Nestle and Swiss withholding tax

[TheMotorcycleBoy]

I'm wondering whether to make an investment in Nestlé SWX: NESN. Then I observed the dividend withholding tax for non-residents of 35%. However further research revealed a tax treaty between UK and Switzerland effectively reducing the tax rate to 15%. However, it seems, that this requires the filing of a Swiss form 86 and after reading more stories about this e.g.

https://www.investorschronicle.co.uk/ta ... ing-chore/

I'm starting to wonder if this is actually worth the effort. So I'm curious if there is anybody here who has completed this process, or whether they know of whether any of the online platforms (e.g. iWeb) will help in facilitating it.

Thanks Matt

[PinkDalek]

[I'm starting to wonder if this is actually worth the effort. So I'm curious if there is anybody here who has completed this process, or whether they know of whether any of the online platforms (e.g. iWeb) will help in facilitating it.

Short version:

Link not read as not a subscriber but, yes, have completed the process for about 40 years.

Although not recently as my current broker holding them (same stable as iweb) does not come up with a detailed enough tax voucher and requisite statement that is required by the Swiss Tax Authorities in Berne.

Btw I don't believe brokers can facilitate it in the same way as a W8-BEN if that is what you mean, as it is the individual UK taxpayer who has to get and complete the appropriate paperwork, get it stamped by HMRC to confirm UK resident and then get the claim off to Berne (nowadays using a more modern approach than in prior years).

Edit: The more modern approach https://www.estv.admin.ch/estv/en/home/ ... iewer.html

Longer version:

May be here in this thread Re: The 2 stock portfolio. [Nestlé] viewtopic.php?p=224243#p224243 but haven't read it again. That may be the one where Lootman had some suggestions (but I've done nothing on that front yet) or it might be this one Re: International Shares as part of High Yield Portfolio viewtopic.php?p=158968#p158968

[fca2019]

one way round the tax problem is buy a Swiss fund such as iShares MSCI Switzerland ETF which has 21% holding in Nestle and a good historic performance. If you're buying cause of belief in the Swiss economy.

[TheMotorcycleBoy]

[I'm starting to wonder if this is actually worth the effort. So I'm curious if there is anybody here who has completed this process, or whether they know of whether any of the online platforms (e.g. iWeb) will help in facilitating it.

Short version:

Link not read as not a subscriber but, yes, have completed the process for about 40 years.

Although not recently as my current broker holding them (same stable as iweb) does not come up with a detailed enough tax voucher and requisite statement that is required by the Swiss Tax Authorities in Berne.

Btw I don't believe brokers can facilitate it in the same way as a W8-BEN if that is what you mean, as it is the individual UK taxpayer who has to get and complete the appropriate paperwork, get it stamped by HMRC to confirm UK resident and then get the claim off to Berne (nowadays using a more modern approach than in prior years)...

Many thanks PD,

I suspect you're right re. folk like iWeb not having the forms as part and parcel of their offering, unlike the W8-BEN. I'll webchat them tommorrow. I know they (iweb) aren't helpful re. German shares...but I still bought Adidas, since the w/h tax is less. As for Nestle, unfortunately 35% is too great, and since I've not needed to file personal tax returns since about 2003 (about 3 yrs after I dissolved my software contracting entity), I don't feel much like restarting again just for a sake of a Swiss share, alas.

one way round the tax problem is buy a Swiss fund such as iShares MSCI Switzerland ETF which has 21% holding in Nestle and a good historic performance. If you're buying cause of belief in the Swiss economy.

Hi FCA,

Hmm... that does sound very tempting. I'm assuming that iShares have filed the paperwork themselves (but I'll check somehow). TBH the Nestle play is more a question of diversification, into what is, I'm led to believe, a very good company. I don't have a detailed view on the Swiss economy - looks like another research project for me for example:

https://www.eda.admin.ch/countries/unit ... onomy.html

(unless you the time to give me a quick heads up)

Re. the fund: I found that iShares MSCI Switzerland, I could only find a US-based product
https://www.ishares.com/us/products/239 ... capped-etf

Alas, iWeb does not offer this - furthermore I suspect 2 FX expenses when held in a UK-based ISA (swf -> USD -> GBP etc.). Whereas I need find this, UK based vehicle, on offer with them:
https://www.markets.iweb-sharedealing.c ... 0P000162DQ

A whopping 25% in NESW - so perhaps this is my answer.

Matt

[PinkDalek]

one way round the tax problem is buy a Swiss fund such as iShares MSCI Switzerland ETF which has 21% holding in Nestle and a good historic performance. If you're buying cause of belief in the Swiss economy.

I've only looked here https://www.ishares.com/us/products/239 ... hartDialog *** and attempted to compare with my sketchy records.

