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I bought a Vanguard S&P 500 ETF that is issued in Ireland, yet my country of residence is the Netherlands (I'm doing this since from what I see there is no current Dutch ETF that follows the S&P 500). Now from what I read, since the ETF is outside my residence country I need to pay dividend tax (Dutch law would have allowed me to reclaim the withholding dividend tax had the ETF been Dutch). Now a tough one: Since Irish dividend tax is 20%, how can I I evaluate how much the ETF really costs? I know there is no direct proportion between dividend paid and capital gains (stock prices), I'm just trying to estimate in the long run how much it costs me to hold a foreign (Irish) ETF over a homemade one. If I could for example get an approximate number and add it to the management fee to get a real sense of what the ETF really costs that would be great...

  • Would "they" really withhold some of your dividends? In the US, dividends are reported to the IRS and you pay when you file your taxes. – RonJohn Jul 18 at 5:22
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    Note also that there was a similar but unanswered question two years ago that has an interesting link. money.stackexchange.com/questions/83107/… – RonJohn Jul 18 at 5:23
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    @RonJohn, yes quite common in Europe that there's a dividend withholding tax. In The Netherlands both the dividend and tax withheld are reported to our "IRS" and you can adjust the tax already paid on your annual tax statement. Well it's already entered there for you. Cross-border is a bit more of a pain. – Paul Palmpje Jul 18 at 7:10
  • @Joel_Blum, can't you reclaim the Irish tax on your return? I hold German shares in my Dutch portfolio and are able to reclaim the German withholding tax. Only up to 15% sadly because it's only allowed up to our level. One could reclaim more from the Germans BUT it's just too expensive for the amounts considered. – Paul Palmpje Jul 18 at 7:14
  • @PaulPalmpje I will look into that, from what I read about Irish funds there is a certain dividend leakage...still not sure how much – Joel_Blum Jul 18 at 7:38
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According to https://ycharts.com/indicators/sp_500_dividend_yield the dividend yield is about 2%.

Thus, the cost is 20% of 2%. If there's both Irish and Dutch tax, then you'd add the two taxes together and multiply by 2%.

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  • So I guess what I'm really asking is what's the proportion between dividend paid and stock price gains (how much the stocks went up ..or down). Does the question make sense? – Joel_Blum Jul 18 at 5:31
  • @Joel_Blum the dividend is going to be about 2% of the current value of the ETF no matter how much it goes up or down. – RonJohn Jul 18 at 5:37
  • From what I read there is no 1-1 proportion between earnings, profits and stock price (think about losing companies like Uber, as far as I know they have no dividends to pay since they're losing, but the stock price went up) – Joel_Blum Jul 18 at 5:39
  • @Joel_Blum you asked about the S&P500, not individual stocks. Thus, I provided a graph that shows what S&P500 dividends (in the same ratios and weights as the S&P500 index uses) have been for the past 5 years. They've hovered around 2%. – RonJohn Jul 18 at 5:42
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    @Joel_Blum there seems to be a failure to communicate. If you've invested €1,000 in the S&P500 ETF, then the dividend will be approximately €20; you will pay 20% of that in taxes: €4, so the total will be €1,000 + (€20-€4) = €1,016. If the ETF appreciates 10% to €1,117.6, then the dividend will be *approximately*2% of that: €22.35; you will pay 20% of that in taxes: €4.47. That's because the cost of dividends are 20% of 2%. – RonJohn Jul 18 at 6:01

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