OK. I opened an account with Interactive Brokers. It is approved and awaiting funds. I made the transfer at the bank, but apparently, I can do it directly through my online banking account.
In the meantime, I'm still wondering if the Irish domiciled ETFs are the way to go.
Mainly, because of two reasons:
#1 Interactive Brokers comissions:
For U.S. domiciled stocks: USD 0.005 per share, minimum 1$.
For LSE International Order Book and USD-denominated stocks: USD 0.05% of trade value, minimum 5$
#2 Dividend taxation.
As mentioned earlier, U.S. dividend tax for non-U.S. citizens is 30%, while the Irish one is 15%. However, as a Romanian, I am a citizen of a tax treaty country (and this is also mentioned in my W-8 form), and this is what is stated in the
double taxation treaty from 1974:
Romania imposes withholding taxes on dividends, interest, royalties, rentals and technical service fees. The Convention establishes the present Romanian tax rate of 10 percent on dividends as an upper limit to the tax so that in combination with any likely corporate tax (now 30 percent) the total of Romanian taxes on corporate profits would be fully creditable against the United States corporate tax.
and
ARTICLE 10
Dividends
(1) Dividends paid by a corporation of one of the Contracting States to a resident of the other Contracting State may be taxed by both Contracting States.
(2) The rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 10 percent of the gross amount of the dividend.
(3) Paragraph (2) shall not apply if the recipient of the dividends, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State and the shares with respect to which the dividends are paid are effectively connected with such permanent establishment. In such a case, paragraph (6) of Article 7 (Business Profits) shall apply.
Also, I should mention that the current dividend tax in Romania is 16%, but is due to be reduced to 5% starting next year.
Additionally, at the time of my W-8 form submission (effective 3 years), my fiscal residency is still Romania, but will change to Kuwait by the start of next year. I don't know if that makes any difference, however, Kuwait has no treaty with the U.S. on double taxation.
So, at this point, I am a little confused.
I am looking for a very simple 3-asset portfolio, somewhere along the lines of 75% Total Stock; 20% Total Bond; 5% REITs.
I'm not exactly sure how much of the yearly return would be comprised of dividends, and I'm not exactly sure how the dividend taxation works (Is it made automatically? Do I have to submit any form aside from the W-8 already submitted by Interactive Brokers? In case the double taxation treaty is applied, am I charged 10% automatically, or 30% and I have to submit some papers to get the other 20% back?).
Either way, I'm interested in 3 transactions per month, so a minimum of 10$ for U.S. domiciled funds (should be $3, but IB requires a minimum of $10, or the difference is applied as a monthly fee) or 15$ for Irish domiciled funds.
Another thing to take into account is the fees on each specific fund. If you compare U.S. Domiciled Vanguard to Irish domiciled iShares for instance, you would find a big difference in TER.(
0.17% vs
0.50%).
So, right now I'm still undecided.
Any kind of input is deeply appreciated.
