accumulator ETF withholding tax?

[umeca74]

Hi, investment noob here!

I am about to open a SAXO account and buy in some global ETF (equity) for long term holding. Simple stuff
I wonder if I can somehow minimize the "withholding tax" for dividends. If I buy ETFs that are accumulators (they don't generate any income), do I still lose (up to) 30% on US based ETFs? I suppose dividend is paid somewhere before it is reinvested in accumulator types.

or I shouldn't really worry about this as growth basically comes from the stock price appraisal instead of dividends?
thanks
Nikos

[TedSwippet]

I wonder if I can somehow minimize the "withholding tax" for dividends. If I buy ETFs that are accumulators (they don't generate any income), do I still lose (up to) 30% on US based ETFs? I suppose dividend is paid somewhere before it is reinvested in accumulator types.

From past posts, it appears that you are resident in Cyprus. Assuming this, you should be able to file a W-8BEN form with Saxo, giving you the 15% US/Cyprus tax treaty rate on dividends from US stocks and US domiciled ETFs.

Now, three other important observations. Firstly, few if any brokers will now let EU or UK residents buy US domiciled ETFs. The culprit is EU PRIIPs regulation. This requires funds and ETFs to provide a Key Investor Information Document containing certain information, and so far no US domiciled ETF has chosen to do so. Secondly, there are no accumulating US domiciled ETFs. US regulations require US domiciled funds to distribute accrued dividends to investors at least annually. And thirdly, Cyprus has no US estate tax treaty, meaning that anything you hold which is 'US situs' (this includes US stocks and US domiciled funds and ETFs) above $60,000 is at risk of US estate tax at rates of 26%-40% of your holding.

Modifying your question to: Do I still lose 15% to US tax on Ireland domiciled accumulating ETFs? The answer is partly yes. The ETF must itself pay 15% US tax on the dividends it receives from US stocks (15% is also the US/Ireland treaty rate), so reducing the amount it reinvests. This only applies to the US stock component part though, so on a global ETF that would be 15% US tax drag on about 50% or so of underlying dividends.

There is no escaping some level of US tax drag on anything that holds US stocks. The only exception is within a UK SIPP or pension, where the provider can achieve a 0% rate on US source dividends, provided they file the right US paperwork (some do, some don't). And even here, to achieve this without holding individual US stocks you would need to use a US domiciled ETF, something that PRIIPs has made largely impractical for EU and UK investors.

Holding Ireland or other non-US domiciled ETFs avoids any risk of egregious and confiscatory US estate tax.

[umeca74]

thank you.
I also found some other information that pretty much says there's no real difference in this particular choice, i.e. the withholding tax is the same:
https://bankeronwheels.com/distributing ... e-classes/

the good thing about Cyprus is that investments in stock markets are pretty much tax free (neither CGT nor dividends )
so I would go for accumulating just to minimize the reinvestment hassle