Where to invest from EU (Croatia)?

[shimrod]

Hi, I'm new here.

At 34, I've only started considering financial independence, and I seem to have hit an obstacle in that the two core principles seem to be: save a significant part of your income, and invest in investments with a moderate but dependable yield, requiring minimal hands-on involvement (like Vanguard).

But Vanguard, Betterment, and other companies I see recommended here are not available for me, and funds I can easily invest in like ones offered by local banks' investment services have yields closer to 4% before inflation, than 5% after inflation.

Is there a default answer for EU residents, like Vanguard seems to be for US residents, that might be available even in my Johnny-come-lately non-Eurozone country?

[zz_marcello]

- Open a brokerage account from Interactive Brokers (available in nearly every country in the world; incl. Croatia)
- Buy Vanguard Index Funds (Use Ireland based ETF versions)

Done

[shimrod]

So it is! Thanks.

After this got me started, I now see that TD Ameritrade and Saxo Bank also allow Croatia on the application. Is there a reason why you mentioned Interactive Brokers, but not those?

Why Ireland based?

I've been reading

http://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/

and it seems to be saying that the Ireland-based and the American-based funds both have their dividends taxed, but that a non-resident investor can reclaim the U.S. tax, but not the Irish one:

"See, the U.S. government will charge up to 30% dividend withholding tax. However, that depends on your country’s dividend tax treaty with the U.S. My country has a cool deal with the U.S. and thus my dividends will be charged with a 15% withholding tax instead of 30%. The remaining 15% withholding tax can be reclaimed by filling in a W-8BEN form."

"A (non-Irish) European investor is charged dividend withholding tax by the Irish government. Whereas the Irish investor can claim this dividend withholding tax back from their government, the rest of us (in most cases) can’t."

Is this correct?

[Micks]

Why Ireland based?

I've been reading

http://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/

and it seems to be saying that the Ireland-based and the American-based funds both have their dividends taxed, but that a non-resident investor can reclaim the U.S. tax, but not the Irish one:

"See, the U.S. government will charge up to 30% dividend withholding tax. However, that depends on your country’s dividend tax treaty with the U.S. My country has a cool deal with the U.S. and thus my dividends will be charged with a 15% withholding tax instead of 30%. The remaining 15% withholding tax can be reclaimed by filling in a W-8BEN form."

"A (non-Irish) European investor is charged dividend withholding tax by the Irish government. Whereas the Irish investor can claim this dividend withholding tax back from their government, the rest of us (in most cases) can’t."

Is this correct?

You are usually taxed on dividends you receive yourself. The taxes paid by a fund are generally not reclaimable. Differences between countries in terms of taxes are big.

The two quotes are plainly incorrect. The W-8BEN form is filled in to be able to apply the treaty rate of 15% on US dividends and does not further reduce it. Non-Irish residents are not taxed by the Irish government on ETF dividends. This differs from dividends from US domiciled ETFs, which are taxed at 30% (or 15% if your country has a treaty with the US).

I think this page from the bogleheads wiki would be helpful to you.

[ivanskoro]

Hi, sorry to bring up an old topic — I'm also from Croatia and have similar questions to this topic — I did not want to open a new one.

Currently, I'm informing myself about investing in US-domiciled Irish ETFs.
Only one thing is not clear to me, would I be taxed at 30% or 15% (+ Croatian tax applied at the end, of course)?

Thank you

[ctuser1]

Only one thing is not clear to me, would I be taxed at 30% or 15% (+ Croatian tax applied at the end, of course)?

I am not an expert, but have had to dabble with US+foreign taxation for 1 year when I was working overseas.

You should NOT have to pay BOTH the "30% or 15% tax at source" AND the "Croatian tax applied at the end".

In almost all cases, you should end up paying the higher of US/Irish/Croatian tax rates. There is usually some tax treaty that makes it so directly, or some complicated mechanism of pay-tax-at-source-then-claim-credit, with the end result that you end up paying the higher of two countries tax rate.

 

[ivanskoro]

Unfortunately, Croatia doesn't have a tax treaty with the US, so I will definitely end up paying the Croatian tax as well.

I understand that Irish citizens can request a tax-deduction of 15% (because of the tax-treaty) so they end up paying only 15% US tax on dividends.

My question is can non-Irish citizens request the same tax-deduction?