Very roughly, with dividends reinvested and net of expenses, their hypothetical $10,000 grew to about £15,000 at December 1998. December 1998 is the earliest for me I have available where I am. Friday 29 May 2020 now roughly $50,000. Approximately 3.3 times the $15,000.

For me and in sterling, with dividends not reinvested, my Nestle SA holding has grown about 7.7 times from what it was back in that December. That is excluding bothering to account for the minorish CGT driven disposals I've made along the way.

Out of interest, I know nothing of ETFs (unlike many of TLF) but do they physically receive dividends and, if so, what happen for them re the Swiss Withholding Tax? That aspect may have been covered by Lootman in the second thread I linked to (as he has had some considerable experience of ETFs, including being involved in setting them up so I recall) but beyond my pay scale and I haven't looked again.


*** Their overall holdings, inc the Nestle 21% by weight, are somewhere on that page.

[Lootman]

Out of interest, I know nothing of ETFs (unlike many of TLF) but do they physically receive dividends and, if so, what happen for them re the Swiss Withholding Tax? That aspect may have been covered by Lootman in the second thread I linked to (as he has had some considerable experience of ETFs, including being involved in setting them up so I recall) but beyond my pay scale and I haven't looked again.

European ETFs are generally domiciled in either Ireland or Luxembourg. To know how tax withholdings from other countries are handled you have to refer to the tax treaties those two countries have with other countries.

In general Ireland has more favourable tax treaties than Luxembourg, which is why it has become home to so many ETFs, as well as the fact that Ireland applies no extra taxes on ETF to non-Irish holders.

As an example an Irish ETF that invests in US shares will have 15% withholding. There would be no need for an individual UK investor who buys that ETF to bother with a W8. If you take a look at an Irish ETF that invests in US shares, its dividend yield will be approximately 15% lower than the yield on the underlying index, other things being equal.

This shows Irish tax treaty withholding rates with other countries:

https://www.revenue.ie/en/tax-professio ... index.aspx

Regarding Nestles US-traded ADRs, I just checked my records and dividends are withheld at 15% by the Swiss.

[PinkDalek]

I suspect you're right re. folk like iWeb not having the forms as part and parcel of their offering, unlike the W8-BEN. I'll webchat them tommorrow. ...

Was typing my earlier reply whilst you had posted this.

The forms are easy to obtain, that is not the difficulty - see https://www.estv.admin.ch/estv/en/home/ ... sland.html.

It is the specific wording that is needed on an expanded individual tax voucher that is needed to get the whole thing moving.

An emailed note of when I attempted to get things moving was along the following lines:

Phoned HSDL 03456-060560 attempting to obtain R189 Form to include Tax Voucher. Being told they don't deal with such a form. Told to speak to a tax adviser [my reply redacted]. No joy so asked how I escalate the situation and ended up starting to lodge a complaint as suggested by the person I spoke to. Before this proceeds, agreed to email 2017's with supporting documentation from Barclays in the body of the email to customercare-[email address] marked For the attention of [a helpful individual] with account number included.

(Barclays there is a red herring but I used to get what was needed from them, albeit with annual difficulties, before bloomin' Smart investor came along and I was forced to move broker as I couldn't continue to hold Nestle through them).

Tax Voucher there means the additional wording required by Berne, over and above what one would normally see on tax vouchers. I can't find the precise wording for the moment but (as I wrote on one of the other threads):

They can provide a separate certificate but appear unable to come up with the precise confirmatory form of words required by the Swiss Authorities (their form R189), which certifies that the withholding Tax has been deducted by them or their intermediaries and has been remitted to the Swiss Authorities.

I was later told (as recorded in another email):

They cannot provide the "tax voucher" narrative on the third page. Without this Berne will not repay. The reason they can't give the voucher is something about no-one being trained in this area and they being execution only.

I've even had emails and telephone conversations with estv.admin.ch who, despite being helpful themselves, insist on the form of wording to enable a valid claim.

I'd be interested in what you glean from iweb but I very much doubt a webchat will help you, unless they are experienced in such matters and even then I doubt they'll come up with the goods unless things have changed. Which was certainly not my experience during the course of a number of telephone conversations with HSDL who said, in effect, they are execution only (as above).

I haven't progressed since then but your query has ensured I'll be taking another look, so thanks for raising the question.

[flyer61]

Matt,

take a look at JP Morgan European Investment Trust - JETI. It's biggest holding is Nestle and it's biggest country holding is Switzerland.

Another angle possibly to get the exposure you are after.

[TheMotorcycleBoy]

Matt,

take a look at JP Morgan European Investment Trust - JETI. It's biggest holding is Nestle and it's biggest country holding is Switzerland.

Another angle possibly to get the exposure you are after.

Will do, many thank flyer61. That's on this afternoon's to do list after my WFH is done for the day. Along with researching UBS ETF MSCI Swtz.

