Thanks to @gloinvest for the hint. @lawinvest brings a second calculation for US shares:
Example for US shares:
- You receive 100 $ dividend.
- 15 € will be withheld in the USA. (Provided form W-8BEN has been filed)
- In Germany you pay another $ 25 tax on the $ 100 + $ 1.375 solidarity tax
- But: 15 € are credited → you pay only an additional $11.375.
For the ETF in Ireland:
- You receive $100 dividend.
- 15 € will be withheld in the USA. (at font level)
- In Germany you pay another $14.875 tax on 70% of $85 + $0.8181 solidarity tax
- No crediting of withholding tax
So there is a 4.31% advantage here with direct investment in US shares via an Irish ETF
For countries with higher withholding tax (e.g. Switzerland 35%, France 25%, Italy 26%) it is much more complicated, because the credit is often capped and you have to get the rest via refund procedures.
ETFs often have better withholding tax efficiency because large fund companies can sometimes carry out refunds/reclaims that you would not be able to do as a private investor.
📊 Taxing dividends cleverly - ETF vs. individual share?
( Does this apply to D, other countries too? in AT, funds are taxed at a flat rate ( KEst) in CH there is wealth tax ..... )
You have Colgate in your portfolio and wonder why the dividend of 26,36 % while the same dividend via a dividend ETF is only taxed at 18,46 % is charged? Here is the explanation - and a smart tip for all dividend fans!
💡 The difference: partial exemption for ETFs
Benefit in Germany equity ETFs benefit from the so-called partial exemption:
- 30% of the income is tax-freeif the ETF invests at least 51% in shares.
- This reduces the effective tax burden on dividends from 26.375 % to approx. 18.46 %..
Individual shares such as Colgate, on the other hand, are subject to full withholding tax - despite partial crediting of the US withholding tax.
🧾 Conclusion
🔹 Individual shares = full tax but deduction of withholding tax
Dividend ETFs = tax-optimized, particularly interesting for non-US equities with higher withholding tax. Important for broad diversification!
🔹 Partial exemption = compensation must be calculated to determine whether it is worthwhile.
Can it be an ADVANTAGE in the long term? According to the above calculation, the advantage lies in direct investment for pure US equities, otherwise ETF is simpler and more profitable.
Here are a few examples:
🌍 Global dividend ETFs
- Vanguard FTSE All-World High Dividend Yield UCITS ETF $VHYL (+0.51%)
ISINIE00B8GKDB10 - Distributing, quarterly
- TER: 0,29 %
- Partial exemption: 30 %
- Invests worldwide in high-dividend companies
- iShares MSCI World Quality Dividend UCITS ETF $WQDS (+0.24%)
ISIN : IE00BYYHSQ67: IE00BYYHSQ67 - Focus on high quality dividend payers
- TER: 0,38 %
- Distributing, with global diversification
- SPDR S&P Global Dividend Aristocrats UCITS ETF $ZPRG (+0.36%)
ISIN : IE00B9CQXS: IE00B9CQXS71 - Contains companies with long-term dividend history
- TER: 0,45 %
- Distributing
🇩🇪 Dividend ETFs on German equities
- Deka DAXplus Maximum Dividend UCITS ETF $EL4X (-0.22%)
ISINDE000ETFL235 - Focus on highest dividend yields in the HDAX
- TER: 0,30 %
- Distributing
- Amundi DivDAX UCITS ETF Dist $E903 (+0.27%)
ISIN: DE000A0F5UH1 - TER: 0,25 %
- Distributing, based on DivDAX Index
🇺🇸 US dividend ETFs with good withholding tax structure
- Vanguard Dividend Appreciation ETF (VIG) $VIG (+0.24%)
ISIN: US9219088443 - Focus on high-growth dividend payers
- Attention: US domicile → note withholding tax
- SPDR S&P US Dividend Aristocrats ETF (SDY) $SPYD (+0.46%)
ISINUS78464A7634 - Contains US companies with at least 25 years of dividend growth
Which ETF do you have in your portfolio? Or why individual shares?
P.S. Before everyone says, it's common knowledge. You can never give out information like this too often. Maybe I heard it 5 years ago, but I haven't thought about it now. Surely others will feel the same way, right?
