ETFs - just not worth the hassle in Ireland?

Cameron326

Hi there, having done a fair bit of reading now on the subject, it’s seems to me that purchasing ETFs when resident in Ireland as a long term investment is just not worth the hassle. Would you agree with that? Reasons are as follows:

1) whopping 41% exit tax on any gains
2) nightmarish 8 year deemed disposal, effectively meaning you have to sell a big chunk thus destroying your accumulative gains .. or otherwise find big sums out of your own pocket to forward pay the tax. And not just once, but year after year after the 8 year mark is reached.

A couple of other reasons too, but they’re the main ones. Seems such a shame, as in virtually every other country ETFs seem a no brainer for any investor who is looking for some fairly secure longterm plays and doesn’t fancy getting into property.

So having already maxed out my tax free personal pension plan limit, I will probably instead just hand pick half a dozen stocks ... or otherwise just put even more into my personal pension plan, despite the higher fees, as at least I don’t have to deal with the 8 year nonsense.

As I’m self employed, I do have an accountant already, but the 8 year deemed disposal with then constant ongoing reporting of gains for ETFs just sounds like such a headache. I’ve also looked at nonETF investment funds, but again the playing field in Ireland especially post Brexit + higher fees seems to make them not necessarily a better play than ETFs (even though they’re only taxed at 33%?).

Any thoughts much appreciated!

dubrov

Do you know what the situation is with US domiciled ETFs?
I had read that gains are subject to Capital Gains (33%) and no 8 year disposal rule.

Bacchus

Can you share any links on this? I'd no idea there were special rules around ETFs. I've one ETF (that's doing nicely so far) but if there's extra strings and tax headaches, I think I'd rather just go and pick 5 stocks from the sector myself.... or this that a bad idea too?

Mad_maxx

dubrov wrote: »

Do you know what the situation is with US domiciled ETFs?
I had read that gains are subject to Capital Gains (33%) and no 8 year disposal rule.

unfortunately you cant buy them anymore , not available to irish residents

jive

When you could buy US domiciled ETFs it was fine - 33% CGT and no deemed disposal. The ETFs available now are penal tax-wise and it makes other investments more appealing. I've read about investment trusts which seem to be a good alternative.

I sold all of my non-US domiciled ETF holdings, paid tax on 41% of the gain and purchased property which I never wanted to do but I've maxed out my AVCs and all other after tax investments are extremely unappealing due to tax treatment here. I'd rather have a rental income, deal with being a landlord and have the potential capital appreciation.

For what it's worth, I still hold all my US domiciled ETFs which continue to snowball nicely. If they change the deemed disposal rule or there's a method of investing into US domiciled ETFs again I would sell my properties in a heartbeat as I've no interest in being a landlord but I feel as though the rules of the game have forced my hand here.

In Ireland we seem to penalise the financially prudent while sleepwalking into a pension crisis and the reality is the Government are aware of it but are not bothered due to short-term thinking as a result of cyclical FF/FG governments. My only hope is that there will be enough folks in white collar jobs, still earning but unable to spend and unable to get a return on savings the traditional way, will start to make some noise. Irish Savers Action Group (hilarious that we even need such a group) are doing some work on this.

Another alternative is investing into the likes of Berkshire Hathaway but I would not be comfortable with this due to the risk associated with it being just 1 company and not a diverse ETF.

TL;DR
ETFs not worth it in Ireland right now. Look at Investment Trusts or property investment instead.

Bacchus

Thanks for the info. Balls to that anyway. I'll shift my ETF later today and put it back in to a few stocks on my watchlist.

Static M.e.

These posts on EFTs from the An Irish Investor are worth a read.

This is also interesting from Ms Money Hacker on ETFs vs. Trusts.

Cameron326

Bacchus wrote: »

Can you share any links on this? I'd no idea there were special rules around ETFs. I've one ETF (that's doing nicely so far) but if there's extra strings and tax headaches, I think I'd rather just go and pick 5 stocks from the sector myself.... or this that a bad idea too?

This one is for starters.
https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331

As others said, you used to be able to purchase US based ETFs which were only charge 33% CG, but that is no longer possible.

Cameron326

I *think* any Investment Funds/Any kind of collection of stock that isn’t an ETF (I’m not an expert here!) are only taxed at 33%. Can anyone confirm that as I’ve seen conflicting information.

However, the disadvantages are that Investment Funds :

A) incur annual fees (though these are not necessarily all that high) and

pay out dividends rather than accumulate - which means you/your accountant has tax work filing that needs to be done annually as opposed to just on selling.


That’s why I’m thinking they’re not all that preferable to ETFs, and that individual stocks, while arguably that bit riskier, are much clearer and easier to deal with. I might also have to look at property in future too, though I’ve never really had any interest in being a landlord! Thoughts?

Kilough

Not an expert on ETFs or the associated the tax implications but what about this option from Trading 212? Does anybody know how this 'Pie' option is seen from a tax point of view, I am assuming any gains would be taxable as standard stocks and not as a US based ETF? If wanting to track an active ETF, there is a bit of legwork keeping up to date using this option so not totally ideal but might work for some.

https://europoor.com/buy-ark-etfs-via-trading-212-pie-feature/

Kilboor

Kilough wrote: »

Not an expert on ETFs or the associated the tax implications but what about this option from Trading 212? Does anybody know how this 'Pie' option is seen from a tax point of view, I am assuming any gains would be taxable as standard stocks and not as a US based ETF? If wanting to track an active ETF, there is a bit of legwork keeping up to date using this option so not totally ideal but might work for some.

https://europoor.com/buy-ark-etfs-via-trading-212-pie-feature/

Using the Pie feature on Trading 212 you are buying individual stocks so it's only liable for CGT of 33%

Cameron326

That pie thing is pretty decent. Unfortunately I’m on Degiro which doesn’t have that feature!

Kilough

I've only got Degiro myself but I think I'll set up a 212 account and try this out. Want to add the ARKF to my portfolio

neris

Our government and tax authorities really make it hard for anyone with a bit of extra money to try and build a financial cushion to get them through life.