Liechtenstein investment tips

[simplefem]

Hoi zemma ,

I'm a half Liechtensteiner/half European person that's been living in Liechtenstein for the past 4 years.

Since there is no dedicated "LiechtensteinPersonalFinance" subreddit I thought I'd ask here(since as we all know Liechtenstein = Schweiz or is pretty close to it at least haha).

My situation is kind of "peculiar" as I am not sure how long I'll actually stay here(stay in Liechtenstein , move to Schweiz , move back to my home country, move to Asia/America , etc).

When it comes to investing I'd like something with a "steady" gain(some fluctuations here and there are within the plan so risk-wise I wouldn't necessarily like an "100%" safe option). I've already invested an amount into VWCE , but I find myself second guessing that pretty often...(seeing as there are other options that yield and could/will lose more , namely the "fully American ones")

With all that in mind I'd like to ask the following:

1)For the following 2 cases which ETFs would you suggest?

i)All in in America(not world ETF)

ii)World ETF

Some ETFs I've research are the following e.g. EQAC , CNDX , VUAA , ESE , SXR8 , VT ...

2)What are the tax implications when it comes to ETFs in Liechtenstein? Are they the same as in Switzerland? Meaning is a distributing ETF always the best option when we're talking taxes?(seeing as they make the tax filing much easier). Also how do I go about with the tax filing this year seeing as the ETF that I've invested in is accumulating(making the whole process a bit harder). Do I just "eyeball" it?

3)What would happen/should I do if I were to move (as mentioned above)? Back to Europe, America/Asia , etc. What I mean is , any particular ETF I should "avoid" or any particular action I should "take" when that time comes?

If you managed to reach this point I really really appreciate your time and I am awaiting your possible answers(and maybe some other tips/insights)

As a side note , I heard from many of my relatives here that while the Pillars "exist" nobody invests in them. How "factual" is that?

 

[tobiahjude99]

@simplefem As far as I know, there is zero tax on cap gains in any way in Liechtenstein and you are taxed on your wealth in total. In that case distributing or non-distributing is no difference.

I would continue to invest in VWCE. Dont focus on single countries and dont be swayed by recent past performance. American outperformance the last decade, is an anomaly that‘s unlikely to just keep going forever. Dont bet on anything, just buy everything. This will make sure of a good outcome.

Now the question for european (ireland domiciled as in vwce for example) or US domicled etfs (as in where is the fund located, not the stocks inside the fund), comes down to how withholding taxes are treated. I doubt Liechtenstein has a double taxation treaty with the US, which means they will withhold the full 30% of your dividends. You may be able to claim those back via tax declaration, but that‘s something for a Liechtenstein tax expert or do some research, but probabaly hard to find info.

What you could do to avoid this (example with VT, the best all world US domicled etf, basically US version of vwce/vwrl): sell ALL of your VT holdings the day before ex-dividend date a bit more than half an hour before close and the re-buy the next day (the ex-dividend day or the day the fund is traded without the dividend included) half an hour after open (opening times of the new york stock exchange where VT is traded). On the ex-date the dividend gets deducted from the share price and you can buy in lower. This way you avoid the dividend being transfered to you and thus taxed the 30%. This should be allowed for you as you dont pay any taxes in LI anyway and therefore dont do any tax avoidance.
You would need to do this 4x per year exactly the day before ex-date. You do pay a bit on spread/fees with that, but those are low with VT.

You dont have to do this with Ireland etfs like VWCE, the fund itself has tax treaties with various counties like the US, but they are not perfect and you for example lose 15% of the dividends on the US stocks inside VWCE. But the other option above is a big hassle and only really worth it with a lot of money invested.

I would say those are the most promising options you have.

Now what happens if you move: you normally can just keep your funds you have. I guess you can invest with ibkr and that‘s available world wide. But what you should do before you move is selling EVERYTHING and then either re-buy or re-buy at your new location. As there are no taxes in LI, and probably taxes in your new location, you avoid ALL of the capital gains taxes you would otherwise pay on the accumulated gains in your new country.

 

[simplefem]

@tobiahjude99 Hoi ,

I really appreciate your answer. So if I understood this correctly summing everything you wrote up:

1)Don't "jump" on the America hype(the bubble will sometime "burst" leaving you much more exposed than with a World ETF)

2)Continue with the VWCE(seeing as it's not a US based ETF) , meaning I only lose "15" of the dividends.

3)I shouldn't declare the ETFs on my tax form , since they don't get taxed.

4)Selling the ETFs before the (possible) move.

So from your point of view the combination of point 1) and 2) makes the other ETFs I've listed as a "no go" , right?

And finally the 15% loss is already calculated within the ETF itself , right?

 

[escuej1]

@simplefem Lets face it, if the US market tanks, everything else will follow.

 

[tobiahjude99]

@escuej1 That‘s a weak argument. Short term correlation is high yes, but not the long term correlation.

 

[tobiahjude99]

@simplefem I made some edits to my answer, if you didnt already read the edited version.

To 1) Not neccessarily a bubble that‘s going to burst, but theory would predict lower expected returns for the next decade.

That‘s for example what Vanguard predicts here: https://investor.vanguard.com/inves...d-economic-market-outlook-2024-global-summary

With buying the total world stockmarket you make sure to have a solid return basically. VT/VWCE are 62% USA already anyway.

2) exactly

3) you probably just need to declare the total invested value or total net worth of every asset you own added, for your wealth tax, regardless of what it is.

4) exactly

For the other funds: not necessarily a no-go, but I just would not recommend betting on anything in particular. The bet can go right of course, but also wrong. The last ten years you would obviously betted right, but see above article from Vanguard.
And yes the 15% "loss" is already reflected in the fund, you just never see it deducted and also with say VWRL (distributing version of vwce) it would not withhold additional taxes when paying out the dividend (except if Ireland withholds additional withholding taxes towards LI, that I dont know 100%, but you avoid this with going VWCE anyway, as the dividends stay in the fund)

 

[simplefem]

@tobiahjude99 I saw your edits! And I appreciate your time and effort!

A final question(if you would be willing to answer) and I'll wish you a happy weekend:

So would the VT recommendation that's been "going around" in this sub not apply in my case? And what about VWRL? Since VWRL yields more (from what I've checked). I really want to be "done" with this whole thing and go "auto pilot" for the rest of my stay/investment "journey" haha.

 

[tobiahjude99]

@simplefem VT is recommended because of it being better for swiss residents, because we can reduce the US witholding taxes to 15% with the w8-ben form and then get the other 15% back with a tax declaration. With Ireland etfs (VWRL/VWCE) you lose 15% of US stocks withholding taxes on dividends.

Also VT has a little lower cost (TER) and more holdings (includes small cap stocks, but they make up a small portion and it shouldnt make that big of a difference in the long run)

VWRL and VWCE should be identical as it‘s the same fund, but different share class. One is distributing (vwrl) and one accumulating (vwce). Maybe you saw it in different currencies displayed.

For a one and done solution VWCE is the best solution in your case, as with vwrl you would need to reinvest the dividends yourself and may run into another layer of withholdings taxes (but doubt that actually, Ireland probably has no withholding taxes on its funds, I dont know by memory right now)