ETF vs BKR.B?

[johanmichel]

This might sound strange, but I live in an EU country that heavily taxes ETFs (41%) and are deemed disposable every 8 years.(Ireland)

I've heard people suggest buying BKR.B instead for two reasons. Firstly, it's a stock, so you get more efficient tax (33%) when you sell it. Secondly, it somewhat tracks the S&P 500 and sometimes even outperforms it.

What are your thoughts?

 

[nishan]

@johanmichel I think it's a good idea, but your tax laws are cruel. Do people not get enraged by having their retirement savings pillaged like this while corporations get some of the best treatment in the world?

On the point - I do believe BRKB is a decent proxy for SP500, and if anything, I would expect it to outperform. You have to consider that Buffet and Munger won't be there for ever and in 10-20 years, who knows what Berkshire will be like. Should still be okay I suppose

 

[evi]

@nishan As someone from Ireland yes people who invest are outraged on the taxation system for ETF’s. But even our capital gains (for stocks) tax yearly tax free allowance is only 1270€ which is just laughable (compared to the UK) Someone correct me if I’m wrong but the 1270 dates back to I believe 1999 when the Irish pound was being replaced by the €. In all honesty I don’t see this being changed anytime soon. Irish investors (and politicians) are primarily focused on real estate so little incentive for things to change.

 

[step_by_step]

@evi The UK cap gains allowance is now only £6k and will be reduced to £3k next year. But yeah at least our top rate is only 20% (for now, I fully expect this to go up when Labour get in) and we don't have deemed disposal, seriously wtf is that shit. It enraged me when I found out something like that even exists.

I was considering moving to Ireland to get an EU passport but after reading your tax laws noped out of that.

 

[flywrite]

@nishan On the topic of cruel tax treatment, US citizens get heavily penalized for buying non-US ETFs because they are considered PFICs and the IRS will take near or above 50% and burden you with tedious tax administration. As a US expat living in the EU, I know too well that tax codes everywhere have zero regard for expat trying to save for their retirement.

The only thing I would add to your point is that securing tax benefits (e.g. an IRA, Roth IRA or Irish equivalent) could easily be more important than whether BRKB outperforms the SP500. For example, if I can invest in a standard IRA then I don't pay taxes on the investment but I do pay the capital gains when I take it out. If I invest with money from my bank account I pay taxes on both ends. If your income tax rate is say 20% it means you have to invest 25% more to see the same gain as the IRA investor. It rarely makes sense to invest out of your personal bank account if you can avoid it.

 

[relle25]

@johanmichel I know the only reason why people suggest BRK.B - private companies. BRK.B owns some private companies that is impossible to buy through stock market.

 

[gen00]

@johanmichel I'm in a similar situation. I ended up making a spreadsheet to DIY an S&P500 index fund by holding individual stocks.

 

[marlee12345678]

@gen00 Would you not try JPmorgan American investment trust? Ticker is JAM. It mirrors the sp500 pretty closely and is taxed as a stock.

 

[gen00]

@marlee12345678 I'm in an edge case. I have an american IRA, but no access to funds or ETFs. I looked up that trust and its not available either.

 

[godfollowerchristlover]

@johanmichel Estate taxes issue

 

[bethlehem57]

@godfollowerchristlover https://www.bogleheads.org/wiki/Non-US_investor's_guide_to_navigating_US_tax_traps

 

[jjchris]

@johanmichel Ruth

 

[rosie4]

@johanmichel RemindMe! 1 day

 

[marlee12345678]

@johanmichel Have a look at JPmorgan American investment trust. Ticker is JAM.

It mirrors the sp500 pretty closely and is taxed as a stock in Ireland.

I thought about Berkshire but when warren Buffett dies it might go to shit.

 

[step_by_step]

@marlee12345678 I have the same concern about Berkshire after Buffet/Munger but you do have to wonder how much they still actually do and how much responsibility has been transferred to the succession team.

 

[marlee12345678]

@step_by_step I'd say the stock will still drop due to investor fear and panic. And perhaps never recover because people were really investing in Buffet/Munger in a way rather than the fund. But I can't predict the future. It might even shoot up 500%, who knows. But it's a risk I'm not willing to take.

 

[goingon4him]

@marlee12345678 Yep, as someone from Ireland I now only buy JAM and FCIT. Both investment trusts and taxes at the CGT rate.

 

[anro25]

@goingon4him Yeah the problem is thou it's not certain how Revenue will treat Investment Trusts at upcoming years. If they decide to tax them like ETFs then we are all doomed.

 

[marlee12345678]

@goingon4him Why FCIT as a matter of interest? Returns seem pretty low compared to JAM

https://www.google.com/finance/quote/JAM:LON?hl=en&comparison=LON:FCIT&window=MAX

 

[startupchristian]

@marlee12345678 US market has outperformed the rest of the world for the past decade, but that is no guarantee of continued success.