Tax on ETFs - US v EU

gawker

Hi everyone

I've recently started to build a portfolio of ETFs. My current (small) portfolio has a mix of EU- and US-based ETFs. However, after much digging through various threads and online sources, I am starting to think that buying any EU or Irish based ETFs leads to considerable more tax being paid. To anyone with more experience, does the below comparison ring true? If so, is there any logic to having EU-based ETFs in your portfolio?

EU/UCITS ETF| US ETF
Taxed at 41% of profit upon withdrawal | Taxed at capital gains tax upon withdrawal, with any dividend being taxed as income
Taxed after 8 years no matter what | Only taxed CGT after withdrawal
No capital gains tax allowance applies | CGT allowance of €1,270 per annum
No offset between investment losses and wins across portfolio | You can offset losses when calculating CGT liabilities


If the above is accurate, it's very weird the Irish state would make it more expensive to invest in Irish ETFs than American ones.

Strettie11

yes this is correct and seems a baffling decision

alb

Since ETFs are frequently one of the most recommended ways to invest these days many people are asking about this and there will continue to be more threads. It's confusing and everyone is repeating the same work in searching for the answers.

Please can we make this post a sticky and flesh out the original post with links to the various resources (Whether revenue, other threads here, or threads on askaboutmoney) that have the best info about the whole 'buying ETFs in Ireland' disaster?

Strettie11

Revenue Guidance
http://www.revenue.ie/en/companies-and-charities/documents/exchange-traded-funds-guidance-note.pdf

lawred2

gawker wrote: »

Hi everyone

I've recently started to build a portfolio of ETFs. My current (small) portfolio has a mix of EU- and US-based ETFs. However, after much digging through various threads and online sources, I am starting to think that buying any EU or Irish based ETFs leads to considerable more tax being paid. To anyone with more experience, does the below comparison ring true? If so, is there any logic to having EU-based ETFs in your portfolio?

EU/UCITS ETF| US ETF
Taxed at 41% of profit upon withdrawal | Taxed at capital gains tax upon withdrawal, with any dividend being taxed as income
Taxed after 8 years no matter what | Only taxed CGT after withdrawal
No capital gains tax allowance applies | CGT allowance of €1,270 per annum
No offset between investment losses and wins across portfolio | You can offset losses when calculating CGT liabilities


If the above is accurate, it's very weird the Irish state would make it more expensive to invest in Irish ETFs than American ones.

if in a PRSA/Pension Fund do any of the above apply? Whether US or EU based?

wasabi

On EU UCITS ETFs you don't pay USC or PRSI on distributions, though.

I hold some of my portfolio in EU bonds/REITs ETFs for that reason. I expect the reduction of tax paid on distributions to be greater than the capital gains related disadvantages over time.

wasabi

lawred2 wrote: »

if in a PRSA/Pension Fund do any of the above apply? Whether US or EU based?

No taxes on gains in a pension wrapper, so it doesn't matter.

lawred2

wasabi wrote: »

No taxes on gains in a pension wrapper, so it doesn't matter.

tx