2 Isn't Ireland domiciled ETF being taxed 15% (maybe not withholding tax)?
That's the Ireland-U.S. tax treaty rate on stock dividends. Bonds, including U.S. Treasuries, should be eligible for the portfolio interest exemption that's not unique to Ireland. The central problem for these purposes is that SCHO is a U.S. domiciled fund, and therefore at the fund level there's a (refundable, without interest) withholding tax which adds unnecessary complexity and acts as a drag on returns.
3. [Graph omitted.] Have added the dividend to the price and the return inclusive of dividend after five year is higher for SCHO
OK, but what's the source of that graph? And why would it differ from what the fund managers themselves are reporting for 1/3/5 year standard annualized performance figures — which should (hopefully obviously) be your first port of call?
4. (Graph omitted.) Likewise, Dividends collective for the last ten year is higher compared SCHO to IBTS
Same questions. My hunch is that whatever data source you're using flubbed SCHO's share split adjustment. Start with the respective fund managers' standard reported performance figures up to the same specific reporting end date. Here are the standard annualized NAV returns in U.S. dollar terms that Schwab and Blackrock iShares U.K. themselves publish for SCHO and IBTA (respectively) through December 31, 2024. IBTA is already accumulating, and Schwab's figures assume all dividends are reinvested.
SCHO
1 Year: 4.00%
3 Years: 1.40%
5 Years: 1.32%
IBTA
1 Year: 4.06%
3 Years: 1.43%
5 Years: 1.35%
You'd expect these figures to be nearly the same, and indeed they are. However, IBTA very slightly outperformed SCHO despite a 4 basis point expense ratio advantage for SCHO. That's probably due to minor differences in tracking errors, the underlying 1 to 3 year U.S. Treasury indices that these funds track (ICE v. Bloomberg), and/or a bit of inefficiency in investor-level dividend reinvestment versus IBTA's fund-level reinvestment.
5. I am not sure what you mean by this. If I am non-US and when I invest in US ETF is I will be taxed by 30% and likewise for Ireland-domiciled ETF, the tax is 15%. Referring to the following extracted from
https://www.etf.com/sections/etf-basics/bond-etf-taxation-3-things-you-need-know, so how does this play into picture from non-US?
- U.S. Government Bond ETFs: Exempt from State Taxes
Because U.S. Treasurys are tax-free at the state and local level, interest payments from sovereign bond ETFs that hold U.S. Treasurys are also exempt from state and local income taxes. They are subject to federal taxes, however.
You should ignore tax information applicable to U.S. persons when trying to understand U.S. tax implications for non-U.S. persons.
Again, Ireland specifically doesn't have anything to do with this, and therefore the Ireland-U.S. treaty rate on stock dividends is moot. IBTA is not a stock fund. The core problem for you, a non-U.S. person, is SCHO's U.S. domiciled fund wrapper. This wrapper means the fund is U.S. estate taxable and subject to U.S. withholding tax (refundable in this case, without interest). That's despite the fact what the fund holds (U.S. Treasuries) would not be U.S. taxable if you directly held them.
I think the reason for the (refundable) withholding tax is that the fund managers could hypothetically hold assets that are U.S. taxable. The fund's charter/mission isn't law, basically. So, since it's a U.S. fund, tax is withheld for non-U.S. fund shareholders, and then it's refunded if the fund clears a tax reporting year without holding taxable assets. But that withholding tax obligation no longer applies when the fund is domiciled outside the United States. (The U.S. estate tax obligation is strictly based on the fund's domicile and is not waivable or refundable.)
The above is my understanding, but it's up to you to do your own due diligence.
