# US-domiciled ETFs on Australian Stock Exchange - need to report on FBAR or Form 8938



## Pareto8020

Hello,
I currently own Vanguard VTS and VEU ETFs, which are both US-domiciled ETFs purchased on the Australian Stock Exchange (ASX). From my understanding, this means that they are both effectively resident in the US and governed by US tax and legal system. More info here: Which ETFs are cross-listed and what does it mean? - ETF Watch

As I'm planning a move to the US next year (applying for a greencard now) I'd like to check that it's still OK for me to own these ETFs when I move to the US. From research on other websites, my understanding is that these ETFs are NOT considered PFICs (or would require an IRS private ruling to declare them PFICs). I'm planning to continue acquiring these 2 ETFs while I'm still resident in Australia, and likely after I move to the US too. I've checked with Computershare (Vanguard's share registry) and my broker, and they both don't have a problem with me being a foreign resident (outside Australia). 

1. Is anyone aware of any reason I should NOT continue acquiring and owning these US-domiciled ETFs on the ASX when I move to the US?

2. When I become a US resident, am I correct in assuming that these US-domiciled ETFs do NOT need to be reported on FBAR and Form 8938?

Thanks again for your generous time and support!

P.S. I also own Vanguard VAS ETFs which are Australian-domiciled, and will be selling them before the end of this year (as I intend to move to the US in 2020).


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## JustLurking

Pareto8020 said:


> 1. Is anyone aware of any reason I should NOT continue acquiring and owning these US-domiciled ETFs on the ASX when I move to the US?


Assuming cross-listing doesn't change the nature of these ETFs' domicile, holding them should be okay when you become a US resident. It's non-US domiciled funds and ETFs that run into the US's horrible PFIC tax rules.



Pareto8020 said:


> 2. When I become a US resident, am I correct in assuming that these US-domiciled ETFs do NOT need to be reported on FBAR and Form 8938?


Nope, sorry. Still reportable, with all of the US's trademark excessive penalties for noncompliance. From the IRS's form 8938 Q&A:


> If you have a financial account maintained by a foreign financial institution and the value of your specified foreign financial assets is greater than the reporting threshold that applies to you, you need to report the account on Form 8938. A foreign account is a specified foreign financial asset even if its contents include, in whole or in part, investment assets issued by a U.S. person. You do not need to separately report the assets of a financial account on Form 8938, whether or not the assets are issued by a U.S. person or non-U.S. person.


Same for FBAR. You might be able to remove these compliance hassles (and their threats of eye-watering penalties for a paperwork footfault) by reregistering your holdings to a US based broker once you arrive in the US.


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## Bevdeforges

To try to simplify things a bit, you may want to contact Vanguard as your move to the US approaches. In general terms, if the fund issues a 1099 form (report of income from the fund) you won't have to file any of the FATCA documents on the fund. Not sure if that would mean you have to transfer the investment to Vanguard's US entity or something, but it's well worth at least asking the question.


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## Pareto8020

JustLurking said:


> Assuming cross-listing doesn't change the nature of these ETFs' domicile, holding them should be okay when you become a US resident. It's non-US domiciled funds and ETFs that run into the US's horrible PFIC tax rules.
> 
> 
> Nope, sorry. Still reportable, with all of the US's trademark excessive penalties for noncompliance. From the IRS's form 8938 Q&A:
> 
> Same for FBAR. You might be able to remove these compliance hassles (and their threats of eye-watering penalties for a paperwork footfault) by reregistering your holdings to a US based broker once you arrive in the US.


Thanks JL, darn thought I'd get around that, no such luck. 



Bevdeforges said:


> To try to simplify things a bit, you may want to contact Vanguard as your move to the US approaches. In general terms, if the fund issues a 1099 form (report of income from the fund) you won't have to file any of the FATCA documents on the fund. Not sure if that would mean you have to transfer the investment to Vanguard's US entity or something, but it's well worth at least asking the question.


Thanks for the advice. Just checked my records and looks like I've received a form 1042-S "Foreign Person's US Source Income Subject to Withholding" but that's the only form I've received for my VTS/VEU ETFs. I haven't received an 1099 that I'm aware of. Oh well, I'll have to submit the 8938 and FBAR forms for other foreign investments/accounts that I have anyway, so just have to add these ETFs to the list... and hope I don't make a costly mistake.


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## Moulard

Not sure how this would work, but you might find that once you move (and assuming you update your address details, provide an SSN etc), that you start getting a 1099. Definitely worth asking them the question.


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## Bevdeforges

Pareto8020 said:


> Thanks for the advice. Just checked my records and looks like I've received a form 1042-S "Foreign Person's US Source Income Subject to Withholding" but that's the only form I've received for my VTS/VEU ETFs. I haven't received an 1099 that I'm aware of. Oh well, I'll have to submit the 8938 and FBAR forms for other foreign investments/accounts that I have anyway, so just have to add these ETFs to the list... and hope I don't make a costly mistake.


Ah, but when you move to the US, you'll no longer be a "Foreign Person" but a full fledged US taxpayer. The withholding should be a bit less and at that point you'll get a proper 1099 each year for tax purposes. So, onward and upward! <g>


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## 255

Pareto8020 -- The reporting requirements are for "financial accounts," not individual stocks/etfs, so as you've already learned, you'd still need to report. My recommendation would be to close-out your positions with your Australian broker and repurchase with a US broker -- that way you'll get the appropriate 1099 and not have to worry about trying to get out of the 30% withholding tax generated by receiving your 1042-S. When in the U.S., you'll use form 8949 and Schedule D to report individual stock/ETF transactions. Cheers, 255

P.S. Vanguard does have its own brokerage firm and they charge zero commissions for online trades in Vanguard ETFs. They are not as competitive commission-wise for stocks and options; but they are fine for "buy and hold" investors. Additionally, they don't charge for DRIP (Dividend Re-investment Program) transactions.


