A good long term portfolio w/ good expense rations

[ExpatJ]

"expense rations"

Before you invest a single THB, learn the terminology. The phrase is expense RATIOS.

So true!

Edited January 2, 2015 by ExpatJ

[fletchsmile]

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

With respect, I think you're the one mixed up on all these issues.

You said yourself, you think dividends have no impact on share prices. You're looking at lowest cost but ignoring tax in arriving at that cost, particularly tax on dividends.

You're also stuck on the idea that fund fees in the Asia region for mutual funds are 2-5%. That's simply not true. As I've said if you see anything near 5% run. Don't touch it with a barge pole,

Please also stop linking my name to those level of rates / fees. I don't pay them, and would advise others to stay well clear. There's absolutely no need.

Those rate are not the same throughout "Asia", and those rates certainly don't apply as the norm in Thailand, please research it.

So why do you keep comparing the lowest cost ETF to the highest cost mutual funds which people tell you to stay away from? It doesn't make sense?

In reality a more sensible comparison would be to compare ETF fees, consider the tax, and then compare to say 0.5% - 1.7% if you buy in Thailand (depending on asset class), and less if you bought thru other countries like the UK. If you're needlessly costing yourself 0.6% in tax, in addition to the ETF fees then on a 0.5% - 1.7% mutual fund range you're talking tenths of percent. Nothing like 2%-5% more Factor in the admin hassles and time consuming element of getting US investments right, then it's a viable alternative to pay a little more (a few tenths of a %) particularly if you know your stuff and can find better performance.

Cheers

Fletch

[fletchsmile]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

The US/Thailand treaty only covers income taxes and (Thai) petroleum income taxes. See article 2 of http://www.irs.gov/pub/irs-trty/thailand.pdf

So it's going to be the automatic 30% withholding tax here too.

Not sure that's correct - given the answer I got to question I posed to Interactive Brokers (both presented below):

Q. Please advise whether or not US Withholding Tax is payable on dividends paid by international ETFs like the following:

* FAX - Aberdeen Asia-Pacific Income Fund

* VGK - Vanguard European ETF

* VPL - Vanguard Pacific ETF

* VWO - Vanguard Emerging MArkets ETF

Also, understand the WHT rate is 30% for a non-US person/resident - pls confirm

IB Answer: Virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders. The rate at which IB is obligated to withhold for a given payment depends largely upon whether there is a tax treaty in place between the country where the dividend paying country is based and the country of residence of the dividend recipient. .

Please be advised that as a Thailand resident, for above US ETFs, you will be subject to a 15% withholding tax, and the four ETFs in question are subject to this tax rate

30% is the standard default rate on US stocks where no W8BEN is in place. There are some exceptions.

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

I assume that IB asked you to sign a W8BEN form to trade US stocks, which is why they are telling you, you're subject to 15%. i.e their reply should more accurately have said: "as a Thai resident with a valid W8BEN form in place... you will be subject to 15% WHT, and the 4 ETFs are subject to tax at this rate.

Cheers

Fletch

[fletchsmile]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

"expense rations"

Before you invest a single THB, learn the terminology. The phrase is expense RATIOS.

"expense rations"

Before you invest a single THB, learn the terminology. The phrase is expense RATIOS.

alt=clap2.gif>

So true!

I guess you guys have found your level. Congratulations

[BoneRanger]

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

Simply lumping together actively managed funds in a particular sector and comparing that with an equivalent ETF isn't a fair comparison. Funds vary greatly from the closet trackers (far too many of those) to the contrarian, to the index-agnostic stock picker, etc., etc..

For active investment, one needs to choose the fund manager, not the fund, and though past performance is one factor, it is only one. It helps to see how his/her approach works over different parts of the economic cycle and how it works in the case of major market discontinuities. One also needs to understand what the approach actually is and why it does (or does not) work. This can take some time, but the rewards are well worth it.

