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Vanguard S&P 500 ETF via HK Stock Exchange?

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Old 24-12-2018, 08:12 AM   #1
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Vanguard S&P 500 ETF via HK Stock Exchange?

Hi folks

I want to get started in investing in ETFs in foreign markets. Ideally I wanted to invest in the Vanguard ETF (I believe it's called 'VWRD'?), but the 30% withholding tax for non-US citizens put me off. I know London-domiciled ETFs are taxed more favourably but this still seems to be at 15%. I believe Hong Kong offers 0% tax, so that's what I'd like to look at.

This is where I'm stuck I'm afraid. I have no idea where to start in terms of which ETF to purchase and how to go about doing that. Is it simply a matter of buying a 'VWRD' ETF on the Hong Kong stock exchange?

Very sorry to ask what must be a silly question, but I'm coming up short in terms of finding the information I'm looking for online. Any help would be greatly appreciated.

Thanks
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Old 24-12-2018, 08:20 AM   #2
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I have no idea the answer to your question. But I believe that if it is possible, ShinyThing would have recommended it to this forum.
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Old 24-12-2018, 08:41 AM   #3
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I have no idea the answer to your question. But I believe that if it is possible, ShinyThing would have recommended it to this forum.
Yes, Ireland domiciled ETF is still the best.

I hope his next question isn't "Which broker is best to buy VWRD?"
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Old 24-12-2018, 09:29 AM   #4
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Yes, Ireland domiciled ETF is still the best.

I hope his next question isn't "Which broker is best to buy VWRD?"
This might be the silliest question of the day, but is the general consensus that it's better buying Ireland-domiciled ETFs through the London Stock Exchange and paying 15% withholding tax rather than purchasing through the Hong Kong Stock Exchange and paying 0%? Apologies in advance if I've just said something stupid.
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Old 24-12-2018, 11:09 AM   #5
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This might be the silliest question of the day, but is the general consensus that it's better buying Ireland-domiciled ETFs through the London Stock Exchange and paying 15% withholding tax rather than purchasing through the Hong Kong Stock Exchange and paying 0%? Apologies in advance if I've just said something stupid.
Hong Kong is part of China. You are basically thinking that US gives China preferential tax advantage when it comes to withholding tax for dividends vs its 'allies'. Don't worry, thats not the case, US hasn't gone to that extent yet...

There is 30% withholding and the fund manager has to pay for it out of the ETF assets.
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Old 24-12-2018, 11:20 AM   #6
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This might be the silliest question of the day, but is the general consensus that it's better buying Ireland-domiciled ETFs through the London Stock Exchange and paying 15% withholding tax rather than purchasing through the Hong Kong Stock Exchange and paying 0%? Apologies in advance if I've just said something stupid.
Pray tell us where you got the information saying that HK domiciled ETFs containing US stocks are subject to 0% withholding tax for US non resident aliens?
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Old 24-12-2018, 11:56 AM   #7
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Pray tell us where you got the information saying that HK domiciled ETFs containing US stocks are subject to 0% withholding tax for US non resident aliens?
Maybe I'm totally wrong, I'm completely new to this and very confused, but I was looking here... https://www.alvinpoh.com/the-best-in...azy-portfolio/

Specifically the line "and Hong Kong-domiciled ETFs have a 0% tax on dividends."

Please do correct me if I'm wrong, and apologies again if I've embarrassed myself

[Edit: I just re-read your comment and see it relates to whether the fund contains US stocks. So my query would be whether there is an ETF listed on the HK Stock Exchange I could purchase that would be very similar in performance to the Vanguard S&P 500 without needing to purchase US stocks to achieve this for the tax benefits. I guess not or everybody would already be doing it, right?]
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Old 24-12-2018, 12:11 PM   #8
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Maybe I'm totally wrong, I'm completely new to this and very confused, but I was looking here... https://www.alvinpoh.com/the-best-in...azy-portfolio/

Specifically the line "and Hong Kong-domiciled ETFs have a 0% tax on dividends."

Please do correct me if I'm wrong, and apologies again if I've embarrassed myself

[Edit: I just re-read your comment and see it relates to whether the fund contains US stocks. So my query would be whether there is an ETF listed on the HK Stock Exchange I could purchase that would be very similar in performance to the Vanguard S&P 500 without needing to purchase US stocks to achieve this for the tax benefits. I guess not or everybody would already be doing it, right?]
i go to his home page and instantly concluded that this is not a website of a finance/investing expert, its more of a general lifestyle website - multivitamins, notebook, car, etc? why would anyone rely on this for accurate investing info? To be fair even in his bio, he doesn't claim to have any special investing qualifications, so that post should be taken as a general guide and not specific tax info to be relied upon.

Surely you can tell the difference between a finance advice site and a general lifestyle website?
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Old 24-12-2018, 12:16 PM   #9
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i go to his home page and instantly concluded that this is not a website of a finance/investing expert, its more of a general lifestyle website - multivitamins, notebook, car, etc? why would anyone rely on this for accurate investing info? To be fair even in his bio, he doesn't claim to have any special investing qualifications, so that post should be taken as a general guide and not specific tax info to be relied upon.

