Stock split tax implications for non-US shareholders

[Ipe]

I don't understand the point about selling and rebuying options, Nico, given that they'll be adapted accordingly, what's the benefit? My 4x June 2022 $1250's will become 20x $250, still ITM, so what's their point? My $3500's become $700's - if anything they'll be far MORE liquid after the split.



I don't know the potential timing yet - as late as possible, even in after-market on the final possible day, then pre-market the next. Don't know, lots of confusion around what happens between 21st and 28th August IMO.

Hopefully we'll get the clarification that it's a non-event and such scenarios won't be necessary.

Remember the Euro? Between 1999 and 2001 we already had the euro only it's physical appearance was in the form of guldens, marks, francs. Same thing will happen here. You buy one old share, you get 5 new shares. It's the essence of bookkeeping, change something on the left page, make the contrary change on the right page and your balance will stay in balance.

 

[junas]

I'm in the same boat, and I was also thinking about selling prior the split and then buying again after.
When would you do that? Since they are giving the 4 new shares on the 28th to whom held shares on the 21st, I'd sell on the 28th before closure and then buy again on the 31st. I assume that I won't get such dividend since I hold no more shares. Correct?

I think your dates are wrong in that example. If you want to avoid receiving stock dividends the critical thing is not to have any ownership record on the 21st. Remember the T+2 rule here. The price of the stock should go down once the record date passes. After that you can buy anytime without any tax implications. If you buy e.g. August 25th you won't receive any dividends and it's a normal purchase. In your case 28th and 31st are irrelevant if I understood correctly that your only goal is to bypass the split.

In theory, stock price should be 1/5 of the original after 21st passes (the record date).

In practice, it's way more complicated because of several reasons:

• short covering
• S&P500 timing (unlikely, but it could happen in the middle of this hassle)
• liquidity issues (only 20% of the normal $-value float temporary available before newly created dividend shares are in circulation). Volatility can be nuts.
• stupid people buying based on stock price instead of market cap

 

[MrQc]

Got this from Binck just now...
Just a normal stock split.
Edit: Thus tax free.

 

[NicoV]

I don't understand the point about selling and rebuying options, Nico, given that they'll be adapted accordingly, what's the benefit? My 4x June 2022 $1250's will become 20x $250, still ITM, so what's their point? My $3500's become $700's - if anything they'll be far MORE liquid after the split.

In your example it doesn’t matter, but take e.g. a 1555 call with 4 sept expiration, that would be converted to a 311 strike, I doubt that one will have lots of trades.

 

[Mich]

When do we expect to receive some more formal announcement regarding the stock split/dividende? I just called my broker and they have no idea (for sure) what's going on. Dividende is taxed, stock split isn't. They said that every dividende must have an cash out option and based on this price the stock will be taxed. I guess this is not true and it will be handled as a real split and not a dividende. But referring to a press release is not a strong position. Do we expect some more formal description of this event soon?

 

[jeewee3000]

When do we expect to receive some more formal announcement regarding the stock split/dividende? I just called my broker and they have no idea (for sure) what's going on. Dividende is taxed, stock split isn't. They said that every dividende must have an cash out option and based on this price the stock will be taxed. I guess this is not true and it will be handled as a real split and not a dividende. But referring to a press release is not a strong position. Do we expect some more formal description of this event soon?

That is where I think Tesla dropped the ball a little bit. (See my earlier post in this thread)

When Apple announced a stock split 7:1 in 2014 the SEC filing was very specific about the how of the split. The Tesla SEC filing lacks detail IMHO.

 

[jeewee3000]

In your example it doesn’t matter, but take e.g. a 1555 call with 4 sept expiration, that would be converted to a 311 strike, I doubt that one will have lots of trades.

I understand your point but to be fair, a 1555 call is also not the most liquid compared to round 'tens' (1550 and 1560) and especially 'hundreds' (1500 and 1600). Did some math back and forth and basically the already very liquid strikes ($1000, $1500) stay very liquid. The more obscure strikes stay obscure.

Selling and rebuying options would cost me just under 1% (exchange fees of 0,45% + transaction costs).

By the way, my broker charges €2,45 transaction cost per option contract. So buying and selling options will get 5x more expensive (transaction cost wise) for the same exposure...

