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Tax trap in ETF merger: Investors must act now!
Amundi merges two MSCI World ETFs: Investors must consider tax consequences. Important information about performance and costs.
Tax trap in ETF merger: Investors must act now!
Two MSIC World ETFs from the fund company Amundi are currently merging, which could have tax implications for many investors. The “Amundi MSCI World V UCITS ETF Acc” (WKN: LYX0YD) will be transferred to the “Amundi MSCI World UCITS ETF Acc” (WKN: ETF146) on February 21, 2025. This merger comes against the backdrop of better tax conditions for US stocks, which could lead to higher returns in Ireland since the move, such as t-online.de reported.
As part of the merger, shares in the smaller fund will be sold and investors will receive shares in the new ETF in exchange. Fund mergers are not uncommon in the industry, with Amundi merging a total of 65 ETFs in 2023 for various reasons, including insufficient funds or poor fund performance. According to Stiftung Warentest, important points that investors should consider before a merger are, in addition to the running costs, the use of income and the replication method.
Tax consequences for investors
The merger is not tax neutral because the transfer results in gains from the old fund being realized, which are taxable. Investors in Germany must prepare for a tax deduction. Old funds are located in Luxembourg, while the new funds are located in Ireland, which allows a partial exemption of 30 percent for German private investors. This results in a tax deduction on 70 percent of the profits:
- Abgeltungsteuer: 25 Prozent
- Solidaritätszuschlag: 5,5 Prozent auf die Abgeltungssteuer
- Kirchensteuer (sofern zutreffend): 8 oder 9 Prozent auf die Abgeltungssteuer
The effective tax burden without church tax is 26.375 percent, while with church tax it can be between 27.82 and 27.99 percent. A lack of funds in the settlement account could also force investors to sell fund shares to pay the taxes. Taxes paid once will be taken into account on subsequent sales.
How versicherungsbote.de further reported, many German savers have to expect mail from their custody account manager because of these tax implications. The move to Ireland is mostly for tax reasons, as US dividends are taxed lower here. The MSCI World Index consists of around 70 percent US stocks.
Overall, investors should check before the merger whether the new fund fits into their portfolio and, if necessary, act in a timely manner to avoid possible financial disadvantages.