It seems to me a no-brainer that a fund where an expert picks the stocks that are most likely to outperform over a period and avoids the dogs is going to do better than an ETF where (typically) the weighting is heaviest for the larger cap stocks (i.e. large, older companies where the time of fastest growth is probably behind them, or over-hyped businesses with inflated valuations) and the dogs come as part of the parcel.

Using the football team metaphor, a top-notch fund can be like a team where the manager has hand picked who he considers to be the finest players, whilst an ETF is a team made up of good, middling and mediocre players picked by drawing players' names out of a hat. If I were a betting man, I know which team I'd place my stake on in a match.

But the fact remains that passive funds out for managed funds consistently (it does seem counter intuitive, which is good I guess for the funds managers who make a very good living charging high fees for their actively. Managed funds! ).

No, the fact remains that passive funds outperform some managed funds - not all - and not consistently. If you don't want the middling performance produced by ETFs, then it can be well worth one's time researching fund managers to identify the ones that can consistently outperform across the full market cycle. They do exist. In the UK I would consider the likes of Adrian Frost, Neil Woodford, Angus Tulloch, Nigel Thomas and the Asian Equities team at Aberdeen to fit in that category. They all have a 15+ year track record of out performance. I'm sure managers of similar calibre exist in the US and other countries.

The sad fact, however, is that most fund managers are pretty mediocre and not particularly bright. I base that upon my experience of having worked with groups of them at a Saudi Arabian bank in London (which managed the investments of the Saudi government and large oil companies) and a retail-focussed asset management operation for a few years. I certainly wouldn't want to trust them with my money. And even some of the bright ones become closet index trackers because they're afraid to lose their jobs if they make bold calls which eventually come bad. The exceptional managers can be hard to find - but it's well worth the effort in my opinion.

Statements about how ETFs consistently outperform actively managed funds (a) are usually based upon US data and ( are made by representatives of the ETF industry who have an axe to grind. Unfortunately, it's become taken as gospel by people who don't like (for whatever reason) fund managers. The reality is much more complicated.

.

Paying active managers is a bad idea and chasing the winners is even worse.

[AyG]

Paying active managers is a bad idea and chasing the winners is even worse.

Paying active managers is only a bad idea if you're not prepared to do the work to identify the ones who consistently outperform, to understand why the outperform, and to monitor ongoing performance.

The alternative, passive management, is to accept performance that, by definition, is going to be mediocre.

Personally, I prefer to put in the effort and get the superior performance (where available).

[paddyjenkins]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

30% is the standard deduction on most US distributions, with no W8BEN in place, although some like MLPs can be higher

You should be able to complete a W8BEN though and have deducted at the rate agreed between your tax residence country and US. For both UK and Thailand the rate is 15%. This is the most common rate for countries with arrangements in place, Australia being another. For Singaporeans though the WHT rate on US stocks will remain at 30%.

Cheers

Fletch

This is what I thought, in theory. But do you actually have any accounts in which you are defined as a resident of Thailand and in which you hold US dividend paying stocks/ETFs or US bonds from which you have seen 15% deducted, or are you simply assuming this would be the case? Obviously I assume you'd have signed the W8BEN.

[fletchsmile]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

30% is the standard deduction on most US distributions, with no W8BEN in place, although some like MLPs can be higher

You should be able to complete a W8BEN though and have deducted at the rate agreed between your tax residence country and US. For both UK and Thailand the rate is 15%. This is the most common rate for countries with arrangements in place, Australia being another. For Singaporeans though the WHT rate on US stocks will remain at 30%.

Cheers

Fletch

This is what I thought, in theory. But do you actually have any accounts in which you are defined as a resident of Thailand and in which you hold US dividend paying stocks/ETFs or US bonds from which you have seen 15% deducted, or are you simply assuming this would be the case? Obviously I assume you'd have signed the W8BEN.

