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How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

Index tracking funds and ETFs
tlf67482
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How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#394880

Postby tlf67482 » March 12th, 2021, 11:54 am

Does anyone know of a method of checking if a specific ETF is settled using the ICSD model?

Equiniti are sending out emails saying there will be additional charges for Irish securities as these are now international holdings and as most of what I call the comment ETFs are usually Irish domiciled I want to see if I need to do anything?

From my limited understanding the ICSD model means there are no additional charges?

To add to the "fun" (not) they are saying you need to sell by 15th to avoid these charges. Well done Equiniti why didn't you wait until a bit later on a Friday to do this! I get some of the responsibility is with me but come on.....

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#394891

Postby Alaric » March 12th, 2021, 12:16 pm

tlf67482 wrote:To add to the "fun" (not) they are saying you need to sell by 15th to avoid these charges. Well done Equiniti why didn't you wait until a bit later on a Friday to do this! I get some of the responsibility is with me but come on.....


This appears a message limited to Equiniti unless anyone with ETFs at another Broker has heard similar.

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#394990

Postby daveh » March 12th, 2021, 4:25 pm

Alaric wrote:
tlf67482 wrote:To add to the "fun" (not) they are saying you need to sell by 15th to avoid these charges. Well done Equiniti why didn't you wait until a bit later on a Friday to do this! I get some of the responsibility is with me but come on.....


This appears a message limited to Equiniti unless anyone with ETFs at another Broker has heard similar.


I've heard nothing from II or HSDL and hold VWRL, IAPD, EMDV at one or other so that's three different Irish domiciled ETF companies.

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#395099

Postby 1nvest » March 13th, 2021, 12:05 am

As the UK is no longer in the EU, and both the UK and EU will transition over to higher taxation as a means to pay down the cost of Covid, any EU domiciled funds held by a non EU state member is at risk of seeing adverse changes IMO. By either by one of the parties or perhaps even both. Safer to hold/migrate to domestic domiciled funds/holdings. I suspect the EU may move first with some form of financials taxation.

Presently most EU countries have their own separate withholding tax rates. France even increased theirs to a 75% rate at one time. With centralisation that could all change to be a common EU wide rate that might equally invalidate the existing UK/Ireland tax treaty zero effective rate element. Something that the UK might also welcome/desire for the scale up benefit that might have for UK based financials.

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#395424

Postby jonesa1 » March 14th, 2021, 12:17 pm

1nvest wrote:As the UK is no longer in the EU, and both the UK and EU will transition over to higher taxation as a means to pay down the cost of Covid, any EU domiciled funds held by a non EU state member is at risk of seeing adverse changes IMO. By either by one of the parties or perhaps even both. Safer to hold/migrate to domestic domiciled funds/holdings. I suspect the EU may move first with some form of financials taxation.

Presently most EU countries have their own separate withholding tax rates. France even increased theirs to a 75% rate at one time. With centralisation that could all change to be a common EU wide rate that might equally invalidate the existing UK/Ireland tax treaty zero effective rate element. Something that the UK might also welcome/desire for the scale up benefit that might have for UK based financials.


If UK holders of EU domiciled funds were hit by high levels of withholding tax, presumably the funds would have to relocate, or see all their assets evaporate?

Andrw

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#395461

Postby Alaric » March 14th, 2021, 2:30 pm

jonesa1 wrote:If UK holders of EU domiciled funds were hit by high levels of withholding tax, presumably the funds would have to relocate, or see all their assets evaporate?


Is not the reason that ETFs quoted in London and marketed to UK consumers are Dublin based that the Irish government offered financial incentives? These included a stamp duty exemption for ETFs which I think the UK has now copied. An imposition of financial penalties to UK holders would presumably see the funds change domicile.

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Re: How do I find out if an ETF is using the ICSD model? Are Irish based ETFs Now International Holdings?

