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Alcatel-Lucent Message Board

  • tradestoxx11 tradestoxx11 Jan 13, 2013 12:42 PM Flag

    New French Tax on purchases and ADR fee....

    Reading a few posts on this there seems to be some confusion on these issues. The following is my understanding on both issues...

    1) New French tax. This tax began on Dec. 1st. Some brokers started it right away..others are just now modifying their systems to begin collecting it. This is a TAX being imposed by the French Government on PURCHASES of French stocks trading here in this country as ADR's. The TAX is equal to .20% of the total purchase price of the transaction itself. In other 10,000.00 worth of ALU and you will be taxed 20.00 in addition to whatever commissions you pay your broker. Daytraders however need not worry because it is based on the NET amount PER DAY. In other 10,000 worth of ALU and SELL 10,000 worth of ALU on the SAME day and your tax is Zero.

    2)ADR FEE. This is NOT new. this is based on the number of SHARES you own. Last year the fee was .02 cents PER SHARE. The year before it was .01 cent per share. This can certainly be more costly than the new Tax. If you own 50,000 shares for example and the fee this year is .02 cents...your fee will be 1,000.00. This is once per year as opposed to the tax which is every time you buy shares.
    Last year BNY Mellon was the one assessing the fee which is passed down to your broker and then to you. Someone posted that this year it will now be Wells Fargo. That may be the case. I am somewhat hopefull that if a switch was made it was to help benefit the shareholders. On the other hand though..i'm not too hopefull about that and i would plan on it being 2 cents again. This will be assessed against shareholders as of a certain record date. I don't know the date but i believe last year it was in February (or maybe March..but i think it was feb). Is there any way to avoid it? Sell and try to buy back after the record date. BUT..maybe you won't be able to buy back at that price and then you're out the stock and will pay more for it PLUS commissions PLUS the new tax to get back in your position.
    It might also be that the stock trades down ahead of the record date and so you'd never get back in at the same price anyway. all in all..probably best just to stay the 2 cents....and hate the fact it happens.

    You do know the old saying..death and Taxes..right? Welcome to France where they do all they can to get as much as they can. And actually...while i could be wrong..i think the ADR FEE itself goes mostly to ALU anyway. the .20 % tax a french tax.

    In any event..this is my understanding of both issues. Perhaps someone knows the record date and can fill in that blank. While personally this will be a BIG amount of money for my 27% portfolio position I won't be doing anything other than holding and paying it.

    I think the stock will be 2.50 a year from now and so....who cares about 2 cents?

    Not me. :)


    Sentiment: Strong Buy

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    • Thanks for all your explanations but is this ADR fee tax deductable? If so, on what category? Interest expense like the margin we can offset with any dividend/interest income? Since i also have huge number of ALU, i am not happy with this extra 2c/share every year! I don't plan to sell this share in single digits and i am a long term investor who normally waits for 3-5 years or even longer.

      Sentiment: Strong Buy

      • 1 Reply to palmspawn
      • The tax issue is an interesting question. For starters...the .20% New fee when buying is a TAX and therefore could be deducted as foreign taxes paid IMO just like when a foreign company pays a dividend and taxes are withheld.

        As for the ADR Fee...Normally it's DEDUCTED from the dividend when a company pays a dividend and therefore is normally treated as an investment Expense for those who itemize and is subject to the 2% of adjusted gross income rule. That makes perfect sense because the ADR fee is being paid to generate that dividend income.

        In ALU's case however..there is no dividend being paid and so this fee is really being paid to generate a capital gain and so i'm wondering if it could be added to the cost basis of the stock.
        I don't know the answer to that as of now but NORMALLY it's an investment expense. but again..everytime i've seen it listed as that on my returns it's been associated with a dividend being paid as well.

        Good question for a CPA and/or the IRS I'd say.

        Sentiment: Strong Buy

    • also......

      "On another front, Congressman Tom Price (R-Ga.) authored a bill in November that would bar the U.S. government from enforcing a tax by foreign governments on securities trades in the U.S. H.R. 6616 has six co-sponsors has been referred to the House Ways and Means Committee.

      A paper put out by SIFMA for its members notes that the French government, by itself, is unlikely to enforce a tax on the trading of French ADRs in the U.S."

      Sentiment: Strong Buy

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