 

[Tslynk67]

I understand your point but to be fair, a 1555 call is also not the most liquid compared to round 'tens' (1550 and 1560) and especially 'hundreds' (1500 and 1600). Did some math back and forth and basically the already very liquid strikes ($1000, $1500) stay very liquid. The more obscure strikes stay obscure.

Selling and rebuying options would cost me just under 1% (exchange fees of 0,45% + transaction costs).

By the way, my broker charges €2,45 transaction cost per option contract. So buying and selling options will get 5x more expensive (transaction cost wise) for the same exposure...

It's a fixed fee of 19.95 at Keytrade, so won't change much for me. But I'll appreciate having 20 contracts per strike rather than 4, makes for a lot more flexibility.

Plus I'm sure the psychologically lower strikes will encourage interest.

Going to be crazy, mind you, isn't it ever?

I guess as Binck confirmed it will be treated as a split, the others will follow soon. Will be interesting if we get different info from other brokers

 

[NicoV]

I just got a follow-up email from Keytrade stating that with the information they have they consider it a simple stock split, and they don’t plan to withhold tax (i.e ‘roerende voorheffing). With a careful wording that their view may change if more info becomes available.

 

[Tslynk67]

Just received this from Keytrade - looks pretty positive, still a force-majeur at the end, but...

Dear,

We contact you regarding your question about the split of Tesla.

Here the answer as provided by our services:

It is our current understanding of the operation that it concerns a simple division of shares, without enrichment of the stockholder, or impoverishment of the issuing company. So the operation doesn’t seem to be regarded as a dividend on which tax should be withheld, and Keytrade Bank doesn’t envisage withholding a tax on the operation.

Attention: this interpretation of the operation could change, in case of future communications that would imply that it is a result of a reorganization of the company that would make, from a legal point of view, that it’s not to be regarded as a mere stock split, but as a dividend subject to withholding tax.

 

[jeewee3000]

With a careful wording that their view may change if more info becomes available.

looks pretty positive, still a force-majeur at the end, but...

I don't like the "our view may change based on other info" bit

 

[NicoV]

I don't like the "our view may change based on other info" bit

I’ll ask again if their view is still the same a couple of days before the split (they confirmed that they probably wouldn’t send an update if things change and that it would be best to check again a couple of days before the split date).

 

[Tslynk67]

I don't like the "our view may change based on other info" bit

I think they have to add that, otherwise if something did change and they had to tax it then we'd be suing them.

Given that it's the same response a Binck, I'm feeling fairly comfortable, but nevertheless, will be happy when it's done and dusted.

It's a bit like the $420 going private again...

 

[MrQc]

I think they have to add that, otherwise if something did change and they had to tax it then we'd be suing them.

Given that it's the same response a Binck, I'm feeling fairly comfortable, but nevertheless, will be happy when it's done and dusted.

It's a bit like the $420 going private again...

Or the SolarCity buyout...that was feverish. Tried everything to be able to vote...failed...
EDIT: I wrote buyout, I meant acquisition, was meaning to vote in favour. NVDR...

 

[Christine69420]

I don't like the "our view may change based on other info" bit

They already have the statement from Tesla I presume. Don't think it will change.

 

[sandervl]

I've asked the same question to my bank (Volksbank Stuttgart, Germany) and got the following reply:

nach Rücksprache mit dem Zentralverwahrer ist kein
Steuerkennzeichen hinterlegt/ bekannt beantragt,
d.h. Stand heute gehen wir
davon aus, das es sich um einen echten Stock Split
ohne ertragssteuerliche Auswirkung handelt.

Sollten neue Erkenntnisse bis zum 21.8.2020 bei uns auftreten,
werden wir Sie informieren.

In other words: as of today they assume it's a normal stock split without any tax consequences. With the disclaimer that they will inform me if new information is received.

 

[Amon]

Dear fellow investors, especially the German ones. In my opinion I think that at the end of the day the german tax authorities won't count this split as tax relevant, but I have the feeling that this will be a decision made afterwards. Saying that I'm afraid that the german brokers will forward the capital gain tax to the german tax authorities and later they will make an announcement that this was wrong. The problem is that the once forwarded money will be gone and the broker will just consider the already paid tax for future trades by not charging you due to the correction via Aktienverlusttopf. This is of course just my opinion and not a advise or official statement. But I tried within the last 2 days everything to get a official statement without success.
The BMF has no official statement on this srock split. The WM didn't forwared yet any data to the Broker about the details of this split and the Broker doesn't know what to do yet and awaits the Wertpapiermeldestelle announcement.

