Taxes on non-German accumulating ETF

30 posts in this topic

33 minutes ago, Rahash said:

So, if I try to keep it simple and only invest in ETFs that are domiciled in Germany, what are my options? Are there, for example, ETFs that track the S&P500? I found this one which is traded in Frankfurt but domiciled in Luxemburg - "db x-trackers S&P 500 2x Leveraged Daily UCITS ETF", so I guess it's not what I'm looking for (?)

 

It doesn't matter where the funds is domiciled, it just has to be kept in a Depot at a German bank/broker.

So while you could buy that risky (you did notice that it's leveraged with a factor 2, that's what the 2x means, so if the S&P 500 falls by 50%, the value of that fund will fall by 100%, i.e. you will have lost all your money!) fund, the db x-trackers S&P 500 2x Leveraged Daily UCITS ETF, I would suggest something "safer" for a long-term investment.

 

The German bank/broker will automatically deduct all German tax that is due on all funds, German or foreign, that you keep in your German depot. Though if you only own accumulating funds, you will also have give the bank/broker permission to take the money for the tax separately from your Girokonto, since these kinds of funds won't generate any "liquid" money to pay the taxes with, details in: https://www.test.de/Fondsbesteuerung-ab-2018-Das-muessen-Sie-ueber-die-Fondssteuer-wissen-5124267-0/

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@PandaMunich

I have an account with Degiro (though specifically my account is with the Irish version of their website - maybe I should switch to the German one?), do you know if they deduct automatically? I gave them my tax ID number, but not any permission to take money from my bank account.

 

Thanks for link, it's really helpful.

 

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No, they are a Dutch broker, and therefore do not collect German tax (source):

5a60e3c8c1f86_2018-01-1819_12_04-Start.j

 

If you want to "keep it simple" you would have to transfer your funds to a German bank/broker, please see here for an overview of such banks/brokers (see the different tabs for the different rankings of these banks/brokers, depending on what trader type you are): http://www.modern-banking.de/vergleich-brokerage-2.php

 

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Picking up on this topic again, just trying to see if I understood all I read (here and in other topics) on taxes after 1.1.2018. I Marked my assumptions with "(?)" - would be happy to get feedback on those.

 

First of all, assuming that I have just one account where I invest (worldwide) I understand that I'm exempt from 1602EUR of profit per year (as I'm married). (?)


I don't need to pay taxes on dividends accumulated in ETFs I invest in, and for everything above 1602 I should pay up to 25%+5.5% when I sell it, and some advance every year (sum * 0.7% * 1.1%) if I just keep it and don't sell. (?)

 

If I use a German bank/broker they will deduct everything automatically. If I understand correctly I would need to file a "Freistellungsauftrag" to make sure they exempt me from the first 1602E of my profit. (?)
However these platforms are all in German and quite inconvenient for me.

 

If I use a platform like Degiro - they don't deduct any tax themselves? I'm not sure about dividend tax as they write "DEGIRO ist verpflichtet die Quellensteuer auf Dividenden einzubehalten. Die verschiedenen Steuersätze hängen von dem Land ab, aus welchem die Aktie stammt. Dies wird jedoch in der Jahresübersicht vollständig dokumentiert." 

 

but regardless of the dividend tax, they only send me a yearly report which I should use in my yearly tax return. https://www.degiro.de/helpcenter/faq/steuern/907 (?) 

 

anything else regarding taxes that I missed?

 

Thanks, I appreciate any correction to my assumptions and any feedback!

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Hello everyone,

 

Thank you for the tons of information that you all provide. I always learn a lot of new tricks and get better and better in understanding the taxation system.

 

Today I come back with one question to this topic of Non-German ETF's and their taxation.

In the latest period, I started investing in a Vanguard All-World ETF, EUR currency, with the origins in Ireland. I use DeGiro as my online broker to minimize costs.

 

Now I come back to the main topic, taxation. The one in Germany is kind of clear, approx. 26.35% for the dividends, and on the yearly percentage growth of the ETF.

The unknown part for me, and to which I would like to ask your expertise, is this thing called the dividend leakage.

This is what I found on this dividend leakage: "As most of the European Vanguard funds are domiciled in Ireland you need to be aware of the Irish double taxation agreement. A (non-Irish) European investor is charged dividend withholding tax by the Irish government. Whereas the Irish investor can claim this dividend withholding tax back from their government, the rest of us (in most cases) can’t. You can ask your national tax department on your country’s dividend tax treaty with Ireland."

