ETF's

Dempsey

Can anyone help me find out which ETF's are easiest to deal with in terms of paying tax?

Looking to find out the Risk vs Tax Headache

gavmcg92

Dempsey wrote: »

Can anyone help me find out which ETF's are easiest to deal with in terms of paying tax?

Looking to find out the Risk vs Tax Headache

It's a long read but the below and several other posts on that forum deal with the topic. US domiciled ETFs were the better choice but due to changes in European law, they are no longer available on European platforms. I'm just holding the ones that I managed to buy before the crackdown.

https://www.askaboutmoney.com/threads/the-tax-treatment-of-etfs-for-irish-residents.199443/

Dempsey

So if I went onto DeGiro in the morning, i cant buy the US ones?

gavmcg92

Dempsey wrote: »

So if I went onto DeGiro in the morning, i cant buy the US ones?

Have you read the link above?

In particular, many US investment products are now not legally available to residents of EU countries, because as they don’t have an EU-approved KID, they cannot legally be sold to EU residents. Many US ETFs for example can’t comply with EU PRIIPs legislation because parts of the new rules are contradictory to some US financial regulations.

https://www.iamadvisors.com/how-do-the-new-eu-priips-rules-affect-us-expat-investors/

sk8board

I was putting together a generic ETF portfolio on degiro last week and thought I'd share the make-up if its of interest to anyone.
I was looking to average into something relatively generic over the next few years, with the base target of returns over time beating inflation by 2-3% after tax, and paying out some small dividends.

Some quick context: from a personal perspective, this isn't my only investment in isolation at all, I'm just diversifying my risk profile a bit.

50% SWRD (Developed markets): (63% US, 8% JPN, 5% UK, 3% FR). annual charge: 0.2%.

15% EMIM (Emerging Markets): (30% CN, 12% TW, 12% KR). annual charge: 0.18%.

15% VEUR (Europe): (UK 27%,FR:17%,CH:15%,DE:14%). annual charge: 0.12%. quarterly dividend

5% IPRP (EU property): (DE:37%,FR24%,SE:10%). annual charge: 0.4%. quarterly dividend

5% TRET (Global property): (US:57%,JPN:12%,AU:6.5%). annual charge: 0.25%. quarterly dividend

10% AGGH (Global Bonds): (40% US, 15%JPN). annual charge: 0.1%. avg age 6.9 years

Diarmuid

That looks very close to a Total World Market and some bonds. Why now just buy something like VT and some global bond? Save you a lot on the hassle

https://investor.vanguard.com/etf/profile/VT

sk8board

It’s a fair point.
Firstly, I couldn’t find VT on degiro, (what’s the code?) so I built the 3 others instead - emerging, developed and EU.
I know the 60% in US stocks in VT is proportionate to world money markets, but I wanted more in emerging and home markets and a lower % in US.
Also have 10% reit property etfs, which isn’t part of VT.

Diarmuid

That's true but the beauty of buying one ETF is that your management over time is easier ie calculating dividends for tax, rebalancing every year,. You just buy one ETF and forget about it for the next 10-20 years. I started with the same approach as you but over time I just simplified it as much as possible.

studdlymurphy

Do you buy bulk at the start and then sit on it or buy it monthly/weekly or something?

Static M.e.

I dont think it matters whether you buy it bulk at the start or not. What matters is the price (depending on platform) you can ay for each trade. As an example, if you are buying €500 twice a month on DEGIRO, you would be better off, waiting untlil the end of the Month and then spending €1000 in a single trade becuase the trading fee is free (dependent on the EFT in question).

jive

Static M.e. wrote: »

I dont think it matters whether you buy it bulk at the start or not. What matters is the price (depending on platform) you can ay for each trade. As an example, if you are buying €500 twice a month on DEGIRO, you would be better off, waiting untlil the end of the Month and then spending €1000 in a single trade becuase the trading fee is free (dependent on the EFT in question).

Calculating the tax bill after the 8 year deemed disposal rule would be a pain in the nuts if buying weekly. I just buy in a lump every few months to make things easier. Monthly would also be alright but I’d avoid buying weekly.

sk8board

Diarmuid wrote: »

That's true but the beauty of buying one ETF is that your management over time is easier ie calculating dividends for tax, rebalancing every year,. You just buy one ETF and forget about it for the next 10-20 years. I started with the same approach as you but over time I just simplified it as much as possible.

Which world index did you buy and is it on degiro? I couldn’t find any of the more obvious ones, to buy from here.