Surely you can tell the difference between a finance advice site and a general lifestyle website?
Yeah I know, it's not the most reliable source I've tried searching for quite a while but getting reliable and consistent information doesn't seem to be very easy unfortunately. Am I correct in assuming that for Singaporeans wanting global exposure and lower tax on their investments, going through the London Stock Exchange with Ireland-domiciled ETFs would be one of the most attractive options?
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Old 24-12-2018, 12:42 PM   #10
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Yeah I know, it's not the most reliable source I've tried searching for quite a while but getting reliable and consistent information doesn't seem to be very easy unfortunately. Am I correct in assuming that for Singaporeans wanting global exposure and lower tax on their investments, going through the London Stock Exchange with Ireland-domiciled ETFs would be one of the most attractive options?
To my knowledge there is no etf on the hang seng index that tracks the same thing as VWRD and the other popular one, IWDA. You can buy an etf tracking the S&P500 in the hang seng index,( think it is 3140) but VWRD and IWDA are not the s&P500. Yes there is significant overlap but they arent exactly the same.

The reason why VWRD and the IWDA+EIMI combo are so popular is that they cover the whole world, with a low expense ratio, and buying the least amount of indexes as possible, lowering cost and keeping things simple.

Say for example you bought VRWD. You'd get hit with the 15% tax, yes, but by buying one index you've bought a highly diversified etf which is about 90% of the worlds developed markets and about 10% in emerging markets. If you bought it on SCB, fees are $10.

If you wanted to buy individual etfs to track different indexes- say you buy 3140 to track the s&p, then you buy another index to track china, another for emergining markets, and also another to track europe and another for australia. Thats $50 in transaction costs. Then you'd need to keep track of all this yourself and also do manual rebalancing, which will eat up more transaction costs.

You do the math which one is more worthwhile.
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Old 24-12-2018, 01:10 PM   #11
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Yeah I know, it's not the most reliable source I've tried searching for quite a while but getting reliable and consistent information doesn't seem to be very easy unfortunately. Am I correct in assuming that for Singaporeans wanting global exposure and lower tax on their investments, going through the London Stock Exchange with Ireland-domiciled ETFs would be one of the most attractive options?
Appears to be.
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Old 24-12-2018, 02:06 PM   #12
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Seems like buying S&P500 on HKEX is a bad idea.


From Vanguard's site, VOO:

Last total last 4 dividend is US$4.74, and at current price US$221.16, yield is 2.15%

From HKEX, 3140:
yield is 1.01%


Even if dividend withholding tax is taken into account, VOO is still an better option compared to 3140.

As suggested, LSE is recommended for S&P500 (CSPX or VUSD)
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Old 24-12-2018, 03:59 PM   #13
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Hong Kong has a 0% dividend tax withholding rate for Hong Kong listed securities. So if you hold shares in a Vanguard fund domiciled in Hong Kong, you wouldn't have to pay dividend tax to Hong Kong. Sounds great, right?

However, the fund itself pays dividend tax on the dividends associated with U.S. listed securities contained in the fund. The dividend tax rate the fund pays is 30%, since it's domiciled in Hong Kong. That's the standard non-treaty rate, because (unlike Ireland) there's no treaty with the U.S. providing a lower rate.

To net it out, funds domiciled in Ireland and Luxembourg, as examples, win this particular contest for non-U.S. persons resident in Singapore.
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Old 24-12-2018, 05:16 PM   #14
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Yeah I know, it's not the most reliable source I've tried searching for quite a while but getting reliable and consistent information doesn't seem to be very easy unfortunately. Am I correct in assuming that for Singaporeans wanting global exposure and lower tax on their investments, going through the London Stock Exchange with Ireland-domiciled ETFs would be one of the most attractive options?
That guy made a mistake. HK has no capital gain taxes or dividend taxes for HK listed stocks (like SG), but that is not relevant to US holdings inside any HK listed ETFs. Also, the US-China tax treaty does not apply to HK.

One of the best sites for passive investors is Bogleheads. They have a forum as well as a wiki.

https://www.bogleheads.org/wiki/Nonr...decision_table

https://www.bogleheads.org/wiki/Non-...with_the_US.3F
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Old 24-12-2018, 06:47 PM   #15
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HK has no capital gain taxes or dividend taxes for HK listed stocks (like SG), but that is not relevant to US holdings inside any HK listed ETFs.
Well, it's relevant in a sense. It means you, personally (as a resident of Singapore at least) won't pay any dividend tax on that Hong Kong domiciled fund's (net) dividends. That fund will pay the 30% U.S. dividend tax on its U.S. listed stocks, of course.

There's no reason why Hong Kong couldn't add another dividend tax of its own that you would then pay, above and beyond what the fund pays. But Hong Kong doesn't, at least not at present.
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