Funds: Are you paying too much tax?

If you've invested in an offshore equity fund, it pays to find out how the tax is calculated, says Paul Amery. It could make a big difference to your returns.

On the iShares website the dividend yield of the popular S&P 500 exchange-traded fund (LSE: IUSA) is given as 1.35%. Yet the US iShares site gives the yield on the equivalent US-listed fund (NYSE Arca: IVV) as 1.91%. Why the difference? It's down to US withholding tax on dividends.

If, as a UK investor, you've ever held shares in US firms directly, you'll know that any dividends you receive have 30% taken off in tax. If you fill in a form to prove you're UK-resident and give it to your US broker, you can cut this to 15%.

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.