ADR vs home market shares

Now that we are seeing ADRs on the platform, I am curious for an explanation of the pros and cons of buying an ADR like LRLCY (L’Oreal) vs the Euronext Paris OR (L’Oreal). Similarly there is RBGLY vs RB for Reckitt Benckiser. The US ADRs do not have a transaction tax when purchasing. That seems a plus. Are they paid without any withholding tax on dividends? Are ADRs like these of any interest or use to European-based investors?

My guess is a no-arbitrage principal will ensure that one version of share ownership cannot outperform the other. but that there may be reasons for certain classes of investor to prefer one rather than the other.

There is normally an ADR service fee applied to any dividend payments. Other than that, holding a security in different wrappers, or trading on different exchanges/timezones, gives you an opportunity to trade in different currencies or points throughout the day. Say you worked 9-5 in the EU, then you could hold the US line, and trade after your normal working hours, when the US market is still open.

do you perhaps know which rates exactly apply? I was looking at the SalMar unsponsored ADR (SALRY) and it states three different rates (~8%, ~23% and ~32%) as can be seen in the image below. I would assume the 15% tax rate so ~23% total fee would be deducted but am not sure.

The tax rates depend on the shareholder status and country of origin normally.

that explains it a bit better.

Hello Community,

I am trying to solve the puzzle of ADRs, reason avoid tax stamps or similar duties, keep USD as primary investment currency.

Anyway, I been googling for hours without answer.

How are ADRs taxed as EU investor.
Do we pay Witholding tax of US plus Witholding Tax of local government/country in which company resides?

For instance BTI, UK takes 0% Witholding tax, should we expect full dividend or 15/30% Witholding by US?

Cheers

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Didn’t search, silly me.

However even reading here I cannot find clear answer.

@Richard.W did you find answer? Personally still unclear on the topic.

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I remain unclear on this. Will continue research and report back if I find an answer.

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I think a 30% US withholding tax on ADR dividends may be standard. It may differ depending on where the recipient resides. I forget which is your country of tax residence.

I have some UL (Unilever) ADR and receive the dividend with no deduction of tax.

That leads to questions if one purchase Sanofi, which is listed on NYSE, does one get applied both US Witholding and French Witholding, in my case 30+28=58%.

Croatia has no trade agreement with US thus 30%.

Intersting, se we have 2 separate cases on 2 ends.

You had 0% Witholding on ADR, while I had Witholding Tax on ADR.

In reality if ADR should be taxed by US , you would have 15% deduction right? Due to UK & US deal.

I thought withholding was influenced by the country of origin so for example, Norway has 25% withholding and then the (unsponsored) ADR provider could add another fee with the dividend so net you’d be losing around 30% of the dividend.

That was my impression as well. But L1 support in T212, has no tax/financial expertise on the topic. They just closed my ticket without any factual evidence that my BTI share deserves US Witholding tax when company is originating from UK.

I found something once about the taxes for Germany, not sure if every country define their own values.
I’m really scared about my tax declaration next year. :money_with_wings:

My UL dividend was paid on a different platform (Interactive Investor). I think I had 0% withholding because Unilever is British and the UK does not charge withholding tax on dividends. But BTI is also British, so it is a puzzle. Could it be anything to do with your country of residence and the tax treaty it has with the UK?

I have BATS, 0% dividend Witholding. I was testing BTI, to avoid stamp duty tax.

Croatia is in EU, has standard tax agreement with UK.

Not the first time I had wrong taxing. For instance Canadian stocks. As croatia has treaty for 15%, was witheld 30%, got fixed after complaint.

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Hello Team,

I know you are busy this days.

I had ticket raised due to my BTI dividend being taxed 30%.

Request #315091, which was closed without my consent and no reply on topic.
Raised subsequent issue: 362585

We have a topic raised to discuss:

I have BATS holding, which had dividend payouts without any witholding tax. Recently I added to BTI position, dividend was paid in November. I noticed 30% tax witholding.

Which is puzzling as British American Tobacco is UK based company, so source of income is UK.

Can we get some clarity on this.

Thanks

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Just to update,

After T212 did some internal chech up.

Conclusion is BTI should not have been taxed via US Witholding, due to company being UK based. Thus all affected clients will get reimbursement for difference.

Should be done by end of week/beginning next week.

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Good that you pushed back on this!

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Good news! :smiley:
I am glad that your persistence paid off Vedran and that the issue is fixed.

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