Dividend withholding tax of LSE-listed ETF in Saxo

After I consolidated my ETF holdings to Saxo in June, the first dividend from my ETF in London Stock Exchange was declared in my Saxo account in July. But wait, how come they were taxed at 20%? They were not taxed at all when I held the ETF in POEMS. After I have sent an email to Saxo, the withheld tax was refunded to me before the pay date in August.

Round Two

The second dividend was declared in October. Again, it was taxed at 20%! After a few emails to chase for the refund, it was credited into my Saxo account after the pay date.

Transfer Again?

The ETF pays dividend four times a year. It is going to be a pain if I need to email for tax refund for every dividend payout. And if Saxo decides not to refund withholding tax (e.g. change in custodian structure), it may be time to do another account transfer, sigh…

Consolidated my ETF holdings

Last month, as planned in my previous post, I transferred part of my ETF holdings to Saxo. My ETFs are now held in the accounts below.

• DBS Vickers Securities
  • Vanguard Total Stock Market ETF (US)
  • ABF Pan Asia Bond Index ETF (HK)
• Saxo Capital Markets Singapore
  • iShares DJ STOXX 50 ETF (UK)
  • Vanguard Total Stock Market ETF (US)
  • Vanguard Emerging Market ETF (US)

I will use Saxo for my subsequent ETF purchase. ETF in DBS Vickers Securities will remain as it is to save transfer fee.

How long did it take to complete the transfer? After I have authorized both parties (one for transfer-out, one for transfer-in), it took about ten working days. Remember to ask both parties for forms and instruction to authorize both parties to do the transfer. The transfer from optionsXpress to Saxo was delayed because I did not know I also need to inform the party who will do the transfer-out of shares.

Consolidating my ETF holdings

My ETFs are held in several broker accounts, as shown below. This is because I have changed broker several times when searching for low cost broker for ETF in US, UK and HK exchanges.

• DBS Vickers Securities (formerly DBS Vickers Online)
  • Vanguard Total Stock Market ETF (US)
  • ABF Pan Asia Bond Index ETF (HK)
• POEMS
  • iShares DJ STOXX 50 ETF (UK)
• optionsXpress
  • Vanguard Total Stock Market ETF (US)
  • Vanguard Emerging Market ETF (US)

Each broker has its disadvantage. DBS Vickers Securities is the only broker I know in Singapore that does not charge custodian fee for US stocks, but its commission is higher than others. optionsXpress, which started its business in Singapore later, charges less commission than DBSVickersOnline, but funding the account is a bit troublesome when I use bank draft from Custom House for its lower foreign exchange spread. Finally, POEMS charges custodian fee and dividend handling fee, though its UK trading commission is lower than others. So, it would be good if there is a broker that is easy to fund and with low commission to hold all my ETFs.

Recently, a friend mentioned consolidating his ETF to Saxo Capital Markets Singapore because of its low commission for UK market, zero custodian fee and zero dividend handling fee. I have explored this option before but put off the idea due to the minimum SGD15,000 requirement to open an account. Later I found out from Saxo customer service that I could transfer in stocks to meet the minimum SGD15,000 requirement. So I decide to consolidate my ETFs to Saxo. The advantages are:

1. Lower commission than POEMS for UK stocks.
2. Zero custodian fee and dividend handling fee as compared with POEMS.
3. Ease of funding: you can fund the account by SGD cheque. Trade done in foreign currency are converted using the current spot rate plus/minus 0.5%. This is close to Custom House rate and lower than banks.

As transferring of stocks from one broker to another incurs fee, I plan to transfer my ETFs only from optionsXpress to get rid of the funding headache, and from POEMS to get rid of the high commission, custodian fee and dividend handling fee. I will leave the ETFs in DBS Vickers Securities because they do not incur on-going custodian fee.

The transfer of my ETFs to Saxo is in progress. I will post update when they are done, so stay tuned.

Buying USD-denominated stocks in SGX

Recently I bought Lyxor Japan ETF in SGX which is denominated in USD. I use Lim&Tan broker to buy USD-denominated stocks because its minimum commission is lower at USD12.50. I would usually click the estimated commission link to check how much commission is payable before I submit my order. If I choose to settle the order in SGD, the minimum commission becomes SGD25. Given the current USD:SGD exchange rate, it is more expensive than the commission in USD. If I choose to settle the order in USD, and convert the total order value to SGD, which commission is applied?

I emailed Lim&Tan helpdesk to clarify and received their call on the same day. Below is Lim&Tan’s reply:

1. Settle the order in SGD — minimum commission SGD25.00
2. Settle the order in USD — minimum commission USD12.50
3. Settle the order in USD, then call Lim&Tan within T+2 to convert total order value to SGD — minimum commission USD12.50 converted to SGD, which is currently about SGD17.

Of course, I use the third way to buy Lyxor ETF because the commission is cheaper.

Investing in foreign ETF

A reader asked me in email how I invest in ETFs that are not listed in Singapore Exchange. I replied that currently for Vanguard Total Stock Market ETF (VTI) that is listed in the US, I use optionsXpress Singapore; for iShares DJ STOXX 50 ETF (EUN) that is listed in London Stock Exchange, I use POEMS. However, this may change as I am considering other low cost brokers to consolidate my ETF holdings. I will write on this if there is any update.

In my reply to the reader, I also included sgfunds.com topic “Seek Help in Investing in Foreign ETFs“, which has some information on foreign ETF trading, tax and charges.