The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Using ETFs to get Foreign divs in IRAs||Date: 5/31/2013 9:25 PM|
|Author: TempoAllegro||Number: 118651 of 122998|
My question is about how to avoid tax hassles on foreign dividends in an IRA. I have a Roth IRA, but I understand that foreign nations will take hefty taxes out of dividends if the company is domiciled there, but the rules vary by country as some have agreed with the USA to keep their taxes on ADRs low. Switzerland may be a country that is difficult for Americans to deal with, but Great Britain is much easier. So I heard one should just put foreign stocks into taxed accounts, but I want more international exposure plus dividends in my IRA. Can I use country specific ETFs that offer dividends to help?
Here's a sample target company on the left, the country from which it originates in the middle, and the iShares country-specific ETF on the right:
GSK (Great Britain) EWU
POT (Canada) EWL
BHP (Australia) EWA
NVS (Switzerland) EWL
BAMXF (Germany) EWG
SNY (France) EWQ
STO (Norway) FILL (Global Energy Producers)
VALE (Brazil) EWZ
SNE (Japan) EWJ
TSM (Taiwan) EWT
Is it correct to say that for a Roth IRA, basically, do not put any specific foreign companies in there if you want avoid both a pretty big chunk taken out in foreign taxes and the possible difficulties involved with applying for a partial refund? Just how involved is the process? Does anyone know the percentage for taxes on the above countries or any agreements with those countries?
Can the problem be avoided by putting the country-specific ETF into the IRA (let's assume it has some of the target company), as the ETF deals with the tax issues of worry – meaning any dividends received from the ETF are free and clear in my account?
While I am on the topic, I should ask if the “ETF hassle-free tax strategy” above may be applied to ETFs of REITS or MLPs in an IRA as well?
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