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How to tax ETF sold for less than the price at 8-year deemed disposal?

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  • 30-11-2020 11:52am
    #1
    diarmid
    Registered Users Posts: 3 ✭


    The 8-year deemed disposal rule for EU/OECD ETFs works fine if the ETF goes up before you actually sell: you just record the incremental gains in Form 11 322(a).

    If you keep a column in the spreadsheet to record the unit price at 8 year anniversary of the lot, complete Form 11 409(a) at 8 years, use the 8-year value as the new reference for gains when actually exiting, you're good to go, so long as value went up.

    But what if the ETF goes down between deemed disposal and actually selling it?

    Take this:

    Year 0: Invest 10000 EUR to buy one lot of an ETF
    Year 8: Investment in that lot grows to 18000 EUR on its 8th anniversary.
    Year 9: File Form 11, enter 8000 EUR in field 409(a), and pay 41% in tax (3280 EUR)
    Year 10: Investment declines to 14000 EUR, and forced to sell for 4000 EUR realized gains.
    Year 11: File Form 11, supposed to put gain in field 322(a) but it's actually gone *down* 4000 EUR vs Year 8.

    What do you do?

    No way Revenue would accept a negative value in 322(a). The ring-fencing rule prevents you using one ETF's loss to offset another ETF's gain.

    Yet "Part 27-01a-02 - Investment Undertakings", paragraph 4.4.5 on page 14, clearly allows investment funds (e.g. mutual funds) to use over-payments from deemed disposals to reduce exit tax payments and reimburse the unit holder. I would be most disappointed if there was no way to do the same for ETFs.

    Could you for example report zero in Form 11 409(a) until such time as gains from selling other ETF lots have exceeded the 4000 EUR worth of paper gains that vanished since deemed disposal of that first lot?

    Anyone know for sure?
    Tagged:


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