Cute Hoor

Diarmuid wrote: »

That looks very close to a Total World Market and some bonds. Why now just buy something like VT and some global bond? Save you a lot on the hassle

https://investor.vanguard.com/etf/profile/VT

You can't buy VT on Degiro because Vanguard don't provide KIDs for US domiciled funds to European based investors.

Heres a good link
https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331

antimatterx

jive wrote: »

Calculating the tax bill after the 8 year deemed disposal rule would be a pain in the nuts if buying weekly. I just buy in a lump every few months to make things easier. Monthly would also be alright but I’d avoid buying weekly.

Isn’t the deemed disposable only on certain ETFs

A side note, deemed disposable is a stupid role, how the hell can you come up with something like that. Why do you have to pay tax every 8 years in assets you don’t sell. Fair enough dividends, but rules like this make Ireland a less attractive place for financiers to reside

sk8board

Cute Hoor wrote: »

You can't buy VT on Degiro because Vanguard don't provide KIDs for US domiciled funds to European based investors.

thanks, thats what I figured. I'm happy with what I've put together so.

Viscount Aggro

De giro - can anyone tell me what dividend with holding tax they charge, on UCITS etfs ?

Example is an ETF with an Irish ISIN in the name.
Because the way dividends are taxed was changed in the budget.
From JAN 2020, its 25% tax at source.
From JAN 2021, the broker has to look up your tax return, and tax the payments at your marginal tax rate. That should be fun.

handlemaster

So is it that ETFs can be bought but not from a US exchange but only a european and in euro ? I see s&p 500 iShares and vanguard are to be gotten on degiro but only in euro. Also doesn't say if the dividends are re invested or I dont see it anyhow.

themossinator

I think you can buy Vanguard ETFs on Tradestation

JimmyVik

Sorry if this is a silly question.
Im really confused about the tax on ETFs. Everything I read just gets too complicated for my little brain.

I bought €10,000 "iSHR S&P500 B A" on Degiro a while ago and miraculously if I sold today would make about €1000 profit. Would I have to pay tax on that profit?
Am I allowed to make any profit on that ETF without paying tax on it?

The dividends are reinvested into that fund, so I wouldnt be receiving dividends.

And could I use my capital gains tax allowance of €1270 per year, so that I didnt have to pay tax?

iAcesHigh

JimmyVik wrote: »

Sorry if this is a silly question.
Im really confused about the tax on ETFs. Everything I read just gets too complicated for my little brain.

I bought €10,000 "iSHR S&P500 B A" on Degiro a while ago and miraculously if I sold today would make about €1000 profit. Would I have to pay tax on that profit?
Am I allowed to make any profit on that ETF without paying tax on it?

The dividends are reinvested into that fund, so I wouldnt be receiving dividends.

And could I use my capital gains tax allowance of €1270 per year, so that I didnt have to pay tax?

I had similar question HERE and answer is everything but simple. In short, yes you need to pay taxes probably between 33% or 41% (USA vs EU) and you should have disclosed it on the year you bought some ETF shares. Great article about taxes on ETFs: HERE

JimmyVik

iAcesHigh wrote: »

I had similar question HERE and answer is everything but simple. In short, yes you need to pay taxes probably between 33% or 41% (USA vs EU) and you should have disclosed it on the year you bought some ETF shares. Great article about taxes on ETFs: HERE

Thanks for that. Thats me out of ETFs so.

Tar.Aldarion

JimmyVik wrote: »

Thanks for that. Thats me out of ETFs so.

Don't think there is any better option tbh

Sorolla

A1JX52 is the best there is.
One ETF and nothing else.
Buy and hold.
Stay the course for at lease 15 years.

The best advice I can offer.

JimmyVik

Sorolla wrote: »

A1JX52 is the best there is.
One ETF and nothing else.
Buy and hold.
Stay the course for at lease 15 years.

The best advice I can offer.

I went for this one

EAM | IWDA | IE00B4L5Y983 | EUR





Accumulating, so no dividends to worry about.
Just want a fire and forget investment.

Static M.e.

Sorolla wrote: »

A1JX52 is the best there is.
One ETF and nothing else.
Buy and hold.
Stay the course for at lease 15 years.

The best advice I can offer.

Are you not better off with the Acc version rather than distributing? I've read you should pay less tax.

HillCloudHop

Is there much point in buying an ETF considering the deemed disposal rule will destroy most of your gains if you're planning to hold longterm?

