Vnq

grey_gym_sock

TheTracker wrote: »

Not gone down this path myself but aren't you only eliminating the withholding tax on the dividends paid to you by the etf, not the underlying tax on underlying foreign fund dividends?

VNQ is a US ETF which invests in US REITs. my understanding/assumption is that in this setup, there is at most one layer of US withholding tax applied. and the same goes for a US ETF which invests in US companies generally (i.e. companies other than REITs).

i don't know the details about how this works. my main reason for being confident that there is only one layer of US withholding tax is that people on the bogleheads site/forum (some of whom appear to be extremely well informed) seem very sure that holding US ETFs (or US mutual funds) is tax-efficient for US investors, either in a taxable account, or in a tax-exempt account (which includes the various kinds of pensions in the US). if there were some tax saving on dividends for US investors who held many individual US shares, instead of holding a single US ETF or mutual fund which itself holds many US shares, then i think there would be advocates of doing that in the bogleheads forums. and i haven't seen that. (i have seen some posts pointing out possible capital gains tax advantages of holding individual shares in a taxable account, which stem from the likelihood that buying a lot of individual shares will give you a number of spectacular individual gains and losses, and what you can do with them.)

under the US-UK double tax treaty, there is mutual recognition of the tax exempt status of the other country's pensions, and hence i think/hope my UK pension's holding in VNQ will be taxed in the same way as the US pensions of US investors.

aspiration wrote: »

Can someone please confirm that there will be no withholding taxes (US, Irish etc) in an ISA?

there is no mutual recognition of the tax-exempt status of ISAs with other countries, mostly because other countries don't have ISAs (except japan, which now has the "nippon ISA" - but i think still no mutual recognition). so if you hold (e.g.) VNQ in an ISA, tax will be withheld in the US in the same way that it would be if you (as a UK investor) held VNQ in a taxable account. and you can't reclaim that tax. the withholding rate on US dividends paid to UK investors is generally 15% (if you've filled in the right forms - or 30%, if you haven't). however, i'm not 100% whether the withholding rate is the same for REIT dividends as for other dividends - it might be regarded as another kind of income ...?

incidentally, one might argue that UK governments have missed a trick by not saying ISAs are really a kind of pension, which would allow them to benefit from mutual recognition of pensions in double tax treaties. some countries do have pensions with the facility to access your money early. and LISAs look more like pensions, yet apparently they still won't be called pensions.