*Official* Shiny Things club - Part 2

[Converged]

I am not too sure if i should invest in Nikko using POSB investsaver or open a sharebuilder acc to buy SPDR (may also invest in REIT too)?

Can someone give me some suggestions? Thanks!

 

[BBCWatcher]

I'm going to defer to BBCW on this: BBCW, do you have any idea what the tax treatment would/should be on payments in lieu of dividends on borrowed stock? Assume a US-listed equity and a Singapore-resident owner.

If I’m reading IRS Publication 519 correctly the interest income derived from a security lending program is U.S. taxable, and that’d be at the 30% rate in these circumstances. IB should withhold the 30% tax, although whether IB does so or not the tax is still owed (assuming I’m correct).

I have some vague recollection this topic came up previously and that a securities lending program participant was getting properly withheld.

On edit: Whoa, this one is rich with recent history. Interest, borrow fees, and the like have been/are U.S. taxable, but in 1997 the IRS issued a notice that provided some relief when there was a lending “chain,” to help keep dividends from being taxed twice or more. Naturally several a** h*** financial institutions and their wealthy clients then took that well-intentioned notice and abused the hell out of it, figuring out dubious ways to structure securities lending programs for foreign investors to avoid all dividend tax. (This sort of stuff is a big reason why we don’t have enough nice public goods and services.) The IRS caught up with this scam around 2010 (retroactively to some extent), and so did Congress. Which, if you’ll recall, was amidst the Global Financial Crisis when wealthy foreigners’ tax avoidance scams were particularly unpopular.

Anyway, I still think you should receive the dividends (with rare exceptions if IB doesn’t claw back the shares before the ex-dividend deadline) and collect borrow fees (interest) on the loan. Both should be U.S. taxable, and IB should get the withholding right since the IRS requires the withholding agent (IB in this case) to get it right. Check your statements, of course, because if IB doesn’t get the tax withholding right it’s then your responsibility to cure the problem.

 

[Investnewbie82]

If I’m reading IRS Publication 519 correctly the interest income derived from a security lending program is U.S. taxable, and that’d be at the 30% rate in these circumstances. IB should withhold the 30% tax, although whether IB does so or not the tax is still owed (assuming I’m correct).

I have some vague recollection this topic came up previously and that a securities lending program participant was getting properly withheld.

On edit: Whoa, this one is rich with recent history. Interest, borrow fees, and the like have been/are U.S. taxable, but in 1997 the IRS issued a notice that provided some relief when there was a lending “chain,” to help keep dividends from being taxed twice or more. Naturally several a** h*** financial institutions and their wealthy clients then took that well-intentioned notice and abused the hell out of it, figuring out dubious ways to structure securities lending programs for foreign investors to avoid all dividend tax. (This sort of stuff is a big reason why we don’t have enough nice public goods and services.) The IRS caught up with this scam around 2010 (retroactively to some extent), and so did Congress. Which, if you’ll recall, was amidst the Global Financial Crisis when wealthy foreigners’ tax avoidance scams were particularly unpopular.

Anyway, I still think you should receive the dividends (with rare exceptions if IB doesn’t claw back the shares before the ex-dividend deadline) and collect borrow fees (interest) on the loan. Both should be U.S. taxable, and IB should get the withholding right since the IRS requires the withholding agent (IB in this case) to get it right. Check your statements, of course, because if IB doesn’t get the tax withholding right it’s then your responsibility to cure the problem.

Thank you for your reply!

What does cure the problem mean? Notify IB about it? Or do we have to file taxes separately?
Started the program and there are numerous loans already. Not so sure if I can track any dividend withheld so easily.

 

[Sourbear]

Hi can anyone advise on this?

Hi BBCW/ST,

Can you advise how we can minimise income tax? From what I have read, the main strategies are SA topups and SRS contribution, but the SRS route is not something that is really recommended due to the uncertainties around withdrawal tax rates and limited options for investing SRS monies?

 

[justwakeup]

Thank you for your reply!

What does cure the problem mean? Notify IB about it? Or do we have to file taxes separately?
Started the program and there are numerous loans already. Not so sure if I can track any dividend withheld so easily.

I also just started recently. Because i am not too knowledgeable in this issue, it sounds scary to me as i may be avoiding tax

 

[tangent314]

Hi can anyone advise on this?

It's not that bad IMO. You can always purchase STI ETF with SRS, which is one of the components of the often recommended 3 fund portfolio, so it doesn't really matter that the investment options are limited. There is a possibility in some exceptional cases you end up paying more taxes with SRS if somehow your salary somehow balloons to a lot more (like more than 2.5x) than what it is today when you reach age 62.

 

[Converged]

I am not too sure if i should invest in Nikko using POSB investsaver or open a sharebuilder acc to buy SPDR (may also invest in REIT too)?

Can someone give me some suggestions? Thanks!

Any advice plz?

