- May 10, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Seeking Investment Advice Across Different Currencies and Jurisdictions
### Introduction
Hello, I’m reaching out on behalf of a friend who needs advice on managing investments across various currencies and jurisdictions. Currently, they receive their salary in Francs, deposited into a Swiss bank account, while living and paying taxes in Germany.
### Dilemma with Purchasing ETFs
The main concern is whether to purchase ETFs in Switzerland or Germany. If they choose to buy in Germany, they will need to regularly convert Francs to Euros, potentially facing financial losses due to exchange rate fluctuations.
### Managing Paperwork and Tax Implications
On the other hand, buying through the Swiss bank (Bank Yuh) poses challenges with additional paperwork for declaring capital gains to the German tax authority (Finanzamt).
### Exploring Options
One potential solution being considered is opening two ETF accounts, one in each country, to directly compare manageability and performance.
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The short answer is that it does not matter. Take for example the “Vanguard FTSE All-World UCITS ETF Distributing”:
[https://www.justetf.com/en/etf-profile.html?isin=IE00B3RBWM25](https://www.justetf.com/en/etf-profile.html?isin=IE00B3RBWM25)
It can be bought both at Six Swiss Exchange in CHF (ticker VWRL) or at a number of German exchanges in EUR, for example XETRA (ticker VGWL). The fact that they have different trading currencies is not important, in a sense one always buys shares of the same underlying fund.
You can compare the last closing prices (Friday May 3, 2024):
VWRL @ Six Swiss Exchange: 114.18 CHF
VGWL @ XETRA: 117.06 EUR
Dividing the numbers gives 0.975 which is almost exactly the EUR/CHF rate at closing time. The numbers don’t have to match exactly since the exchanges may not close at same time and due to other minor details.
Of course this does not take into account broker fees such as custody fees and transaction (buy/sell) fees, which may be different for your Swiss versus your German broker.
(I have assumed that the question is about buying the same ETF in either CHF or EUR. Otherwise it is not possible to give a simple answer.)
I assume you’re buying ETFs for the long run.
Usually long term investment profits are exempt from taxes.
Yuh can also hand out a statement in a whim, which you’ll just pass down to Finanz. Doesn’t seem any hassle.
In IBKR you can have cash accounts in a few currencies including CHF and EUR. Maybe neither Swiss, nor German brokerage account?
Is there a German broker, which allows you to open a brokerage account in CHF? I guess there is no problem to have a Swiss brokerage account in EUR.
What are the costs of transferring ETFs form a Swiss brokerage account to a German account ? Maybe now it is better to use Swiss account and later transfer your securities to a German account.
Check if a Swiss broker can provide you reports, which help in reporting taxes in Germany.
You need to consider:
* the convenience of reporting and paying taxes,
* costs of exchanging currencies when buying ETFs, (for example: if you buy ETFs quoted in USD and use Swiss brokerage account – only one currency conversion – from CHF to USD; if you use a brokerage account in EUR – two currency conversions – from CHF to EUR, and from EUR to USD, what is the currency spread?)
* costs of brokerage fees. (which broker is cheaper German, Swiss, IBKR, … ?)
“Another idea I’m considering is to open two ETF accounts, one in each country, to compare their manageability and performance directly.”
In my opinion this is not a good idea because it will make tax reporting more complex.
I would go with a German Broker and buy in EUR… Probably a Sparplan would be best.
To convert and transfer the money you can use Wise, which has acceptable fees compared to Banks.
If you have a lot of money to convert maybe an InteractiveBrokers account would be worth it.
Consider living in Switzerland. The exchange rate loss is minimal compared to the 27% KeSt that you’ll accumulate.
Exchange as little as possible, pay as low fees as possible.
I don’t know about taxes in D but it sounds like the perfect scenario for the likes of DeGiro, no stamp duty and no custody fee (both will be charged by Swiss banks / brokers).
If he buys the likes of MSCI World / All World / SP500, I would buy them in CHF to minimise FX cost (the original asset performance is in USD anyway).
If he buys the likes of Stoxx Europe, can be CHF or EUR, deGiro has a number of free ETFs in EUR but the FX rates for Swiss residents can add up.
Like this he has 2 pots of money and will only have to rebalance occasionally.
Low fees on transactions add up over time, that’s at least as important as the ETF currency.
If your costs are in EUR, not converting your savings expose yourself to FX risk and losses, not the other way around. Leaving the savings in CHF would only make sense if you are planning to move to Switzerland and live there
Regarding currencies, if you live in Germany, you will have to convert to EUR anyway, sooner or later. Be it now, and buying ETFs in EUR, or be it once you sell your ETFs in francs for spending (a year, 10, 20 years, it doesn’t matter). You can’t predict if EUR will be stronger or weaker in 20 years, so, just do what is more convenient for you. Bear in mind that, if you are buying SP500 or world index ETFs, money will be converted to USD anyway, which is another currency risk. But, that is something we can’t control, long term investing beats that all up, hopefully.
Normally people invest with the currency that their expenses are on. If you live in Germany it would be EUR. You earn CHF, convert it to EUR and buy shares. This is also good because long term CHF tends to appreciate towards EUR so you will get more EUR for your CHF and will be able to buy more shares