Tar.Aldarion

keeping 60% of gains is better than 0% gains.

Heraclius

Static M.e. wrote: »

Are you not better off with the Acc version rather than distributing? I've read you should pay less tax.

Would the accumulating ETF be seen as purchasing another block of an ETF each time a dividend is reinvested? Would you need to keep track of each reinvested dividend and pay tax after 8 years on that too?

ryanch09

Heraclius wrote: »

Would the accumulating ETF be seen as purchasing another block of an ETF each time a dividend is reinvested? Would you need to keep track of each reinvested dividend and pay tax after 8 years on that too?

As far as I know you don't actually get extra 'shares' of that ETF, so there's nothing for you to track, I could be wrong though, I started investing in accumulating ETFs in July 2020 and haven't seen anything to indicate that I got any extra shares from reinvested dividends, I think the reinvestment is just reflected in the overall price of the ETF (I am open to correction from anyone if I'm misunderstanding)

cowboyjoe

Bought 3 ETF's thru DeGiro that are accumulating and based out of Dublin last year, in April 2020. No investment in anything else since. I plan to hold for the long term 10-20 years as fund for the 3 small kids.

My question is do I need to notify revenue I bought these ETF's? Even though I have no intention of disposal. I am well aware of the deemed disposal exit tax after 8 years.

HillCloudHop

Could you use Investment Trusts as an alternative to ETFs?
Have to pay management fees, but taxed as a stock and no messy deemed disposal rule.

Heraclius

ryanch09 wrote: »

As far as I know you don't actually get extra 'shares' of that ETF, so there's nothing for you to track, I could be wrong though, I started investing in accumulating ETFs in July 2020 and haven't seen anything to indicate that I got any extra shares from reinvested dividends, I think the reinvestment is just reflected in the overall price of the ETF (I am open to correction from anyone if I'm misunderstanding)

Thanks for the information:) I keep putting off investing in an ETF because I'm afraid of getting the tax declarations wrong and ending up in hot water with revenue.

handlemaster

With the very high valuations currently of stocks e.g. Tesla , ETF could be viewed as being considerably more risky than they have previously perceived.

HillCloudHop

HillCloudHop wrote: »

Could you use Investment Trusts as an alternative to ETFs?
Have to pay management fees, but taxed as a stock and no messy deemed disposal rule.

You can buy Investment Trusts on DeGiro.

33% CGT rather than the 41% exit tax mess.

Diarmuid

cowboyjoe wrote: »

My question is do I need to notify revenue I bought these ETF's? Even though I have no intention of disposal. I am well aware of the deemed disposal exit tax after 8 years.

You don't have to notify Revenue.

I think you're missing the point here. If you don't dispose of (some) of them to pay the tax on the gains, then you have to fund the tax with capital from elsewhere, which you have to save outside the ETF. This capital *is* effectively money you would have put into the ETF in the absence of the deemed disposal rule. So in effect you are making the situation worse!. It's likely that you would do better to fund the investment to the 100% of your capital and then sell some to pay of the tax than fund 80% (say) holding 20% in cash to pay the deemed disposal tax.

PietroM

Hi guys, I have more questions on ETF investing in Ireland if you don't mind:

As an example, Imagine an investment of 100K on an ETF:

1. At year 8 I register a gain of 10K, I pay 4.1K tax on unrealized gain.
   1. At year 9 the ETF falls at 90K and I am forced to sell. Can I ask the reimbursement of the 4.1K paid?
   2. Would anyone know how much I need to sell if I decide to pay the 4.1K taking money directly from the ETF? Do I pay taxes on the money I am taking to pay taxes? How would that work?
2. At year 8 I register a loss of 50K, I pay no taxes on the unrealized gain.
   1. At year 9 ETF raises again at 100K and I am forced to sell. Will Revenue consider this as a gain of 50K since year 8 or no gain considering the original investment?
3. At year 6 I decide to leave Ireland permanently for another European country. Do I need to pay any tax in Ireland before leaving? Am I forced to sell my positions? If this happens at year 10, the other European country will ask me Capital gain on the total gain, will I be able to deduct the taxes I already paid in Ireland at year 8 (assuming double taxation agreement) or ask Revenue for reimbursement?
4. I understand losses on one ETF cannot be used to offsets gains in stocks, but what about other ETF?
5. Did anyone make simulations of the real impact of deemed disposal rule on ETF investing? I suspect the ETF must generate very high yield (i.e. very high risk) to provide reasonable returns (considering hyperinflation)

Thanks for your help