DA-1 for accumulating ETFs

[xeno32]

Anyone already filed a DA-1 for the dividends in an *accumulating* ETF whilst still holding the ETF shares?

Question 1: Do you file the DA-1 right in the year when dividends are received in the ETF, even though the swiss state does not tax them yet? Or do you file it just when selling the shares (potentially long in the future), because I guess at that point the Swiss state will actually ask for taxes on the dividends too?

Question 2: In any case you we need some document stating how much foreign tax was withhold. Where do you get that? At your broker? I never received such a doc.

 

[cathya]

@xeno32

Do you file the DA-1 right in the year when dividends are received in the ETF, even though the swiss state does not tax them yet?

Switzerland taxes dividends each year for both, distributing and accumulating ETFs. This means you would also have to file DA-1 each year to get a tax credit for withholding taxes. Selling an ETF is not a taxable event in Switzerland, assuming you're a private investor.

I would guess that declaring accumulating ETFs in DA-1 is not very common, though. For ETFs with IE or LU domicile it's not necessary as IE and LU don't withhold dividend taxes for ETFs. There are no accumulating ETFs with US domicile. And DA-1 is not relevant for ETFs with CH domicile. I.e., the presumably 4 most common ETF domiciles for Swiss residents are not affected. However, if you do hold an accumulating ETF with another domicile, you may indeed have to declare it in DA-1, each year.

 

[xeno32]

@cathya Okay, if the swiss tax authorities tax the dividends each year no matter if dist./acc. etf then it makes sense to me to also potentially file the DA-1 each year. I still have to do my first tax decl here so still learning.

But for the second part (domicile) I'm not sure I understand. In my understanding, in fact even for IE or LU domiciled ETFs there is a dividend tax withholding. Not by IE but by the US for dividends coming from US companies in the ETFs portfolio. And this is what one could file the DA-1 for?

Upper right part in that diagram is what I mean.
https://www.bogleheads.org/w/images/c/c3/ETF_taxes.png

Edit:
I might see the point. I might not be able to file those 15% because I do not receive the dividend directly from the stocks but rather from the ETF? And the dividend from the ETF had no tax withholding?

 

[virtualhope]

@xeno32

And this is what one could file the DA-1 for?

As far as I understand, no. You have to get a US ETF if you want to get that withholding tax back. There's no legal case to use the DA-1 for any European domiciled ETF.

 

[xefere]

@virtualhope This is correct.

You cannot get back the US withholding tax that was lost between the US companies and the ETF Manager. That is why the recommendation is to get VT instead of VWRL for example.

If you get the US version of the ETF, there is a tax deal for US companies and the companies do have to retain withholding tax for ETF based in the US, instead the investor pay those taxes. In that case, you can get back the 15% since you are the one that paid it.

 

[xeno32]

@xefere Thanks, gave me a better understanding now.

 

[xefere]

@xeno32 You have here an easy table with different scenarios of the withholding taxes depending on your broker and ETF domicile.

https://www.mustachianpost.com/summary-of-swiss-taxes-as-an-investor/

 

[cathya]

@xeno32 Switzerland doesn't provide any tax credit for this so-called level 1 withholding that e.g. Irish ETFs have to pay on dividends from US (and some other) stocks. There are countries that provide a (typically flat) tax credit in such cases, as far as I know, but Switzerland certainly doesn't.

If you invest in ETFs that exclusively hold US companies, your best option as a Swiss tax resident is to buy ETFs with a US domicile. The same is likely the case for world ETFs that hold a majority in US stocks, although it's a bit less clear for that. You should try to avoid US-domiciled ETFs for ETFs that hold (almost) no US stocks, though.

 

[xeno32]

@cathya Thanks, gave me a better understanding now.