Matt

[TheMotorcycleBoy]

I'd be interested in what you glean from iweb but I very much doubt a webchat will help you, unless they are experienced in such matters and even then I doubt they'll come up with the goods unless things have changed. Which was certainly not my experience during the course of a number of telephone conversations with HSDL who said, in effect, they are execution only (as above).

Bad news, I'm afraid, PD. Worse than I'd expected:

Me: Hi Ellen, I would like to purchase some Swiss shares (Nestle). The swiss levy a 35% withholding tax on the dividends. 20% of that can be claimed back via forms and communications with tax offices. Do iWeb do this, in the same way that they handle w8-ben with the US?

iWeb: We don't have any facility to reclaim tax from European shares, so we would not be able to reclaim it. We are also not trading on any Swiss stocks at this time due to some regulations we are informed of in july 2019.

So it's definitely either an ETF or an IT at this stage for us. Anyway - back to the day job.

Matt

[james51]

Have a look at Fidelity European Values (FEV) as well. They have done well for me over the last 10 years, and Nestlé is their largest holding.

[yorkshirelad1]

I'm wondering whether to make an investment in Nestlé SWX: NESN. Then I observed the dividend withholding tax for non-residents of 35%. However further research revealed a tax treaty between UK and Switzerland effectively reducing the tax rate to 15%. However, it seems, that this requires the filing of a Swiss form 86 and after reading more stories about this e.g.

https://www.investorschronicle.co.uk/ta ... ing-chore/

I'm starting to wonder if this is actually worth the effort. So I'm curious if there is anybody here who has completed this process, or whether they know of whether any of the online platforms (e.g. iWeb) will help in facilitating it.

Thanks Matt

I did a reclaim (strictly, the shares were held in a trust) for Nestlé shares about 10 years ago (bulked up several years' worth in one go). It was fairly straightforward (if you have a dogged mindset and happy to cope with form filling), needs evidence from the owner and HMRC as others have pointed out, and lots of patience.

As attractive as they are, the Swiss witholding tax takes the shine off them, and I'd be looking for a UK domiciled equivalent. I haven't held Nestlé for 10+ years. I do hold a chunk of Unilever though.
I also hold CRH (CRH.L), and Irish Witholding tax has recently increased (see e.g. https://www.mazars.ie/Home/News-and-Insights/Newsletters/Tax-Newsletters/February-2020-Tax-Newsletter/Dividend-Withholding-Tax-DWT) so I may take a closer look at these shares in due course.

[TheMotorcycleBoy]

I'm wondering whether to make an investment in Nestlé SWX: NESN. Then I observed the dividend withholding tax for non-residents of 35%. However further research revealed a tax treaty between UK and Switzerland effectively reducing the tax rate to 15%. However, it seems, that this requires the filing of a Swiss form 86 and after reading more stories about this e.g.

https://www.investorschronicle.co.uk/ta ... ing-chore/

I'm starting to wonder if this is actually worth the effort. So I'm curious if there is anybody here who has completed this process, or whether they know of whether any of the online platforms (e.g. iWeb) will help in facilitating it.

Thanks Matt

I did a reclaim (strictly, the shares were held in a trust) for Nestlé shares about 10 years ago (bulked up several years' worth in one go). It was fairly straightforward (if you have a dogged mindset and happy to cope with form filling), needs evidence from the owner and HMRC as others have pointed out, and lots of patience.

As attractive as they are, the Swiss witholding tax takes the shine off them, and I'd be looking for a UK domiciled equivalent. I haven't held Nestlé for 10+ years. I do hold a chunk of Unilever though.
I also hold CRH (CRH.L), and Irish Witholding tax has recently increased (see e.g. https://www.mazars.ie/Home/News-and-Insights/Newsletters/Tax-Newsletters/February-2020-Tax-Newsletter/Dividend-Withholding-Tax-DWT) so I may take a closer look at these shares in due course.

Hi YL,

I did a fair of research on this y'day. Apparently it's now much harder to claim back. e.g. I read one forum post (sorry forget which), but the gist is that tax specialist had been trying for a couple of years (IIRC from about 2017-2019) to set up some claims on behalf of a couple of investors and was not making progress. Apparently after 2016, the Swiss authorities have become increasingly unhelpful - at that's my recollection of what I was reading.

Matt

[PinkDalek]

Apparently after 2016, the Swiss authorities have become increasingly unhelpful - at that's my recollection of what I was reading.

Things changed including not being able to hold certificates (unless an additional more excessive WHT was paid or something like that) but, since then, not my recent experience. Yes the procedure has to be adhered to but the Swiss Authorities are helpful, replying promptly to both direct emails to a named individual and to phone calls to that self same individual. Compare that with the service one gets from HMRC on routine matters.

