Any advantage to buying a stock on a foreigh exchange vs. its ADR on a U.S. exchange?
Specifically, other than a possible currency exchange rate advantage, is there any difference in buying stock in a foreign company through its own foreign exchange, or as an ADR on one of the U.S. stock exchanges with regard to the way dividends and capital gains are taxed?
Answers
419 points
TeachMeMore answered one year ago …
Not that I know of. There may be issues with voting rights if you purchase the ADR, but for tax and dividend purposes, everything's the same.
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2769 points
Oldman answered one year ago …
The ADR & ADS sponsors charge a small fee to process the dividends...about 2 cents/share...and this is a fee that is deducted from the dividends before your brokerage even sees them to distribute. If there aren't dividends, the ADR/ADS sponsors will actually "sell" an equivalent amt of shares/yr. This is recent (since 2006) and a real difference from the purchases on foreign exchanges.
Other advantages if th foreign trades are executable at no special charge...better spreads and better reporting of financials. The ADR's are notoriously late for filing notices from the companies, while the e-mail notices from the foreign exchanges are very prompt. I received a long "shareholder" notice from RWE, and another from ACH, more than a week after the voting closed, from BONY_Mellon.