Yes we do have such accounts in Singapore. My wife is Thai. With a valid W8BEN in place she gets 15% WHT deducted on US stocks. For me I've done as Uk and Thai resident, as the rate is the same

Before we managed to set up the W8BEN 30% was deducted. There's a couple of threads on here where the subject comes up and I've provided links to the legislation as well. The one below for example, post #8

http://www.thaivisa.com/forum/topic/702721-an-easy-question-for-any-us-tax-gurus-living-in-los/

Cheers

Fletch

Edited January 2, 2015 by fletchsmile

[ExpatJ]

Fletch you said...

"You may save a few tenths of a percent in fees,"...

I think you are not quite grasping the fees issue with all due respect. A 'few tenths'!!!?? The fund fees in Asia region are 2-5% , compare to 0.1 % for a good low fee US ETF- thats 20-50 times more in fees you are paying in Asia, not a few tenths. Thats 10,000s $ over a 10 year period for a decent chuck of money before you even talk about taxes!!

With respect, I think you're the one mixed up on all these issues.

You said yourself, you think dividends have no impact on share prices. You're looking at lowest cost but ignoring tax in arriving at that cost, particularly tax on dividends.

You're also stuck on the idea that fund fees in the Asia region for mutual funds are 2-5%. That's simply not true. As I've said if you see anything near 5% run. Don't touch it with a barge pole,

Please also stop linking my name to those level of rates / fees. I don't pay them, and would advise others to stay well clear. There's absolutely no need.

Those rate are not the same throughout "Asia", and those rates certainly don't apply as the norm in Thailand, please research it.

So why do you keep comparing the lowest cost ETF to the highest cost mutual funds which people tell you to stay away from? It doesn't make sense?

In reality a more sensible comparison would be to compare ETF fees, consider the tax, and then compare to say 0.5% - 1.7% if you buy in Thailand (depending on asset class), and less if you bought thru other countries like the UK. If you're needlessly costing yourself 0.6% in tax, in addition to the ETF fees then on a 0.5% - 1.7% mutual fund range you're talking tenths of percent. Nothing like 2%-5% more Factor in the admin hassles and time consuming element of getting US investments right, then it's a viable alternative to pay a little more (a few tenths of a %) particularly if you know your stuff and can find better performance.

Cheers

Fletch

You do make a very good case for investing in relatively high fee funds. And I understand where you are coming from as I used to invest in relatively high fee funds in the past also and make the same types of arguments you are making.

[paddyjenkins]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

30% is the standard deduction on most US distributions, with no W8BEN in place, although some like MLPs can be higher

You should be able to complete a W8BEN though and have deducted at the rate agreed between your tax residence country and US. For both UK and Thailand the rate is 15%. This is the most common rate for countries with arrangements in place, Australia being another. For Singaporeans though the WHT rate on US stocks will remain at 30%.

Cheers

Fletch

This is what I thought, in theory. But do you actually have any accounts in which you are defined as a resident of Thailand and in which you hold US dividend paying stocks/ETFs or US bonds from which you have seen 15% deducted, or are you simply assuming this would be the case? Obviously I assume you'd have signed the W8BEN.

Yes we do have such accounts in Singapore. My wife is Thai. With a valid W8BEN in place she gets 15% WHT deducted on US stocks. For me I've done as Uk and Thai resident, as the rate is the same

Before we managed to set up the W8BEN 30% was deducted. There's a couple of threads on here where the subject comes up and I've provided links to the legislation as well. The one below for example, post #8

http://www.thaivisa.com/forum/topic/702721-an-easy-question-for-any-us-tax-gurus-living-in-los/

Cheers

Fletch

That's good information, thanks....something to consider.

[BoneRanger]

Paying active managers is a bad idea and chasing the winners is even worse.

Paying active managers is only a bad idea if you're not prepared to do the work to identify the ones who consistently outperform, to understand why the outperform, and to monitor ongoing performance.

The alternative, passive management, is to accept performance that, by definition, is going to be mediocre.

