Hey fellow expats and finance enthusiasts! I’m a European working in Taiwan, and I receive my salary in NTD via Megabank. I’m eager to start investing in stocks using Interactive Brokers (IBKR). Can anyone share the best way to do this while avoiding transfer fees and other potential pitfalls?
I’m particularly interested in insights on currency conversion and any regulations or considerations specific to Taiwan. Have any of you successfully navigated this process? What strategies or tools have you found helpful?
Let’s share our knowledge and make the most of our financial opportunities while based in Taiwan!
Me (a foreigner) and my wife (a Taiwanese) have both invested with IBKR.
Transfer fees are the only challenge you’ll face, roughly 20 USD sending from a Taiwanese bank because of intermediary banks SWIFT fees. You can read more about it here:
Yes, that’s key with most international transfers: Always exchange the NTD in Taiwan first (use a foreign-currency account at a Taiwanese bank) and then send USD/EUR as a SWIFT transfer.
The best option is probably to convert to USD as banks in Taiwan offer much better spreads for NTD/USD compared to NTD/EUR.
Though if you first exchange NTD to EUR, send those to an EU account and then send those to IBKR, it’s probably still more expensive compared to sending USD directly to IBKR because IBKR allows exchanging USD/EUR nearly (?) at spot rate (should you need EUR for your purchases).
Be aware that IBKR will withhold 30% withholding tax from dividend payments from US companies because there is currently no double-taxation agreement in place between the US and Taiwan.
You can partially circumvent this (as a non-US person only!) by investing into Irish and/or synthetic ETFs.
Megabank is probably the easiest (for me) to deal with transfer to IBKR. But you’ll need to change to a real currency first in Taiwan. Don’t try to do that off-island or you’ll take an even larger hit as the NTD is not a freely-convertible currency like the Yuan, EUR or US$. I usually do it at the counter in Taipei… but I suggest going to a major branch of the bank where they’re comfortable & familiar doing this with foreigners. I think one of my friends actually opened an investing account with them, but he never gave me any feedback on what happened.
There is negotiation for a tax treaty ongoing right now. No idea how long it will be before it’s signed. But getting dinged was a nasty shock the first time it happened! LOL!
To avoid withholding tax on US dividends you can also invest in Canada ETFs such as VFV.TO (SPY 500) since there’s a tax treaty between Canada and Taiwan.
Why does everyone get so wound up about the 30% withholding tax on dividends? Is everyone here a dividend investor or something?
On $100000 invested in SPY, which only has a dividend rate of 1.39%， your untaxed dividend is only $1390. At a 30% withholding rate, it is $973. This is only $400 or so in withholding tax.
This is not capital gains taxes, it is only dividend witholding rates. With the S&P 500 at least, it is not really a huge deal. I am definitely not investing in the S&P 500 for the dividends!
And as others have said, there are ways around it.
So what is the impact of that? I kind of like US broker just withholding dividend and Taiwan tax not get involved. Once a tax treaty kicks in what is going to change?
Ok, sure. This also depends upon exactly how much you have invested as well. But you still have 70% of that “69%”. Just remember that historically (especially the 70s-80s), as was quoted in that article, dividends were much higher for the S&P 500. Growth stocks are a much higher percentage of it now, so it doesnt have as much of an impact, and the statement of that article just isnt as valid.
The other issue for non US investors is estate taxes. If I understand correctly, if you invest in US-based ETFs and die, your family becomes subject to US estate taxes on these ETFs even if you/they are not US citizens.
Well, 30% of $0 is nothing. 30% of 1000 is $300, but 30% of 100,000 is a lot more. If your annual returns are dependent on dividends, that’s a lot. Taxes need paid, but excessive taxes need mitigation.
For me, I remember getting dividends years ago that were not withheld. The withholding started in the Bush era.
Who on earth is making $100k in dividends? THEY ARE NOT GAINS!!!
To make $100K in dividends, even if your dividend rate was sky high, say 10% (think highly questionable), you would need to have $1 million in that stock alone. If that is the case, you would likely have a diversified portfolio of over $10 million+, or you are an idiot. And regardless, you should probably have someone at least helping you manage your money who will be very aware of these tax issues.
I just think that people make too much out of these small details instead of just investing the damn money.
(Heated rant over, my apologies)
On a personal note, most of my money is in a non-US domiciled S&P 500 etf, so no worries for me on that front for estate taxes. I guess I will sell my Google and Amazon as I age to not worry about estate taxes at all in the future. Luckily, that is still quite a few years in the future for me.
Even if you “just” lose $1000USD / year in dividend taxes, if you take that over 20-30 years and also include the loss of what that amount of money would accumulate to grow into (or pay out in dividends) then it is really a big deal.
I’m a European working in Taiwan, and I receive my salary in NTD via Megabank. I’m eager to start investing in stocks using Interactive Brokers (IBKR). Can anyone share the best way to do this while avoiding transfer fees and other potential pitfalls?
