonable 1.5% on the forex when buying the stock, I decided not to buy any more German stocks.
The money I want to allocate to Europe has mostly been with Jupiter European Opportunities IT and JP Morgan European Smaller Companies.
In the 6.5 years I have held these, the share price CAGR is almost double that of the i-Shares Europe Excl UK etf that I use as a benchmark.

I also don't have the time to research stocks properly on a range of international markets.

My only remaining direct European holding is Munich Re, which I have held for 8.5 years in an iWeb account. That will be sold off when I have some spare capital gains allowance.

Incidentally, iWeb were charging just 0.5% on currency conversion when I opened the account. Last time I looked, it was 1.5%. I think it's similar with ii and AJ Bell, who I also use.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256030

Postby TheMotorcycleBoy » October 5th, 2019, 2:06 pm

jaizan wrote:With the dividend tax that's difficult to reclaim AND my broker charging a thoroughly unreasonable 1.5% on the forex when buying the stock, I decided not to buy any more German stocks.
The money I want to allocate to Europe has mostly been with Jupiter European Opportunities IT and JP Morgan European Smaller Companies.
In the 6.5 years I have held these, the share price CAGR is almost double that of the i-Shares Europe Excl UK etf that I use as a benchmark.

I also don't have the time to research stocks properly on a range of international markets.

My only remaining direct European holding is Munich Re, which I have held for 8.5 years in an iWeb account. That will be sold off when I have some spare capital gains allowance.

Incidentally, iWeb were charging just 0.5% on currency conversion when I opened the account. Last time I looked, it was 1.5%. I think it's similar with ii and AJ Bell, who I also use.

I think I'll wait and see if the SP falls beneath E260. Likewise with Nike, until they fall to say 77-80 USD.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256283

Postby TheMotorcycleBoy » October 7th, 2019, 7:36 am

jaizan wrote:With the dividend tax that's difficult to reclaim AND my broker charging a thoroughly unreasonable 1.5% on the forex when buying the stock, I decided not to buy any more German stocks.

I agree that having the 1.5% forex charge is non ideal. However, the way I rationalised my own willingness to pay this charge, was that this is one-off charge on the initial investment capital, whereas if I'd taken the alternative of an investment into foreign stocks via a trust or fund then presumably I'd incur charges of a YoY basis, which could be less transparent.

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256306

Postby richfool » October 7th, 2019, 10:56 am

TheMotorcycleBoy wrote:
jaizan wrote:With the dividend tax that's difficult to reclaim AND my broker charging a thoroughly unreasonable 1.5% on the forex when buying the stock, I decided not to buy any more German stocks.

I agree that having the 1.5% forex charge is non ideal. However, the way I rationalised my own willingness to pay this charge, was that this is one-off charge on the initial investment capital, whereas if I'd taken the alternative of an investment into foreign stocks via a trust or fund then presumably I'd incur charges of a YoY basis, which could be less transparent.

Matt

Matt, I think your comparison about charges is a bit like the proverbial apples with oranges comparison.

The "one-off charge" you refer to is the FX charge/cost upon buying a foreign stock in a foreign currency (which note you would also incur upon ultimate sale). Whereas the "YoY charges" I presume you are referring to, relate to the ongoing management of a fund or trust. The latter thus relates to the management of the fund's many different (and thus diversified) stocks/holdings and not to a YOY FX charge.

Note with FX cost when buying or selling a foreign stock, you also take an exchange rate risk.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256315

Postby TheMotorcycleBoy » October 7th, 2019, 11:57 am

richfool wrote:
TheMotorcycleBoy wrote:
jaizan wrote:With the dividend tax that's difficult to reclaim AND my broker charging a thoroughly unreasonable 1.5% on the forex when buying the stock, I decided not to buy any more German stocks.

I agree that having the 1.5% forex charge is non ideal. However, the way I rationalised my own willingness to pay this charge, was that this is one-off charge on the initial investment capital, whereas if I'd taken the alternative of an investment into foreign stocks via a trust or fund then presumably I'd incur charges of a YoY basis, which could be less transparent.

Matt

Matt, I think your comparison about charges is a bit like the proverbial apples with oranges comparison.

Yes, that's true. I wasn't attempting a direct comparison, merely making public my own personal justification to the one-off initial FX charge.

Note with FX cost when buying or selling a foreign stock, you also take an exchange rate risk.

Yes, for sure, and with my iWeb ISA also on the dividends.

TBH I'm being pretty damn shy with the foreign stocks. We opened small positions on Disney:DIS and Microsoft:MSFT, and I'm still pondering either XTRA:ADS or NYSE:NKE. I'm deliberately only going for the cash rich, high quality names. Well fingers crossed!

Matt

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#256738

Postby jaizan » October 9th, 2019, 10:41 am

richfool wrote:The "one-off charge" you refer to is the FX charge/cost upon buying a foreign stock in a foreign currency (which note you would also incur upon ultimate sale). Whereas the "YoY charges" I presume you are referring to, relate to the ongoing management of a fund or trust. The latter thus relates to the management of the fund's many different (and thus diversified) stocks/holdings and not to a YOY FX charge.
Note with FX cost when buying or selling a foreign stock, you also take an exchange rate risk.


1 1.5% when buying + 1.5% when selling = 3%. This grates when I know foreign currency can easily b bought for 0.5%, so the brokers are just screwing the customers.

2 Most of my overseas Investment Trusts charge around 1% per annum. I am prepared to pay this, since on average, they have beat an appropriate benchmark etf by several % per year over the 5~10 years I have held these trusts for so far. I selected an appropriate benchmark etf for every IT, so a Japanese etf for a Japanese IT, Asian for Asian IT and so on. I simply do not have the time to research stocks in every global market properly.

3 Personally I would consider being 100% invested in the UK to be an exchange rate risk, as I purchase imported manufactured goods, imported food, imported oil and go on holiday abroad for several months a year. To minimise exchange rate risk, some overseas investment is needed. Ideally, I would measure my performance against a "currency basket", rather than in GBP.

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Re: ADIDAS AG Buying European domiciled shares in my ISA

#257748

Postby gryffron » October 14th, 2019, 12:20 pm

jaizan wrote:Personally I would consider being 100% invested in the UK to be an exchange rate risk, as I purchase imported manufactured goods, imported food, imported oil and go on holiday abroad for several months a year. To minimise exchange rate risk, some overseas investment is needed. Ideally, I would measure my performance against a "currency basket", rather than in GBP

Except that 75% of FTSE100 earnings come from abroad. And nearly 50% of FTSE250. So actually the leading FTSE shares are already far too heavily biased towards foreign earnings compared to imports (30%, although your personal figure may differ). Investing 100% in sterling is surprisingly difficult.

Gryff


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