Personally, I prefer to put in the effort and get the superior performance (where available).

Actually, the SP500 Index fund holder does better than mediocre and will beat almost all managed funds over time.

The SP500 average is determined by the overall performance of the fund managers...then subtract their expenses. Ooops. Those expenses drag their customers to below average or mediocre.

Say you start with $100,000 invested with a 2% yearly fee VS $100,000 invested in a low cost SP500 ETF.

After 20 years both investments averaged 10% /year.

Results after 20 years - $491,570 VS $672,750

That 2% expense costs you $181,180 in 20 years or $9,059/year or $755/month or $25/day!

[ExpatJ]

Paying active managers is a bad idea and chasing the winners is even worse.

Paying active managers is only a bad idea if you're not prepared to do the work to identify the ones who consistently outperform, to understand why the outperform, and to monitor ongoing performance.

The alternative, passive management, is to accept performance that, by definition, is going to be mediocre.

Personally, I prefer to put in the effort and get the superior performance (where available).

Actually, the SP500 Index fund holder does better than mediocre and will beat almost all managed funds over time.

The SP500 average is determined by the overall performance of the fund managers...then subtract their expenses. Ooops. Those expenses drag their customers to below average or mediocre.

Say you start with $100,000 invested with a 2% yearly fee VS $100,000 invested in a low cost SP500 ETF.

After 20 years both investments averaged 10% /year.

Results after 20 years - $491,570 VS $672,750

That 2% expense costs you $181,180 in 20 years or $9,059/year or $755/month or $25/day!

Very well said. But I'm afraid there are one or two here - as you can see - who have invested in high fee active funds who don't want to hear this :-)

Edited January 2, 2015 by ExpatJ

[BoneRanger]

John Bogel invented the index fund, much to the dismay of the fee based funds and the 65 Billion dollar investment industry in the States.

He is listed as #1 in the Investor Hall Of Fame because he is the conscious of the average investor.

Always full of thoughtful advice, pertinent to this topic, I am posting this 26 minute interview.

[fletchsmile]

Paying active managers is a bad idea and chasing the winners is even worse.

Paying active managers is only a bad idea if you're not prepared to do the work to identify the ones who consistently outperform, to understand why the outperform, and to monitor ongoing performance.

The alternative, passive management, is to accept performance that, by definition, is going to be mediocre.

Personally, I prefer to put in the effort and get the superior performance (where available).

Actually, the SP500 Index fund holder does better than mediocre and will beat almost all managed funds over time.

The SP500 average is determined by the overall performance of the fund managers...then subtract their expenses. Ooops. Those expenses drag their customers to below average or mediocre.

Say you start with $100,000 invested with a 2% yearly fee VS $100,000 invested in a low cost SP500 ETF.

After 20 years both investments averaged 10% /year.

Results after 20 years - $491,570 VS $672,750

That 2% expense costs you $181,180 in 20 years or $9,059/year or $755/month or $25/day!

Very well said. But I'm afraid there are one or two here - as you can see - who have invested in high fee active funds who don't want to hear this :-)

... and there's one or two on here who still haven't grasped it's horses for courses.

For S&P US stocks as a US investor I wouldn't disagree. But have a read of posts above where people like ExpatJ save 240,000 in fees but lose 7,000,000 in returns

[fletchsmile]

John Bogel invented the index fund, much to the dismay of the fee based funds and the 65 Billion dollar investment industry in the States.

He is listed as #1 in the Investor Hall Of Fame because he is the conscious of the average investor.

Always full of thoughtful advice, pertinent to this topic, I am posting this 26 minute interview.

Key words:

US

US investor

average investor

average funds

average returns

Fully understood. But the world's a bigger place:lol:

Looking for the smile on my phone with the coffee cup

Edited January 2, 2015 by fletchsmile

[ExpatJ]

Paying active managers is a bad idea and chasing the winners is even worse.

