Any advice on ETFs relating to Thai Income Tax etc ?

[SurinBeach]

Hi Gents,

I'm new to Investing etc but have opened a Saxo Trader account in Singapore (sold a UK property sold now have a lump sum)

I want to buy a few ETFs, I'm English but non-Resident in the UK for 10 years now ie have Resided in Thailand and have 2 kids here.

Will I be liable for UK Income tax or CGT if I buy through a UK stock exchange, should I buy thru Switzerland perhaps Or SIngapore or HK ?

Or will I be liable for Thailand Income tax for Worldwide income ?

Thanks in advance for any info,

Best Regards

SB

[mpyre]

You may be liable for income tax in your country of residence IF they collect such tax...as most countries do not assess tax on global income (including Thailand I believe) I think you are in the clear. Simplest approach would be to use a Singapore based broker, with a Singapore based account...you can then buy etfs on any exchange in the world, or just stick to Singapore domiciled etf products. I hope this helps.

[SantiSuk]

Good advice to ask the broker if your investments will attract any tax deducted at source in the UK. I do not personally invest in ETF's so I do not know whether they even generate income, let alone whether tax is deducted at source when such income is paid over to you. I will however give my two pennyworth on the situation if he/she tells you that ther will/may be taxation deducted. Also he may refer to the UK rule changes on dividends so it is worth knowing something about that.

As a UK non-resident if you invest through in the UK (directly to the companies or through a UK registered investment company, and possibly, as debated above, if you invest in UK companies through a foreign registered broker) you are potentially liable to UK tax on any income from such investments, but not any capital gains you might make on their disposal. The good news is that you are not liable for the full weight of income taxation that would be suffered if you were still resident. This is one of the benefits of claiming non-resident individual ('NRI') status. It is also a reason why UK NRIs may still find the UK a useful place to invest. I regard it as the safest place in the world for a UK NRI to make investments through - a higher standard of regulation/compensation than elsewhere and a good level of transparency and reporting. A Singapore broker will not give you as much protection as a UK broker so factor that into your eventual choices

Investment income (and savings interest) qualify as a type of income known as "disregarded income". Disregarded, because you are not liable for any additional tax beyond that which might be deducted at source in the UK. So, if your investments are straightforward equities (plc's, private companies, investment trusts and their like) then for the current and previous tax years (see note below*) the company will have deducted a 10% dividend tax and paid that over to HMRC. You will receive the dividend net of that tax. Dividend tax is never reclaimable. As a NRI you will not be taxed by HMRC on the net 90% you received, because of the disregarded income rules.

I'll mention savings interest for completeness. Interest on bank and other interest earning instruments is also disregarded income. Normally banks deduct 20% interest and pay you a net 80% (unless you have registered with them as a non-taxpayer). That taxation deducted at source is reclaimable if you are not liable to taxation in the UK. Savings interest is also disregarded income, so there will be no further taxation on the 80%.

* The UK taxation of dividends will undergo a fundamental change with effect from tax year 2016/17 (ie wef from 6th April 2016). Companies will no longer deduct the 10% dividend tax and UK taxpayers (including potentially NRIs) will be fully taxable on the gross dividend. However, there will be an annual dividend income allowance, whereby the first GBP 5,000 of dividend income will be tax-free. If you expect to receive less than GBP 5,000 in gross dividend income then it is clear you will not be taxable on that income (for the next tax year and beyond). There will be no taxation deducted at source on dividends for 2016/17 and beyond - hopefully the disregarded income rules will not change, so that there will be no tax to pay for any NRIs - ie the previous rule that any dividend or similar income is disregarded for tax except for the (now nil amount) deducted at source. As far as I can determine HMRC has not sought to address this issue (I have asked on many tax industry websites but the answer is still unclear). It is possible that they will because otherwise the rule changes are a significant bonus to NRIs like me who have substantial (tens of thousand and more) dividend income. Touch wood!

The dividend tax changes are a one-off. The rules on taxation of savings interest do not change. You will still potentially suffer the 20% taxation deducted at source by UK banks.

[Retired Chartered accountant - though pretty knowledgeable on areas of tax that are relevant to my own position I was not a professional tax specialist. If you have tax concerns re UK taxation then your best routes are:

• research online, including the excellent guidance notes on the HMRC website. Google "HMRC disregarded income" for instance
• seek advice from UK HMRC - they are helpful and will answer generic questions on a "no names basis". When you the helpline say that you are a non-resident individuals and they will connect you woith a specialist: this area is not well known by yer bog standard tax adviser or even HMRC tax inspector - we are probably only 0.1% of their 'customer' base
• pay for specialist tailored advice, which you should od if significant amounts are involved (unless you are au fait with NRI rules) ]

If you have further questions relevant to this post by all means post them but alert me by PM to their existence

Edited November 2, 2015 by SantiSuk

[SantiSuk]

... And my understanding of Thai taxation rules are that they do not tax worldwide income, unless you are spending that income in Thailand in the same tax year that you earned it*. If you are a UK NRI you have the potentially significant advantage of investing abroad at very low tax rates (and I include the UK as being "at very low tax rates" if you are a UK NRI) with no additional tax arising in Thailand. Thailand does not tax capital gains arising abroad - I am not sure without looking it up whether you can use current year capital gains generated abroad for current year spending in Thailand without any Thai tax impact.

* I coral all my foreign income into a dedicated UK bank account so I can demonstrate that I do not spend out of current year foreign earnings. That was actually tested a few months ago when Thai Tax (investigation branch) called me in to question me on my worldwide and Thai tax position. Reason for investigation - I had made a substantial Thai Thai tax on interest refund claim; full details written up on some other thread.

[AyG]

As others have said, if you're non-resident in the UK, there will be no UK income tax for you to pay for any offshore (non-UK) investments.

London-listed ETFs which attract tax are usually domiciled in somewhere like Ireland, so there's no tax advantage buying on any other exchange.

I'm a bit surprised at your choosing Saxo Singapore. I closed my account with them about a year ago because their charges suddenly became uncompetitive. (Previously I'd switched to them from Internaxx.) TD International in Luxembourg is significantly cheaper.

Finally, for US ETFs with Saxo Singapore all income will be subject to 30% withholding tax, whilst with TD International the withholding tax is only 15%.

[SurinBeach]

SantiSuk, many thanks for your detailed replies, much appreciated.

Thanks AyG, just started with Saxo recently, cos was easy as they did a roadshow in Sukhumvit. I'll check out TD Int ....

Although I only plan to buy 5-10 ETFs and rebalance one pa

[JimGant]

Reason for investigation - I had made a substantial Thai Thai tax on interest refund claim; full details written up on some other thread.

Santi, could you point me to that thread, please? Perusing several pages of your content didn't come up with anything. Many thanks.