Exit tax on monthly ETF purchases

Question on ETF monthly purchases.

If a person is making monthly purchases of ETF units, is exit tax on gains (41%) required each month?

So, 12 calculations per year? You then roll up these 12 figures and declare the total for the year.

Or have I understood it wrong?

Thanks.

namloc1980

Yeah that's about it. ETF taxation in Ireland is unnecessarily complex and just a compete pain all round.

Timmaay

namloc1980 wrote: »

Yeah that's about it. ETF taxation in Ireland is unnecessarily complex and just a compete pain all round.

I thought you only pay the tax if you dont sell after 8yrs? So yep you keep track every month of what you bought, but you only pay the tax 8yrs later (each bloody month)

Timmaay

Timmaay wrote: »

I thought you only pay the tax if you dont sell after 8yrs? So yep you keep track every month of what you bought, but you only pay the tax 8yrs later (each bloody month)

Sure that how it works?

So, if made 12 monthly payments in 2020 I can't pay tax until 2028?

Can I not just pay at start of 2021, and make a deemed disposal (pretend) in 2028? Assuming that I haven't sold before then.

Timmaay

6 wrote: »

Sure that how it works?

So, if made 12 monthly payments in 2020 I can't pay tax until 2028?

Can I not just pay at start of 2021, and make a deemed disposal (pretend) in 2028? Assuming that I haven't sold before then.

Well if you sell anytime before the 8yrs then that rule is irrelevant, you pay the exit tax there and then. The 8yr rule is more there for people who are planning on buying and holding for like 20yrs, in this case they do not want to pay any tax before the end of the 20yrs, they instead want 100% of the profits to be constantly reinvested so as to grow as much as possible, but that 8yr rule is the government's way of getting their slice sooner. https://www.bluewaterfp.ie/investments/deemed-disposal/#:~:text=What%20is%20deemed%20disposal%3F,tax%20is%2041%25%20of%20profit.

Timmaay

Timmaay wrote: »

Well if you sell anytime before the 8yrs then that rule is irrelevant, you pay the exit tax there and then. The 8yr rule is more there for people who are planning on buying and holding for like 20yrs, in this case they do not want to pay any tax before the end of the 20yrs, they instead want 100% of the profits to be constantly reinvested so as to grow as much as possible, but that 8yr rule is the government's way of getting their slice sooner. https://www.bluewaterfp.ie/investments/deemed-disposal/#:~:text=What%20is%20deemed%20disposal%3F,tax%20is%2041%25%20of%20profit.

What if you cash in after 7 years for example? How is the tax calculated, assuming monthly purchases all the way?

Is it 12 calculations per year? You then roll up these 12 figures and declare the total for the year?

Do you also pay yearly, or is it best to just wait until you either cash it in or deemed disposal?


Sorry, a lot of questions! I'm used to buying and selling regular shares and just deal with CGT!

Supercell

Would be better off buying them this way as an AVC in a PRSA, none of this nonsense to worry about, though claiming tax back on your AVC's if not done at source, well thats another fun exercise

namloc1980

Timmaay wrote: »

I thought you only pay the tax if you dont sell after 8yrs? So yep you keep track every month of what you bought, but you only pay the tax 8yrs later (each bloody month)

They are taxed on the gross roll up regime. So if you are buying into ETFs monthly you don't need to worry about any tax on the gain until you either sell the ETF (actual disposal) or you reach the 8th year anniversary of your first purchase and every 8 years after that (deemed disposal) - whichever happens first. Then you have to pay flat tax of 41% on the gain. Bear in mind that unlike CGT you can't offset losses in one ETF against gains in another.

You also need to remember that there are 2 types of ETF: accumulating or distributing. Accumulating ETFs retain any dividends within the ETF and you don't need to pay any tax on these gains as they accumulate (which is great) - the tax will be dealt with on disposal. Distributing ETFs will pay you a dividend and you pay 41% tax on those (not so great).

namloc1980

namloc1980 wrote: »

They are taxed on the gross roll up regime. So if you are buying into ETFs monthly you don't need to worry about any tax on the gain until you either sell the ETF (actual disposal) or you reach the 8th year anniversary of your first purchase and every 8 years after that (deemed disposal) - whichever happens first. Then you have to pay flat tax of 41% on the gain. Bear in mind that unlike CGT you can't offset losses in one ETF against gains in another.

You also need to remember that there are 2 types of ETF: accumulating or distributing. Accumulating ETFs retain any dividends within the ETF and you don't need to pay any tax on these gains as they accumulate (which is great) - the tax will be dealt with on disposal. Distributing ETFs will pay you a dividend and you pay 41% tax on those (not so great).

Ok, this makes sense.


Do you pay same year you sell?

If I sell my my holdings (or part off) in 2020, when's the deadline for payment? CGT for example is Dec for Jan-Nov sales.

And is it paid online (PAYE)?

Thanks

lg123

namloc1980 wrote: »

..... Bear in mind that unlike CGT you can't offset losses in one ETF against gains in another.

WTF?!

Why on earth is there different tax regs for ETFs to a standard share??

Bill Ponderosa

lg123 wrote: »

WTF?!

Why on earth is there different tax regs for ETFs to a standard share??

Fine Gael

The J Stands for Jay

namloc1980 wrote: »

They are taxed on the gross roll up regime. So if you are buying into ETFs monthly you don't need to worry about any tax on the gain until you either sell the ETF (actual disposal) or you reach the 8th year anniversary of your first purchase and every 8 years after that (deemed disposal) - whichever happens first. Then you have to pay flat tax of 41% on the gain. Bear in mind that unlike CGT you can't offset losses in one ETF against gains in another.

You also need to remember that there are 2 types of ETF: accumulating or distributing. Accumulating ETFs retain any dividends within the ETF and you don't need to pay any tax on these gains as they accumulate (which is great) - the tax will be dealt with on disposal. Distributing ETFs will pay you a dividend and you pay 41% tax on those (not so great).

Don't forget if you're buying monthly, after 9 years, you will have an exit tax calculation to do each month.

GreeBo

McGaggs wrote: »

Don't forget if you're buying monthly, after 9 years, you will have an exit tax calculation to do each month.

It's easier to sell them all once the first is 8 years old, then re buy them all back the same day.

The J Stands for Jay

GreeBo wrote: »

It's easier to sell them all once the first is 8 years old, then re buy them all back the same day.

Definitely. I'd rather the transaction costs than the hassle.

GreeBo

McGaggs wrote: »

Definitely. I'd rather the transaction costs than the hassle.

Buy the free ones!