Paying active managers is only a bad idea if you're not prepared to do the work to identify the ones who consistently outperform, to understand why the outperform, and to monitor ongoing performance.

The alternative, passive management, is to accept performance that, by definition, is going to be mediocre.

Personally, I prefer to put in the effort and get the superior performance (where available).

Actually, the SP500 Index fund holder does better than mediocre and will beat almost all managed funds over time.

The SP500 average is determined by the overall performance of the fund managers...then subtract their expenses. Ooops. Those expenses drag their customers to below average or mediocre.

Say you start with $100,000 invested with a 2% yearly fee VS $100,000 invested in a low cost SP500 ETF.

After 20 years both investments averaged 10% /year.

Results after 20 years - $491,570 VS $672,750

That 2% expense costs you $181,180 in 20 years or $9,059/year or $755/month or $25/day!

Very well said. But I'm afraid there are one or two here - as you can see - who have invested in high fee active funds who don't want to hear this :-)

... and there's one or two on here who still haven't grasped it's horses for courses.

For S&P US stocks as a US investor I wouldn't disagree. But have a read of posts above where people like ExpatJ save 240,000 in fees but lose 7,000,000 in returns

Just keep paying those high fees, I'm sure your brokers love you (as we all do:-)

Edited January 2, 2015 by ExpatJ

[ExpatJ]

OK. Deep breaths all around and perhaps close thia thread?

[dinga]

I don't have any Thailand based trading accounts and all of my US sourced coupons and dividends are unfortunately subject to an automatic 30% withholding tax.

But I had thought that Thailand had a tax treaty with the U.S so that dividends originating from the U.S paid to accounts whose permanent address is Thailand would then be subject to only a 15% withholding tax? This is the same as UK based accounts, for example.

Can someone confirm what the actual withholding tax is for Thai based accounts, for US dividends?

The US/Thailand treaty only covers income taxes and (Thai) petroleum income taxes. See article 2 of http://www.irs.gov/pub/irs-trty/thailand.pdf

So it's going to be the automatic 30% withholding tax here too.

Not sure that's correct - given the answer I got to question I posed to Interactive Brokers (both presented below):

Q. Please advise whether or not US Withholding Tax is payable on dividends paid by international ETFs like the following:

* FAX - Aberdeen Asia-Pacific Income Fund

* VGK - Vanguard European ETF

* VPL - Vanguard Pacific ETF

* VWO - Vanguard Emerging MArkets ETF

Also, understand the WHT rate is 30% for a non-US person/resident - pls confirm

IB Answer: Virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders. The rate at which IB is obligated to withhold for a given payment depends largely upon whether there is a tax treaty in place between the country where the dividend paying country is based and the country of residence of the dividend recipient. .

Please be advised that as a Thailand resident, for above US ETFs, you will be subject to a 15% withholding tax, and the four ETFs in question are subject to this tax rate

30% is the standard default rate on US stocks where no W8BEN is in place. There are some exceptions.

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

I assume that IB asked you to sign a W8BEN form to trade US stocks, which is why they are telling you, you're subject to 15%. i.e their reply should more accurately have said: "as a Thai resident with a valid W8BEN form in place... you will be subject to 15% WHT, and the 4 ETFs are subject to tax at this rate.

Cheers

Fletch

Correct Fletch (W8BEN provided to IB)

[AyG]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

[paddyjenkins]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

If that's really the case then I wonder if saxo is pocketing the extra 15% from those clients who are residents of a tax treaty country such as Thailand. After all, how hard could it be to filter the tax based on residence, and withhold accordingly. So if they aren't they may have a reason. Saxo has always struck me as a particularly sneaky and untrustworthy brokerage, and if you look into their history, the founders should throw up some red flags.

