SSgA Relocates ETFs To Dublin

July 08, 2014

State Street Global Advisors (SSgA) is to re-locate where 13 of its exchange traded funds are domiciled, according to a story from Ignites Europe published in The FT.

According to the story, 15 ETFs were registered by the provider in Dublin in May with 13 of them already authorised in France.

A spokeswoman for SSgA, commented: “We can confirm that a number of new sub-funds have been filed and authorised in the Republic of Ireland. Ireland is the domicile for most of our SPDR ETF product range and is where most of our efforts for new ETF product development are driven from.

“We continually evaluate all of our European SPDR ETF product ranges to ensure they best serve our clients. We are currently focussed on supporting the launch of the SPDR Russell 2000 U.S. Small Cap UCITS ETF and SPDR Russell 3000 U.S. Total Market UCITS ETF, which launched on the Deutsche Börse, Xetra.”

Peter Sleep, senior portfolio manager at 7IM, said: "I am excited about SSgA moving their tracking funds from France to Dublin as they have such a huge range of funds and their performance has been very good.”

SSgA will not be the first ETF provider to make such a move. Ireland’s Dublin can arguably be considered Europe’s ETF hub with roughly 428 ETFs domiciled there. Cormac Commins, partner at Irish Law firm William Fry, said: "Other players have made similar moves, such as UBS, Deutsche and Lyxor, who set up similar products in Ireland even if they were first established in, say, Luxembourg.”

It is unclear why SSgA are moving the funds but according to a person familiar with the ETF industry, the profits SSgA make on their funds are taxed at 10 percent in Ireland and 33.33 percent in France.

Similarly, the French government currently imposes withholding tax of 30 percent on all dividends, which can become pricey if the funds are to be sold to foreigners, even with double tax relief in the receiving domicile. The Irish government imposes a general rate of 20 percent withholding tax, which is reduced to zero for EU investors or through tax treaty.

The new proposed financial transaction tax could also be a reason to move funds to Dublin. At the moment charges will be levied on transactions on French, German and possibly Dutch domiciled companies.  This will impact any products where German, French and Dutch companies are a large component of the benchmark

Adam Laird, passive investment manager at Hargreaves Lansdown, added: “Ireland has long been an offshore fund domicile and I believe it has quite a straightforward framework in place.  In addition to this, having more assets in the one place means fewer counterparties to do business with, which means fewer staff required to oversee and more negotiating power on costs.”

For UK investors, funds domiciled in Dublin are offshore funds for UK tax purposes. Funds have to have UK Reporting Fund status for the entire period the investor owns them or any gain the investor makes when they sell falls under income tax.

Funds approved as UK Reporting Funds by HM Revenue & Customs mean that any gains made by investors when selling these products will not be taxed as extra income. UK Reporting Funds status falls under the provisions of The Offshore Funds (Tax) Regulations 2009.

Having UK Reporting Funds status means that any extra income will be charged as capital gains tax as opposed to income tax if it not held in an ISA or pension fund. CGT is usually 18 percent or 28 percent, while income tax ranges from 20 to 45 percent dependent on earnings.

 

 

 

 

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