Tuesday, 26 February 2019

Withholding Taxes on US bonds held by Singapore Residents

There are no withholding taxes (WHT) on interest payments / bond coupons for bonds held by Singapore residents. This has been discussed extensively in the forums but there are still people who don't believe. Recently someone revealed that the source of this (mis)information is an anonymous blogger.

Reading his blog entry, it appears that he is not vested in any US bonds but is just blogging about it. I would rather hear from someone who actually invested in US Bonds whether or not he was charges WHT. User homer123 in HWZ is a long-time bond investor and has confirmed numerous times there is no WHT tax applicable.

Of course to be fair to that blogger, he has probably misunderstood the difference between US-listed bond ETF (which declares dividends) and US bonds, which pay interest.  Dividends are subject to withholding tax unless the ETF issuer goes through the hassle of reporting the income as exempt income, which they don't do. At least those that have been vested in Vanguard and iShares US-listed bond ETFs have reported this. This has also been my experience with the US-listed Vanguard short dated bond ETF VCSH which is why I shifted to LQDE. (VCSH is still a good place to park very short term US$ given the very low transaction costs)

The same applies to Irish domiciled bond ETFs like LQDE. They do not pay any withholding tax and this is clear from their financial statements.

The table below also states the position clearly:


The thread on WHT discussion in HWZ is here: https://forums.hardwarezone.com.sg/money-mind-210/how-buy-bonds-singapore-5278285-8.html

Read financial blogs for fun, but do not rely on them for important things like tax information. As shown in the table above, accurate information from reputable sources is available on the internet. There is no need to get the info from an anonymous blogger!

1 comment:

  1. Hi, I think this falls under the same idea as Manulife us REITs and kbs REITs situation. It's under the portfolio interest rule (PIR).

    If the security is held where non of the USA folks own more than 10% of the company, then there is no withholding tax on the interest.this PIR have been around for some time