Satrix MSCI world vs 10x total world TFSA ETF

[susu]

I just received dividends from my 10X Total World Feeder ETF (TFSA) and was taxed at about 30% on the global dividends, Satrix MSCI World ETF doesn't distribute dividends, would this mean that there is no tax implication on these essentialty meaning I save the 30% because they don't pay out the tax or does it just mean that the dividends are taxed in the hands SATRIX and reinvested into the fund?

UPDATE:

Easy Equities responded to my question about the 30% being incorrect:

This is a foreign dividend with foreign tax the DTA doesn't apply.

DTA applies if it's a foreign dividend and local tax is being charged.

Investopedia does say:

Nonresident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies.

So seems to be correct.

But the question then remains do accumulating funds pay less tax or no tax on dividends

 

[faith4l]

@susu Which platform were you taxed as such? W8BEN form should have allowed to deduct only 15%.

Instead of Satrix World, you can look at MSCI ACWI which is the closest to 10X Total World apart from missing small caps.

These Satrix feeder funds are UCITS funds and are accumulating funds. So the funds receive dividends still, but just don't distribute. So technically it will be worked into the price return.

I have made a comprehensive comment before with links on layers of dividends etc. here

 

[susu]

@faith4l 2024-04-22
Foreign Dividend Withholding Tax GLOBAL-Foreign Dividend Withholding Tax @30.0472%

 

[villeverte]

@susu Saw the same on my account today

 

[susu]

@villeverte I have logged a ticket to find out whether it is correct, will keep you posted

 

[villeverte]

@susu Appreciate that. Thank you.

 

[susu]

@villeverte EE responded:

This is a foreign dividend with foreign tax the DTA doesn't apply.

DTA applies if it's a foreign dividend and local tax is being charged.

Investopedia does say:

Nonresident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies.

So seems to be correct.

But the question then remains do accumulating funds pay less tax or no tax on dividends

 

[faith4l]

@susu You need to factor in the domicile to understand the dividend taxes that is happening. These are all feeder funds.

US domiciled ETF's will charge 30% unless DTA is setup on fund level. This is level 2 taxes. Level 1 taxes already happened for non-US holdings here and essentially is taxed again - which is known as tax drag.

Irish domiciled imposes no level 2 dividend taxes and all taxes are for recipient's host country to be taxed. US equity is only taxed at 15% distributing to these Irish Domiciled funds.

Accumulating ETF's, in Satrix case, all of which are Irish domiciled, based on Satrix, do not report earnings that are generated inside the fund... So atm there is no additional income/dividends being reported from the fund and you should not see anything on your tax certificate for it (unless its changed in the last couple of months).

But remember here - it's accumulating, so it will form part of price return - so you still essentially pay tax on it one day in terms of CGT (outside of a TFSA). Where if it was distributed and reinvested, it forms part of base cost.

But the thing here is Irish domiciled funds generally tend to be more expensive in cost. But if the fund is not imposing DTA on the feeder fund (since it doesn't own the stock directly, it buys another fund, VT), then I would do a rough guess that Satrix MSCI ACWI will be superior factoring in the tax drag with the caveat of not holding small cap. Satrix MSCI ACWI is a feeder fund as well.

I suggest you re-read the link I shared earlier to understand the different layers of taxes based on fund domicile.

 

[susu]

@faith4l There is lot to understand here regarding the layers but if I am understanding correctly the Satrix would have lower tax rates because of being domiciled in Ireland, thus being the superior option. Although 10X has slightly lower fees and exposure to small cap. So it's much of a muchness?

 

[faith4l]

@susu Are you investing inside or outside of a TFSA?

I previously calculated a tax drag of 0.17% for US domiciled funds on non-US holdings, since the fund imposes tax on fund level before distributing. With this drag alone the MSCI ACWI becomes attractive at the loss of small cap. But at an even higher rate, it should become even more attractive.

If accumulating are being taxed one day, it will be whatever your tax with SARS will be (last 3 links in my shared comment has more detail on how this is calculated). Since Irish Domiciled doesn't withhold any fund level taxes atm and all taxes would be for home country.

Again, this is a grey area atm and can potentially change in future. But for now, if 10X is pushing 30% foreign withholding, I would probably choose MSCI ACWI

Disclaimer, I do own MSCI ACWI as I have previously owned Developed and Emerging separate. But I also allocate to small caps in different, offshore funds. For new investors, to avoid tinker and shifting and transaction risks, something like 10X Total World can be a very simple and effective fund, even with the dividend tax imposed - but with the tax information you shared it seems like MSCI ACWI is definitely becoming a more superior option, since its similar in what it does, just he missing small caps.

I'll see if I can get information from 10X and Satrix again regarding their taxation. I was under the impression the VT feeder fund would have been taxed at 15% and not 30%.

 

[susu]

@faith4l On Easy Equities

 

[faith4l]

@susu Google Easy Equities W8BEN and follow their information links to do the documentation.

I have edited my post with additional info that you can perhaps go through to understand divided tax.