[AyG]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

If that's really the case then I wonder if saxo is pocketing the extra 15% from those clients who are residents of a tax treaty country such as Thailand. After all, how hard could it be to filter the tax based on residence, and withhold accordingly. So if they aren't they may have a reason. Saxo has always struck me as a particularly sneaky and untrustworthy brokerage, and if you look into their history, the founders should throw up some red flags.

I very much doubt that's the case. Financial regulation in Singapore is very strict. They simply couldn't get away with doing such a thing.

It is surprising, though that they haven't implemented the 15% withholding since it's limiting the amount of business they get. In my case I've kept my Luxembourg brokerage account partly because they offer the 15% withholding on US stocks. (The other reason being that Saxo doesn't support all the minor LSE markets where I have investments.)

[fletchsmile]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

Have to say that's a terrible practice if true, and I'm surprised they're allowed to get away with that. Yes, most of their clients will be Singaporean but that's not really a decent excuse. Is it possible that the account has just been set up incorrectly? My account manager who was Singaporean and didn't understand the way things worked for non-Singaporeans (eg UK, Thai etc) also originally set the rate on mine to 30%, even after receiving a W8BEN, and didn't know any better. I had to go higher up to get it sorted. I guess another warning to non-US citizens trading US investments to be careful.

BTW ExpatJ, you use eTrade in Singapore don't you? - If I recall you had a couple of threads looking for brokers when you started out on this a year or so back? What's the situation there? Do you have your tax forms in place? and what rate are they deducting?

Cheers

Fletch

[ExpatJ]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

Have to say that's a terrible practice if true, and I'm surprised they're allowed to get away with that. Yes, most of their clients will be Singaporean but that's not really a decent excuse. Is it possible that the account has just been set up incorrectly? My account manager who was Singaporean and didn't understand the way things worked for non-Singaporeans (eg UK, Thai etc) also originally set the rate on mine to 30%, even after receiving a W8BEN, and didn't know any better. I had to go higher up to get it sorted. I guess another warning to non-US citizens trading US investments to be careful.

BTW ExpatJ, you use eTrade in Singapore don't you? - If I recall you had a couple of threads looking for brokers when you started out on this a year or so back? What's the situation there? Do you have your tax forms in place? and what rate are they deducting?

Cheers

Fletch

Good morning. No hard feelings I hope. . Yes etrade. I filled in a W8 at their request

[AyG]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

However, everybody gets 30% withheld on US income.

Have to say that's a terrible practice if true, and I'm surprised they're allowed to get away with that.

It's true. To quote from one of their documents:

"Why do SCM clients not need to fill up a W-8BEN form when they trade US shares?

W-8BEN forms are used when certain investors are entitled to reduced withholding tax rate on dividends based on the relevant double taxation treaty between the U.S. and the clients country of residence.

Saxo Capital Markets withholds taxes on dividends according to the standard tax rate, and hence the W-8BEN is not needed. Clients that may be entitled to a reduced withholding tax rate on dividends are advised to seek redemption for any additional tax paid from the U.S. tax authorities.

[fletchsmile]

Hence if a Thai resident hasn't completed a W8BEN then 30% will be deducted. If a Thai resident completes a W8BEN, then 15% can be deducted instead.

Just to be precise, it also depends upon the broker whether you get the 15% or not.

With Saxo in Singapore you have to complete a W-8BEN before being allowed to trade US stocks. However, everybody gets 30% withheld on US income. I'm guessing that because the majority of their clients is Singapore resident (and so gets 30% deducted Singapore not having an applicable treaty with the US) it's not been worth their while setting things up so that non-Singapore residents can get the 15%.

Have to say that's a terrible practice if true, and I'm surprised they're allowed to get away with that. Yes, most of their clients will be Singaporean but that's not really a decent excuse. Is it possible that the account has just been set up incorrectly? My account manager who was Singaporean and didn't understand the way things worked for non-Singaporeans (eg UK, Thai etc) also originally set the rate on mine to 30%, even after receiving a W8BEN, and didn't know any better. I had to go higher up to get it sorted. I guess another warning to non-US citizens trading US investments to be careful.