So this sounds in my opinion like I will need to cover my account which will get negativ when the broker pays the divident tax and this will force me to sell Tesla shares to balance out. When the BMF Bundesfinanzministerium in Berlin should decide later on that this was wrong I won't have any benefits, cause I have realised already my gains which are definitely tax relevant to cover this wrong taxation on the stock split.

Did anyone reached out for BMF to highlight this issue? Did you asked your Brokers whether they have the official WM statement?

This hole thing reminds me of the google split back in 2014, which qas corrected 7 months later in 2015 by the BMF leading to a Delta correction at my broker with zero impact on me as I had to sell my google stocks to cover the taxation on my Euro account.

 

[SpaceCash]

I'm going to tell you right now, nothing is going to happen and you all need to relax and enjoy life.
If I'm wrong, I'll quit posting here forever

 

[ggr]

I'm going to tell you right now, nothing is going to happen and you all need to relax and enjoy life.
If I'm wrong, I'll quit posting here forever

I agree, and if I'm wrong @SpaceCash will stop posting here forever. ;-). Australia isn't Germany (or Austria), but I've been through this.

 

[avoigt]

First of all many thanks to all of you for sharing information on that for many of us critical and important topics. It's for me another testimony of the tremendous value TMC provides by bringing information and smart people together.

For me that we all must even discuss this is pretty nuts tbh and reminds me of the 'going private' situation. At the end, no one of us gains anything from the split, therefore its a none event but without written and official clarity we are of cause exposed of tax authorities using laws in their interpretation.

I can add that I received a PM from a Swiss Twitter poster where an advisor from KMPG and EY checked that matter and also gave the answer it's in their opinion NOT a taxable event in Switzerland. Congrats to Switzerland!

I see in the above posts similar positive information for many countries and some conflicting for Finland. With, if I am not mistaken for almost all international countries following the logic and meaningful approach to consider it as a not taxable event I only can hope that this applies to my home, Germany too.

Here in Germany, the situation is not yet formally clarified I believe. My broker Cortal Consors did not give me a response and still investigates the matter. The stated not to have received any information and that can take a long time. I read the legal paragraphs above which indeed sound like positive for a not taxable event but that 'just law' of course and it's all about how the local tax authorities in Germany interpret the law.

A German tax advisor also active here on the board informed me yesterday that he was in touch with the local authority in Nuremberg (Landesbehörde in Nürnberg) and the responsible person who is the go-to point for the tax authorities in Bavaria informed that he believes its a taxable event. IMO a federal rule needs to be found and if he says so the federal opinion may be different. The German tax advisor informed me a few minutes ago that he decided to execute today a strategy that includes selling all shares and with hedging to mitigate losses.

I do not believe its a good idea to implement anything until we have better facts and confirmation. There is still time until 21st and anyway I decided already if worst comes to worst for several reasons not to sell any shares until 31st. Right now I am encouraged from the feedback of this board that Germany has good chances to do the right thing and consider this what it is a normal stock split where a definition of dividend with 0 dividends was given.

One risk that remains is that broker depots still deduct the taxes as a precaution until clarity has been given and it can take a long time after 31st until we know. That would be another stupid move that could force many stockholders even if its later considered to be a not taxable to sell stocks. I have large funds invested in Tesla and the deduction on my account would be large as well and there is no chance without selling stock to manage such a situation.

Luckily I decided years ago to put the majority of my stocks in a depot in the US which may not deduct anything but wait which is in any way the meaningful approach.

After my exchange with Martin Viecha yesterday I wait for his response about clarification and expect him to work on that matter as we speak. I do agree that the delivered letter is not really clear in all aspects and could have avoided high blood pressure with many of us.

In fact, the US fact is straight forward on that matter but the many disagree's I received on my post in the investor forum show that many just don't understand what tax authorities in Europe are sometimes used to do and how different the tax laws are in beautiful Europe.

Hoping for the best and let's continue sharing information.

I keep you posted once I hear from Martin