 

[BBCWatcher]

What does cure the problem mean? Notify IB about it? Or do we have to file taxes separately?
Started the program and there are numerous loans already. Not so sure if I can track any dividend withheld so easily.

Just check your IB statements to determine whether IB has withheld tax correctly, that's all. IB should also issue you an annual "1099" tax statement listing the income you received (including borrow fees/interest from their securities lending program) and U.S. tax withheld.

I'm rather highly confident IB is handling this stuff correctly for you already, but it's something you simply ought to check whether or not you participate in the securities lending program. Making sure taxes are withheld correctly is not unique to any particular program.

 

[Ilovemathstutor]

Hi ST, I am sorry if you are annoyed,I certainly don't mean to.
I am not a REIT defender, but just a very fact based and logical person. I can't help but to challenge the view that overweighting REIT is bad, which goes against everything that I have researched. That's all. You can ignore it.

look at most REITs.... most of them dump and never recovered.
when in doubt, scroll out.

this is as simple to understand without jargons as possible.

 

[jx_yew]

any recommendation for Ireland domiciled gold ETF ?
will it reduce the taxes as compare to the US Gold ETF or even the SG Gold ETF?

 

[Sourbear]

Agree. The counter point is that u would be taxed on your investment gains in the SRS as well when u start withdrawing from age 62, which can be quite substantial if u are putting in 15.3k a year consistently for 30 years.

Overall I think it is not a clear win if u are putting money in SRS purely for immediate tax relief.

It's not that bad IMO. You can always purchase STI ETF with SRS, which is one of the components of the often recommended 3 fund portfolio, so it doesn't really matter that the investment options are limited. There is a possibility in some exceptional cases you end up paying more taxes with SRS if somehow your salary somehow balloons to a lot more (like more than 2.5x) than what it is today when you reach age 62.

 

[Shiny Things]

any recommendation for Ireland domiciled gold ETF ?
will it reduce the taxes as compare to the US Gold ETF or even the SG Gold ETF?

Gold doesn't pay any dividends, so, no. (The estate tax treatment might be more favourable, but that only matters if a) you own more than sixty grand worth, and b) you get hit by a bus.)

Anyway, I was going to say "no, stop asking and just buy GLDM", but there is an Irish-domiciled alternative: SGLN (listed in London). I personally wouldn't bother: the expense ratio is higher than GLDM and the structure's a bit weird (it's an exchange-traded "certificate", not a normal ETF).

So SGLN does exist, but I wouldn't recommend it. Just buy GLDM and some term life insurance.

 

[Shiny Things]

I am not too sure if i should invest in Nikko using POSB investsaver or open a sharebuilder acc to buy SPDR (may also invest in REIT too)?

Can someone give me some suggestions? Thanks!

Mate, you waited eleven hours before bumping your post. If you want those kind of response times I charge pretty serious money.

Anyway, use POSB IS.

 

[Converged]

Mate, you waited eleven hours before bumping your post. If you want those kind of response times I charge pretty serious money.

Anyway, use POSB IS.

Thank you for your help! May i noe the reason of choosing IS?
I thought ES3 is better than G3B?
Another issue is IS does not reinvest dividends, unlike sharebuilder - not sure if this is a big problem

 

[Listopad]

This is what I'm seeing now 7.39pm:
If I want to buy US$1000
SCB charges me S$1,364.88
IBKR charges me S$1,354.06 +$2 = S$1,356.06

Premium is: 0.65%

I just changed some US$ in SCB as its back to 0.65% premium

oh my, does it mean had you buy SGD/ sell USD, the premium is much greater than 0.65%. coz say SCB quoting 1.3438/1.3654, vs IB 1.35465/1.35466 .

 

[jx_yew]

Thanks for replying, i will not be holding 60K of gold

Just to make the question complete there is no capital gains tax for US assets(stocks, securities) < 60K ?

 

[BBCWatcher]

Just to make the question complete there is no capital gains tax for US assets(stocks, securities) < 60K ?

"Non-resident aliens" (from the point of view of the U.S. tax code) are not subject to U.S. capital gains tax on their personal assets unless those assets are "effectively connected" to a U.S. trade or U.S. business.

There's no US$60,000 threshold -- or any threshold -- for U.S. capital gains tax. It either applies or it doesn't. The US$60,000 single/uniform exemption is a figure from the U.S. estate tax, a different tax. That's the figure that applies to the estates of non-resident alien decedents.

 

[jx_yew]

Ok, the 60K is for estate tax, if i am not longer in this world.

The below post sum it up.

https://forums.hardwarezone.com.sg/114156141-post234.html

 

[jordanlowlowlow]

query

Hi all, would like to gather some thoughts about Vanguard Total China Index ETF as an addition to the international exposure part apart from IWDA.

 

[limster]

Hi all, would like to gather some thoughts about Vanguard Total China Index ETF as an addition to the international exposure part apart from IWDA.

Please let us know how much IWDA you are currently holding in order to advise you whether or not to add some China. Yes the answer depends on how large your IWDA portfolio is.