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## JustLurking

Moulard said:


> Not sure how this would work, but you might find that once you move (and assuming you update your address details, provide an SSN etc), that you start getting a 1099. Definitely worth asking them the question.


Filing a W-9 with the broker is what triggers the switch from 1042-S to 1099. It overrides any prior W-8BEN filed with the broker.



255 said:


> ... the 30% withholding tax generated by receiving your 1042-S.


The treaty rate for Aus residents is 15% on dividends. Hopefully the OP's 1042-S forms show that withholding rate. (If not, file a 1040-NR to claim back the overwithholding from the IRS.)


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## lindenmp

Hi Pareto,

I realise this is an old thread, but im in a similar situation. Wondering if you could provide an update? How did it all go?


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## Pareto8020

Hi Lindenmp, I'm still in Aust but plan to move mid-2020, so my plan (based on info above) is to sell all of my VAS before end of this year (next month sometime), and then just before moving to the US, sell all of my VEU and VTS and then re-acquire them again when in the US. I may continue to acquire VEU/VTS while I'm in Australia during the start of next year, though my plan to sell them just before leaving means that I'll own them for < 1 year, so no 50% CGT discount (that's ok - I have a large-ish capital loss carried forward to offset against). My primary aim is to keep things simple and I think that's probably the simplest and lowest hassle/risk way to do it.


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## lindenmp

Pareto8020 said:


> .. just before moving to the US, sell all of my VEU and VTS and then re-acquire them again when in the US.


Oh that's interesting. So you mean you're gonna sell into AUD, exchange to USD, then repurchase via an American online brokerage? Not worried about the bad exchange rate at the moment?


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## Pareto8020

lindenmp said:


> Oh that's interesting. So you mean you're gonna sell into AUD, exchange to USD, then repurchase via an American online brokerage? Not worried about the bad exchange rate at the moment?


VTS and VEU go up and down with currency fluctuations anyway, so I don't think the exchange rate is relevant if you sell and then buy on the same day (though the smart people on this forum will let me know if I've said anything wrong!). The value of my VTS now is just the value in USD converted to AUD. A better exchange rate would give me more USD for my AUD, but it would also reduce the value of my VTS, so the net result is the same.


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## lindenmp

I suppose that's true. Another thing to consider is the cost of moving the money from Aus to USA. Even the cheaper services (e.g., Transferwise) will take a cut.
Are you planning to permanently relocate to the USA?


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## Pareto8020

lindenmp said:


> I suppose that's true. Another thing to consider is the cost of moving the money from Aus to USA. Even the cheaper services (e.g., Transferwise) will take a cut.
> Are you planning to permanently relocate to the USA?


Possibly, not sure yet. Yeah I think Transferwise is still the best deal, fortunately I don't have a huge amount of money in ETFs so the conversion fee shouldn't be too bad.


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## Pareto8020

lindenmp said:


> Hi Pareto,
> 
> I realise this is an old thread, but im in a similar situation. Wondering if you could provide an update? How did it all go?


Hi lindenmp just a quick update and change of mind. Actually I'm now planning to just hold onto my US-domiciled ETFs (VTS and VEU) even after I move to the US. I'll report my financial accounts associated with these ETFs on 8938 and FBAR. I'll fill in W9 form when I get to the US, and expect to receive a 1099 for income from the fund, just like any other American. Also this flowchart may be useful to you.


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## Bevdeforges

If the funds are US domiciled, will you actually need to report them on FBARs and all the other paperwork? As long as you get a standard 1099 I don't believe you have to report them. It's only the foreign based accounts with no 1099 or other reporting to the IRS that they are looking for.


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## Pareto8020

Bevdeforges said:


> If the funds are US domiciled, will you actually need to report them on FBARs and all the other paperwork? As long as you get a standard 1099 I don't believe you have to report them. It's only the foreign based accounts with no 1099 or other reporting to the IRS that they are looking for.


From the links provided by JustLurking above, it seems to me like I probably do need to report them on 8938/FBAR. The link provided by JustLurking does say "_A foreign account is a specified foreign financial asset even if its contents include, in whole or in part, investment assets issued by a U.S. person_" (I assume "US person" here refers to Vanguard who provide the US-domiciled ETFs).


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## 255

Pareto8020 -- You are correct, it is the "foreign financial account" that requires reporting -- not necessarily what's in it. In general, under reporting can become an issue, not over reporting. I don't know about foreign brokers, but in the U.S. it is quite easy to transfer a portfolio directly from one broker to another -- might be a another option to consider. Cheers, 255


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## lindenmp

Pareto8020 said:


> Hi lindenmp just a quick update and change of mind. Actually I'm now planning to just hold onto my US-domiciled ETFs (VTS and VEU) even after I move to the US. I'll report my financial accounts associated with these ETFs on 8938 and FBAR. I'll fill in W9 form when I get to the US, and expect to receive a 1099 for income from the fund, just like any other American.


Makes sense! Keep in mind that you won't become a US person immediately when you arrived (and therefore won't qualify for the W9 immediately but will continue to use a W-8BEN). I presume you're aware of the substantial presence test, but also check whether whatever visa you're on makes you exempt from the presence test for some period of time (e.g., my J-1 visa makes me exempt for 2 calendar years)


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## Nunnzie

Bump…

Pareto8020 - I find myself in the same situation trying to organise my finances for a future US move. How did you go with the US-Domiciled ETFs (VTS & VEU) and avoiding PCIF?


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