Lootman wrote: hiriskpaul wrote:
Lootman wrote:Correct. Not only that but US funds are mandated to distribute not just 100% of received dividends, but also 100% of received realised capital gains. That can be a reason to avoid US-listed funds n taxable UK accounts.
So in a sense US funds over-distribute relative to UK ones.
Due to their structure most ETFs do not generate realized gains anyway, so that part is moot. But it's good that Vanguard took the extra step of getting certified as distributing.
Looks like my luck has run out! VTI has non-zero ERI for this year. My other ETF (VB) still zero for this tax year.
I wonder if it has to do with the US tax year being different? They have to distribute within their tax year, which is why US funds invariably make a distribution in December - their tax year is the calendar year.
But they would not feel any obligation to make distributions to coincide with the tax years of other nations.
I am not sure what is going on. The reporting period for the fund (VTI) is the same as that in the annual accounts, so no mis-alignment there. A few curious things in the accounts though. Firstly, the fund does make a "Realized Net Gain" which is about half of "Net Investment Income", but no "Realized Capital Gain" was distributed and virtually all of "Net Investment Income" is distributed. I assume their must be something in the arcane accounting rules to permit this. Secondly, for some reason, the amount of income per share not distributed was much larger for year ending 2018 than for previous years (2018 $0.176, 2017 $0.018, 2016 $0.001, 2015 $0.015, 2014 $0.005). The ERI for 2018, according to KPMG is $0.1324. It will be very interesting to see what happens to the undistributed income in the 2019 accounts. I will be a bit miffed if it gets distributed as I will then be taxed twice! That does not happen with Irish domiciled ETFs though, so hopefully will not arise.
I can see I will have an extra complication for this year's tax return - how to handle this ERI as I have not experienced it before for a US listed ETF. When I receive dividends, 15% withholding tax has already been deducted and is used as a tax credit to offset UK income tax on those dividends. So how should I report the ERI? Does that include or exclude 15% ERI?