#395470

Postby 1nvest » March 14th, 2021, 2:48 pm

jonesa1 wrote:
1nvest wrote:As the UK is no longer in the EU, and both the UK and EU will transition over to higher taxation as a means to pay down the cost of Covid, any EU domiciled funds held by a non EU state member is at risk of seeing adverse changes IMO. By either by one of the parties or perhaps even both. Safer to hold/migrate to domestic domiciled funds/holdings. I suspect the EU may move first with some form of financials taxation.

Presently most EU countries have their own separate withholding tax rates. France even increased theirs to a 75% rate at one time. With centralisation that could all change to be a common EU wide rate that might equally invalidate the existing UK/Ireland tax treaty zero effective rate element. Something that the UK might also welcome/desire for the scale up benefit that might have for UK based financials.


If UK holders of EU domiciled funds were hit by high levels of withholding tax, presumably the funds would have to relocate, or see all their assets evaporate?

Andrw

Indeed. Which might be driven by either side. If the EU increase withholding taxes to levels where UK holders of Irish domiciled ETF's would be better served by a ETF provider in the UK then fund providers will rise to accommodate that. Or if the UK opted to impose foreign asset taxation on Irish based ETF's then that equally might drive fund movement. If wouldn't be a simple relocation of domicile however, rather it would be a sell/close, move and buy/start transition, either for the fund or the holders ... taxable/cost events.

Nowadays for instance if you hold a US ETF that doesn't report to HMRC then HMRC count that all as income taxable, capital gains and dividends alike being added to your income tax. Similarly the US imposes such strong rules that UK/other countries wont even permit a American to open a bank account due to the otherwise complexities of the UK bank having to report to the US. In the main that is considered as 'just not worth the bother'.

Basically globalisation has peaked and now we're in more of a de-globalisation era, and sooner or later likely UK holders of EU based ETF's may see a undesirable hit. Further complicated by the 'risk' that the funds had grown to levels where selling all of the holdings to move to 'less expensive' might generate a large UK taxable event - such as if the investment had been held for many years before that 'hit' occurred.

In the gold standard years, when money was gold, there were periods of both inflation and deflation in equal measure, broadly 0% inflation. The ending of that standard however has resulted in just inflation being considered as acceptable, deflation to be avoided at all cost. Inflation forces you to invest or otherwise see the value depleted by inflation, promotes economic activity. Deflation is seen as being evil that stifles economic activity. Which means that markets have transitioned from being free-floating to being highly controlled. When you can print money freely that devalues all other notes in circulation. Use that money to buy up your own countries bonds as the BoE, Fed, ECB etc. have done and that transitions perhaps 30% of the countries debt being held by 'foreign' to perhaps 10% or less of the total debt being held by foreign. A domestic owned debt is in effect no debt, could conceptually just be torn up. As part of that however it means de-globalisation.

For global exposure to investments I suspect that you'd be better placed by achieving that through individual companies that have global exposure, HQ's in x, y, z countries and the UK, and where their shares are listed equally in x, y, z and London. Vanguard UK for instance might hold US stocks that normally would incur a 15% US dividend withholding tax. Internally however and Vanguard UK might 'lend' Vanguard US shares that were about to go ex-dividend for a few days until cum-dividend, in return for a lending fee equal to the dividend and where Vanguard US received the dividends more tax efficiently. Not that that is actually the case however in this example as I believe Vanguard US would incur a 20% tax on such dividends. I've just used it as a conceptual example.

Brexit will see outflows of some financials, but might also see inflows. With a Remain biased Parliament and media however the tendency has been to solely highlight one side of the story. One thing that does seem relatively certain is that with time there will be pressures towards UK residents holding investments via UK based entities rather than holding funds managed in the US or EU or wherever. Whilst its a nice problem to have seen a original investment now being worth 3 times or whatever more, if selling to move that wealth incurs a potentially large taxable event then you'll have to way up whether it would cost more to move or not. Better if that was avoided altogether.


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