Vanguard S&P 500 (VUSA)

Hi,

I was thinking about buying shares of VUSA. The Key Information Document makes it clear that this ETF is managed by Vanguard Ireland. Just wondering how this affects any dividends. Are the tax rules the same as in the UK?

Thanks for any replies.

Tax rules in Ireland are different, but regarding VUSA - to the best of my knowledge - you’ll see no difference. This ETF will suffer the same tax treatment - as far as I know - no additional tax.
That said you need to be mindful of the ‘UK Reporting Status’ to ensure ETF sales (outside of tax wrappers) don’t suffer Income Tax rather than Capital Gains. VUSA has Reporting Status so you’re fine.

Also bear in mind that VUSA declares and pays dividends in USD. That leaves you (at least minimally) exposed to FX rates as FT will convert for you at the prevailing rate.

Ireland does impose a dividend withholding tax. But to my knowledge it does not apply to ETFs. But were to to invest in DCC or CRH, for example, you might find you loose 20% of the dividend. These are reclaimable via a similar mechanism to the US W-8BEN system. Back in the day the system to reclaim Irish tax was painful to the point of not wanting to bother. Interesting to know what the reclamation system looks like these days are if Freetrade reclaim on your behalf. My guess would be it’s not worth their time, but you never know.

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Thanks for the reply.

Does this mean that whenever I receive VUSA dividends, they will not be taxed automatically at source (as for example individual US shares would) but rather these rules will be applied: https://www.gov.uk/tax-on-dividends ? It doesn’t seem self-explanatory from the Key Information Document.

This is probably a better explanation that what I could give…

https://www.vanguardinvestor.co.uk/need-help/answer/what-taxes-will-i-have-to-pay-on-investments

Key point to your question is the paragraph >>>>

All of our Ireland-domiciled funds and ETFs and all of our UK-domiciled equity funds pay dividends or interest gross of tax. Our UK-domiciled bond funds previously distributed interest income net of income tax at the basic rate, but from 6 April 2017 all distributions will be paid gross.”

Thanks, this was helpful.