BTW ExpatJ, you use eTrade in Singapore don't you? - If I recall you had a couple of threads looking for brokers when you started out on this a year or so back? What's the situation there? Do you have your tax forms in place? and what rate are they deducting?

Cheers

Fletch

Good morning. No hard feelings I hope. . Yes etrade. I filled in a W8 at their request

No hard feelings at all. As I mentioned early on in the thread, giving your level of understanding and what you are trying to achieve what you were proposing was not so bad, and suitable. It's when you start apply that to others you get in trouble

Key points are:

1) Why you've gone for US domiciled high dividend yielding funds as a non- US citizen? Even if set up correctly you could be throwing away 0.6% pa, if you had simply gone for ETFs domiciled elsewhere, given you are paying no CGT.

Please also check the rate they deduct, for your own sake, what rate is actually deducted, as it's possible you could be throwing away 1.2% pa if your broker adopts the practice AYG mentioned at Saxo, or messes up

2) You don't really understand how dividends work, tax, fee structures, onshore vs offshore, when buying ETFs is optimal and when not. Please don't assume we're all in your boat. You've learnt a little knowledge but it's dangerous making blanket sweeping generalisations, and applying them to others, and your decision on US-domiciled ETFs highlights that.

While for you ETFs make sense, and you're happy to imply others would be better off following your route is wrong

- Consider tax: for you, the fund, where you buy from etc. You haven't and hopefully now can see why?

- Fees aren't necessarily a bad thing:

>For REITS personally I wouldn't use an ETF, as the charges are unncessary. I would buy direct and save the fees. i.e choose no ongoing annual fee.

> For US equities low cost ETFs can make sense. Pick the right ETFs though

> In some markets it pays you to pay a little more (few tenths of a %) for potentially superior performance. (BTW Please stop linking my name to 5% charges . The max I pay is around 1.7%, as a conscious decision. and no 5% is not normal in Thailand or Asia )

> Understand your products, your markets and your own expertise. I choose no fee, low cost ETF fee or reasonable fee. High fees like 5% are almost never acceptable. For you I get it that you like low fee ETFs.

> For some people that live onshore in Thailand, it can be worth paying a little more for: less hassle, convenience, potentially more favourable tax, also saves on teh FX conversion fees you'll have swifting money to Thailand on solely USD products + a variety of other reasons

Cheers

Fletch

Edited January 3, 2015 by fletchsmile

[Ludacris]

Fletch, correct me if I'm wrong but the main reason why it makes sense to invest in an ETF in the UK or Singapore (or anywhere else with 0% WHT for dividends) for someone who is a tax resident of Thailand is because Thailand only taxes foreign income if it is brought into the country in the same year right?

If you were a tax resident of say Canada or the US, even if there's no WHT on the dividend you get in the UK, you would still have to declare it on your income tax forms and pay the normal rate in the country you are a tax resident in?

For example, an American can't get away with not paying any tax on dividends just because he invested in the UK I'm sure.

Any idea what other countries have the same tax structure as Thailand with no capital gains tax on the stock market and no tax on foreign income?

[ExpatJ]

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

[ExpatJ]

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

On the 0.6% thing reinvesting the dividend negates it.

[Orac]

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

On the 0.6% thing reinvesting the dividend negates it.

Are you sure. I have a couple of US ETFs through ETrade Singapore and use DRIP to automatically reinvest dividends but they still take the 15% WHT beforehand.

[ExpatJ]

I explained in an earlier post why your 0.6% issue was not relevant in this case and , again, I have less tolerance to accept high fees than you do. But for other points very useful.

On the 0.6% thing reinvesting the dividend negates it.

Are you sure. I have a couple of US ETFs through ETrade Singapore and use DRIP to automatically reinvest dividends but they still take the 15% WHT beforehand.

If I recall Fletch was referring too the price drop in a etf after the associated dividend payment.