 

Does anyone have any experience with this dividend leakage and double taxation agreement?

Is this still valid? For what percentage should I be prepared? Is taxation only on the dividends, or should I expect also on the gain due to the growth of the ETF over the years?

Is there any way to get some money back, by filling some forms, etc.

 

Do you have any other suggestions in which one could avoid this double taxation? Maybe a high profile ETF which follows an All-World Index that does not come with such a double tax problem?

 

Looking forward to your replies!

 

Cheers,

Atty 

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On 6/11/2018, 11:19:19, Rahash said:

If I use a platform like Degiro - they don't deduct any tax themselves? I'm not sure about dividend tax as they write "DEGIRO ist verpflichtet die Quellensteuer auf Dividenden einzubehalten. Die verschiedenen Steuersätze hängen von dem Land ab, aus welchem die Aktie stammt. Dies wird jedoch in der Jahresübersicht vollständig dokumentiert." 

 

My understanding from this is that some countries tax dividend at the source when they are paid to non residents. For example the US will apply a tax of 30% on the net amount payed as dividend to a non resident (when there is no double tax treaty), whereas the UK will not tax dividends payed to non-residents; so in this case, if you are receiving dividends from a US source from a stock you bought through DeGiro you may find in your statement that they withheld tax at the source on this dividend. This does not change the fact you will have to declare the dividend in Germany and sort out the taxes you owe (or not) in Germany. 

 

I have just moved to Germany, I would be interested in hearing if you guys think it's worth the trouble of having an account with a non Germany based broker such as DeGiro and having all this added complexity to your tax return. I understand if you have a large number of trades a month the lower fees would make sense but for the average investor I am not so sure. Maybe better to just pay the higher fees and use a local broker which will take care of the taxes? 

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As they give you the information (as per that quote) it should really not be difficult.   Normally that comes in the German tax reporting format (although obv. check it for this particular case) and so you just enter that information in the return (along with any other items to go on that return of course).     My only problem is that sometimes I have to wait for quite a long time after year end to get it.

 

In other words, it is the opposite.   We could never usually do those calculations ourself.   But they deliver them on a plate.  Part of what we pay fees for.

 

Quote

 if you are receiving dividends from a US source from a stock you bought through DeGiro you may find in your statement that they withheld tax at the source on this dividend. This does not change the fact you will have to declare the dividend in Germany and sort out the taxes you owe (or not) in Germany.

 

Tax basic.   Our obligation to comply with our tax authority is just that.    The cash mechanics (payment / settlement / collection) are something else.  People often conflate the two and there are also comforting ideas such as any payment eliminates the obligation, but it usually does not.    Double tax treaties and similar exist to ensure people do not pay twice, while meeting their obligations.

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1 hour ago, Tavarish said:

For example the US will apply a tax of 30% on the net amount payed as dividend to a non resident

German residents can apply to have those reduced to 15%. These 15% will automatically be offset against your German tax (which your German bank/broker will withhold). Be aware though that some kind of stocks (Master Limited Partnerships) don´t pay dividends but rather distributions for which the withholding tax is 37% which can not be reduced and will not be offset either.

 

1 hour ago, Tavarish said:

the UK will not tax dividends payed to non-residents

For REIT stocks they do.

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Hey guys, a bit late to the conversation. Specifically regarding the new tax regulations that took effect in Jan 2018, I understood how the accumulating Etfs will also be taxed every year. What I could not find out by searching the internet is whether the 30% "Teilfreistellung" is considered for all stock based Etfs. Does it make a difference if the Etf is tracking Dax stocks or if it's tracking US stocks / msci all world etc.? Does it have different tax implications? Also, my broker (DEGIRO) is from the Netherlands and does not tax the "Vorabpauschale" every year. Is it sufficient if I just submit the yearly report from the broker during filing tax returns? One more question is whether Etfs based on government bonds are also considered as "Aktienfonds" or "Mischfonds"?

Since the broker is in the Netherlands and I cannot apply for a Freistellungsauftrag, will the tax free 1602 Euro (married) be considered when filing the returns? 
Thanks for any help and advice. Stay safe!

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