We’ve collected our first dividends from our VWRL investments!
I’m very very excited about that!!!!
Surprisingly, so is Mr. German!
Yay for passive income!
As Richard from Banks Germany pointed out, investing in European Vanguard products (that are domiciled in Ireland) may not be the easiest tax-wise for German residents. Even though Ireland and Germany are in the EU, they have different dividend tax rates, and just because part of the VWRL dividends are withheld in Ireland as tax, doesn’t mean we don’t have to pay the difference in taxes to Germany (Germany has higher taxes than Ireland).
But thanks Richard for pointing it out! It’s so much better to know about it now, than to figure it out during tax time next year.
Of course, none of this would matter if we are expecting to make less than 1608 EUR in dividends over the year, which is the tax-free cut-off for married couples in Germany. However, we’re planning to continue investing 100% of my income, and will hopefully earn more than the cut-off in dividends.
So now I’m on a search for a Germany-domiciled broad based index ETF that gives dividends. Do all ETFs give dividends? I’m not sure. 😕
Chun Yi from Smart Kohle pointed me to the Deka DAX UCITS ETF, which is a very low cost ETF with 0.15% TER. Sounds good, and from the looks of the Deka website, all of their products appear to be domiciled in Germany. I don’t know that for sure, but their website is entirely in German except for the phrase “Made in Germany” – a tell-tale sign. 😛 When Mr. German is less occupied, I’ll ask him to grammar & spell check my draft email to Deka asking them for their domicile; or maybe I should just send my awful version, since obviously someone who doesn’t know German would ask such a question.
The only thing that ‘bothers’ me about the Deka DAX ETF is that it only tracks the DAX, and I want a broad based all world fund like my beloved VWRL. The other Deka products are also region specific. Also, I don’t know if they give dividends and when. Need to poke around their site a bit to find out.
iShares also has some ETFs domiciled in Germany. I’ve found two: iShares Core DAX UCITS ETF (0.16% TER) and iShares STOXX Europe 600 UCITS ETF (0.20% TER). But again they are region-specific and the all world funds are domiciled in Ireland (surprise surprise!).
To not lose steam, I’m planning to buy the Deka DAX UCITS ETF with my next pay cheque. I figure I can’t go too wrong with it.
In conclusion, we gotta move to Ireland!
UPDATE: JustETF has a great list of all the dividend (and non-dividend) ETFs in Germany here.
UPDATE 2: Excuse my novice-ness to the investing world. I think I understand a bit more the concept of growth stocks vs dividend income. I used to think this did not exist in the index ETF world, but lo and behold, it does! There are dividend and non-dividend yielding ETFs that track an index. Non-dividend yielding stocks are growth stocks and should have higher growth rates compared to the dividend yielding group. I’m in the process of deciding whether to focus on growth or dividend as a strategy, the former being easier with taxes (at least in the short-term).