ADR question?

[rayray]

I notice through my brokerage, Vanguard, I received "x" amount of dividends from RDS.B and the fractional shares were then converted to RDS.A shares that will be converted to cash.

Is this the process for all ADR's? No fractional shares?

I didn't contact Vanguard yet. Just not sure if this process is unique to all ADR's or if it depends on the brokerage concerning ADR stocks.

If I would have known this, I would not have re-invested the dividends in RDS.B stock.

[rayray]

Okay, I just got off the phone with Vanguard and this is what I found out concerning Royal Dutch Shell (RDS.B/RDS.A) shares.


First, to own fractional shares of any security one has to own at least ONE FULL SHARE of that security. If ONE FULL SHARE is owned fractional shares are allowed to be held in that security, if for some reason, ONE FULL SHARE is not owned any FRACTIONAL SHARES will be then converted to CASH and deposited into your settlement account.

Being from the United States as a Royal Dutch Shell shareholder for tax purposes I own RDS.B shares to avoid that 15% tax withholding hit if I owned RDS.A shares. See link for further explanation.

http://www.shell.com/global/aboutshell/i...e-a-b.html

As a RDS.B shareholder I get a dividend, I recently changed that dividend option from cash to reinvest. However, Royal Dutch Shell does not give you dividend RDS.B shares, instead, you receive RDS.A shares. But if you don't own at least ONE FULL SHARE of RDS.A those fractional shares will automatically be converted to cash and deposited into your settlement account. So, in order for you to reinvest your Royal Dutch Shell dividends and keep those shares you will have to own at least ONE FULL SHARE of RDS.A.

[ronn38]

you are correct...not so fair I think, but its what they do :-(
I have the same trouble, have for the years I've owned RDS

Ronn

[rayray]

It's confusing and I'm trying to wrap my head around it.

Maybe I'm misunderstanding it, but here it goes, please correct me if I'm wrong. As you can guess I'm no tax or stock expert lol.


In the United States you have two different shares of Royal Dutch Shell:


RDS.A shares, with dividends subjected to a 15% Dutch tax withholding

RDS.B shares, with no tax on dividends

Now, if you own these shares in a brokerage account I don't believe it much matters in what stock you buy because you can get that 15% Dutch tax back by filling out the proper paperwork with the IRS, i.e., foreign tax credit. Of course, our government expects you to pay the proper taxes when due whether cash received or divi's reinvested. I guess this falls under choose your poison!

Now, there is a Scrip Program that a shareholder can sign up for that will greatly benefit the shareholder. When signed up, the Scrip Program allows the shareholder to receive divi's exempted from the 15% Dutch tax withholding. However, one has to remember the United States expects the shareholder to still pay their proper taxes due, in other words, the Scrip Program does not exempt you from the United States tax system. Even with divi's reinvested will not be considered tax deferred because shareholder has a choice to receive divi's in cash. But remember, entering the Scrip Program you are agreeing to reinvest your divi's while participating in the program, the shareholder agrees not to receive the cash.

All divi's will be re invested in RDS.A shares not RDS.B shares, this is where owning at least ONE FULL SHARE of RDS.A is important! All fractional shares will be sold with proceeds deposited into your settlement account.

If the rules did not change there is a LOOPHOLE.

Buy shares in a RETIREMENT ACCOUNT and make sure you are signed up in the Scrip Program in order to take advantage of not paying 15% Dutch tax on your divi's. If you are not signed up in the Scrip Program you will pay the 15% Dutch tax and loose that money FOREVER because the United States does NOT ALLOW the shareholder to benefit from the FOREIGN TAX CREDIT when owning such a stock in a retirement account. Participating in the Scrip Program when holding Royal Dutch Shares in a retirement is the tax loophole. I believe the shareholder has to fill out the proper paperwork for both RDS.A and RDS.B shares. Remember, all divi's have to be reinvested and all divi's will be reinvested in RDS.A shares even if you own RDS.B shares.

If one doesn't want to participate in the program anymore, i.e., wants to receive the divi's in cash instead, simply sell your RDS.A shares (tax free), and keep your RDS.B shares but change the cash/reinvest option.

In order to sign up for the Scrip Program contact your respective brokerage.

Confusing? You bet!

Now, like I said if I'm wrong just kick me in the balls then correct me.

See link below

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http://s01.static-shell.com/content/dam/...s-2015.PDF

[ChadR]

The way I understand the SCRIP program you are correct, but I've never dealt with it so I could be wrong just like you are.

[rayray]

Today, I called Vanguard about participating in the RDS Dividend Scrip Program. From what I was told is that Vanguard does not participate in this program; however, as long as you own and participate in reinvesting all of your RDS.A and RDS.B shares back into company stock the shareholder will not be hit with a 15% Dutch tax. That is as long as you REINVEST ALL of YOUR DIVIDENDS. If one chooses to receive cash in lieu of reinvesting dividends back in RDS stock then the shareholder will have to sell all of their RDS.A shares in order to avoid the Dutch tax, keeping the RDS.B shares and receiving a cash payout from your dividends will impose no taxes on the shareholder. Vanguard said that this is a unique investment and that the shareholder has to pay attention because laws/regulations may change in the future but as of right now as long as both share classes are owned and all dividends are 100% reinvested in company stock no Dutch taxes are imposed. They also said that not all brokerages are the same regarding this stock; in other words, with some brokerages the shareholder will have to sign up for the RDS Dividend Scrip Program.

We will see how this pans out, I now own both RDS.A and RDS.B shares and will reinvest all future dividends in company stock. If for some reason I am taxed I will then sell all of my RDS.A shares and collect the cash payment from RDS.B, all of this is being done in my Vanguard ROTH account.