Does VEU require a W-8BEN form at tax time?

Marie writes:

Can you please tell me whether the VEU ETF requires a W-8BEN form to be submitted?

Thanks.

Straight and to the point there Marie. But seeing as you said the magic words I will give you the a response that is also straight and to the point.

Yes. If you buy VEU you will need to submit a W-8BEN form to the US Tax authorities.

VEU is a US domiciled ETF and is subject to US taxation laws. Therefore if you own VEU you are also subject to US taxation laws!

The IRS in America requires foreigners (that’d be you and me Marie!) to declare their foreign status if purchasing US domiciled assets.

Find out more about the W-8BEN Form on the IRS website

Don’t want to get involved in US tax stuff? I don’t blame you! Me neither.

This is just one reason why I don’t recommend VEU in my list of the Best Australian ETFs

Sit down boys and girls, it’s story time.

A brief history of Vanguard’s VTS + VEU ETFs

Vanguard was originally a US based business before expanding all over the world. When Vanguard launched their American ETFs (for Americans to buy!) they more or less broke down the total market as follows:

• VTS – Which invests in all US Stocks
• VEU – Which invests in all Global Stocks (and excludes US Stocks)

The idea was that Americans could invest in VTS if they wanted exposure to the US market, or they could invest in VTS & VEU if they wanted exposure to the entire world.

All over the internet you will find countless blogs referring to VTS & VEU. And these ETFs make sense to invest in if you are American.

But we’re not.

When Vanguard first launched in Australia they initially offered VTS & VEU to Australians. This is the same VTS & VEU ETFs that Americans can buy. Although you can buy VTS & VEU on the Australian Stock Exchange the ETFs are actually listed in America. They are AMerican domiciled. And this is why you need to fill in the W-8BEN form if you buy these ETFs

Well skip forward a couple of years and Vanguard realized their business was growing in Australia and it was about time to offer Australian based ETF products. When Vanguard launched their Australia ETFs they broke down the market in a similar way, but in a way that made sense to Australians:

• VAS – Which invests in all Australian Stocks
• VGS – Which invests in all GLobal Stocks (and excludes Australian Stocks)

Can you see what they were trying to do?

As an Australian, you could invest in VAS if you wanted exposure to the Australian market, or you could invest in VAS & VGS if you wanted exposure to the entire world.

At this point Aussies could (and should) have said bye bye to VTS & VEU. We now had our own equivalent ETFs

So there you go kiddos. A brief history of Vanguard ETFs in Australia.

How can I avoid filling in the W-8BEN form when buying VEU?

But what does this mean for Marie?

Well, rather than having a portfolio consisting of VTS & VEU Marie could consider having a portfolio consisting of VAS & VGS.

It’s the way Vanguard Australia intended Australians to invest in the market.

And doing so waves bye bye to the US W-8BEN forms and says g’day to the boys at the ATO!

Which although not great, is still better than needing to say Hi Y’all to the boys at the IRS!