Anyway, did you spot my earlier reply to fca2019 with some random examples of a directly held Nestle holding as against a composite ETF?

[TheMotorcycleBoy]

Anyway, did you spot my earlier reply to fca2019 with some random examples of a directly held Nestle holding as against a composite ETF?

Yes, my friend. I pulled the trigger about 1/2 hour ago, and bought £1200 of these:

UBS ETF (LU) MSCI Switzerland 20/35 UCITS ETF

About 24% Nestle, 17.5% Roche holdings, 15% Novartis...

Matt

[Bouleversee]

Anyway, did you spot my earlier reply to fca2019 with some random examples of a directly held Nestle holding as against a composite ETF?

Yes, my friend. I pulled the trigger about 1/2 hour ago, and bought £1200 of these:

UBS ETF (LU) MSCI Switzerland 20/35 UCITS ETF

About 24% Nestle, 17.5% Roche holdings, 15% Novartis...

Matt

I take it you compared that with all the other suggestions, Matt? I'd like to buy something with a decent holding of Nestle myself but couldn't be doing with all that tax reclaiming.

[flint]

I looked at https://www.markets.iweb-sharedealing.c ... 0P000162DQ
as suggested above and tried to buy them.
However, HSBC informed me that they were not eligible for an ISA.
Reluctantly I bought some in a trading account

[TheMotorcycleBoy]

Anyway, did you spot my earlier reply to fca2019 with some random examples of a directly held Nestle holding as against a composite ETF?

Yes, my friend. I pulled the trigger about 1/2 hour ago, and bought £1200 of these:

UBS ETF (LU) MSCI Switzerland 20/35 UCITS ETF

About 24% Nestle, 17.5% Roche holdings, 15% Novartis...

Matt

I take it you compared that with all the other suggestions, Matt? I'd like to buy something with a decent holding of Nestle myself but couldn't be doing with all that tax reclaiming.

Hi Lorna,

I didn't spend masses of time on it. However I ascertained that "UBS ETF (LU) MSCI Switzerland 20/35 UCITS ETF" has a slightly higher allocation in Nestle than "iShares MSCI Switzerland ETF" (about 24% vs 20%). Though I assume that these percentages are based on the current market values of NESW and the remaining constituents of the ETFs so the comparison is non trivial.

https://www.ishares.com/us/products/239 ... capped-etf
https://www.markets.iweb-sharedealing.c ... 0P000162DQ

I also followed up a suggestion of JETI (JP Morgan European...). However, IIRC, the NESW holding here was in the single % figures, so the UBS ETF won it. Furthermore in my naive view the UBS option seems more attractive since there is presumably only one FX (GBP <-> SWF), whereas the iShares one being traded in USD for our purposes the dividends flowing back to a UK ISA must surely have to SWF -> USD -> GBP, or undertake some kind of hedging magic.

For final checks I found the UBS ETS annual charge to be 0.21-0.3% and from making measurements at various points on the graphs I deduced the capital growth for the instrument ranged from about 6.6-8.0% annually and the DY varied from between 1.7-3.0%

That's as far as I got. But it (the UBS MSCI Switz ETF) seemed worth a small investment on the basis of what I found at the time. Nothing like as good as a 100% NESW holding, but it now seems almost impossible for private investors to claim back all but the 15% of the WH tax.

HTH Matt

[flyer61]

Nothing like as good as a 100% NESW holding, but it now seems almost impossible for private investors to claim back all but the 15% of the WH tax.

HTH Matt

Matt, I hold 350 Nestle shares in my SIPP on the HL site. I have tried and failed to get them to do the application for tax refund. This did not cause me immediately to rush out and sell them. The dividend received this year was £507 and change. This looks like a yield around 1.7% after 35% witholding tax on the Capital value. If I compare it to Microsoft (my biggest holding) , the yield here is 1.1%. These are growing dividends.

Don't let the tax tail drive your thinking. We want to be associated with the best and most successful Companies on the earth. Currency risk, taxation etc should be of secondary consideration.

Standing by to be flamed!

[TheMotorcycleBoy]

Matt, I hold 350 Nestle shares in my SIPP on the HL site. I have tried and failed to get them to do the application for tax refund. This did not cause me immediately to rush out and sell them. The dividend received this year was £507 and change. This looks like a yield around 1.7% after 35% witholding tax on the Capital value. If I compare it to Microsoft (my biggest holding) , the yield here is 1.1%. These are growing dividends.

Don't let the tax tail drive your thinking. We want to be associated with the best and most successful Companies on the earth. Currency risk, taxation etc should be of secondary consideration.

Standing by to be flamed!

Don't worry, I don't flame advice. I do, of course, debate advice from time to time. Your decision speaks of an intelligently thought through process.

Matt