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Deemed disposal rule needs to be abolished

  • 03-04-2022 4:52pm
    Registered Users Posts: 87 ✭✭

    Hi everyone, as you know we in Ireland are at an extreme disadvantage when it comes to investing in ETF's because of deemed disposable rule where you have to pay tax every 8 years on ETF's whether you sell or not, please sign this petition to end this crazy rule, I'll copy and paste the petition below if you want to read it and also add the link to the petition

    This is the link

    "This petition calls for the abolition of the deemed disposable rule for exchange traded fund's(ETF)

    Right now in Ireland when you invest in a ETF such as the "Vanguard S&P 500 ETF" or "iShares Core World ETF" you have not only to pay a maintenance fee to Vanguard or BlackRock but also have to pay a higher rate of tax of 41% compared with 33% for individual stocks, and if that was not harsh enough the government say you have to pay that 41% tax every 8 years whether you sell your investment or not, and in doing so killing compound interest, Albert Einstein called compound interest the "8th wonder of the world" the very thing that makes it worth while holding an ETF fund in the first place.

    Another point is that in allowing compound interest to work would result in a far higher tax take for the government.

    The majority of financial advisors and top investors recommend being in a diversified fund for good returns on your investment and for the safety of your money.

    The Irish government is knowingly or unknowingly pushing the Irish people into riskier investments i.e. individual stocks, property, etc. and in doing so putting the ordinary person at a greater risk of losing their savings.

    As Warren Buffet said that the majority of people should be invested in ETF funds as they are far safer than picking individual stocks.

    The abolition of deemed disposable for ETF's would provide a fairer treatment of Irish citizens and push them towards a safer investment than is currently available when investing in the Republic of Ireland"

    This is the link

    Also I'll be sending this to the minister Paschal Donohoe, Leo Varadkar, Micheal Martin and others,

    Feel free to do the same


  • Registered Users Posts: 153 ✭✭Marymoore

    Hi OP i completely agree that rule is ridiculous. Does the S&P have compound interest? How does it work? I understand the price can go up annually but I dont see compund interest added?

    also what maintenance fees do you need to pay? thanks so much

  • Registered Users Posts: 87 ✭✭Covieland

    Hi Mary,

    Standard & Poor's (S&P) is a Fund provider, One of their fund's the "S&P 500" is a Fund with the top 500 US companies. last year it went up something like 24% but this year so far it's down 5%, It has historically grown at an average rate of 8% per year since it was introduced in 1982. Most financial advisors and top investors advise people to be in a diversified fund like the S&P 500, so if one or two of the 500 companies were to fail it wouldn't affect your investment that much.

    I'd only invest into it or any other Investments if you don't need the money for 5 years because when the market crashes it usually takes 4 years for it to recover like in 2008 and other previous crashes.

    Here is a link to a YouTube video to explain compound interest

    Hope this was helpful

    I'm not a financial advisor just very interested in the topic and I invest

  • Registered Users Posts: 87 ✭✭Covieland

    The maintenance fee fo is around 0.25% or less per year.

    Your question about compound interest I would answer it by saying if you invest €1000 and it grows 8% it would be worth as below

    Year - Interest - Total interest - Balance

    0 -- -- €1.000,00

    1 €83,00 €83,00 €1.083,00

    2 €89,89 €172,89 €1.172,89

    3 €97,35 €270,24 €1.270,24

    4 €105,43 €375,67. €1.375,67

  • Registered Users Posts: 153 ✭✭Marymoore

    Thank a million. Do you think now is a bad time to invest with everything going on (war inflation etc)

    also I understand now about compound interest but on the S&P , there is no interest just the price changes all the time

  • Posts: 0 [Deleted User]

    You should try to learn about "dollar cost averaging". Basically you invest a consistent amount on a monthly basis so you'll get the long run market average.

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  • Registered Users Posts: 87 ✭✭Covieland

    100% agree with brainboru1104

  • Registered Users Posts: 10 definitedragon

  • Registered Users Posts: 2,994 ✭✭✭Taylor365

    Lets raise the laughable 1270 CG allowance while we're at it.

  • Registered Users Posts: 1,039 ✭✭✭lg123

    Best of luck with this petition. This rule blatantly benefits professional fund managers and pushes retail investors away from lower risk investments. I have never heard, nor can I think of, an economic benefit to this rule.

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  • Registered Users Posts: 3,098 ✭✭✭Browney7

    Presumably the powers that be would argue it stops someone with say 1 million quid parking it in a fund for 40 years and it takes 40 years for the government to get their pound of flesh.

    Agree with the sentiments expressed by the op but the state doesnt want investors or savers, it wants consumers to get VAT, VRT on cars etc. And of course "thou shalt buy property, the only asset class in Ireland" attitude prevails

  • Registered Users Posts: 2,994 ✭✭✭Taylor365

    Think the general consensus in Ireland is, "Thou shalt not become wealthy!"

  • Registered Users Posts: 700 ✭✭✭techman1

    I think that at least the distinction between ETFs that pay out dividends every year whereby you are paying tax every year on the dividends aswell should be made. Afterall Pascal Donohue in a reply to a dail question from Jim Mcguinness on this very question said that the reason for "deemed disposal" was because ETFs dont pay any tax until they are sold (if deemed disposal was not in place) . However revenue won't use this as a simple way of distinguishing "gross roll up" etfs from CGT etfs. In fact they could not even come up with a reason to remove US domiciled etfs from the previous clarification that they were taxed under CGT.

    Therefore it especially should be emphasised that ETFs that pay out dividends should not be included in deemed disposal as the 41% tax was put in place to take into account that dividends that are rolled up in a fund or etf dont pay any tax until the "deemed disposal". Therefore it should be challenged that revenue are completely wrong in including ETFs that pay out dividends in "deemed disposal" as this is double taxation

  • Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,292 CMod ✭✭✭✭Pawwed Rig

    It is not going to get better any time soon either. The mantra is tax the rich but 'the rich' seems to be anyone on more than 35k.

  • Registered Users Posts: 187 ✭✭someday2010

    Yet again, a massive middle finger to you the hard working person who ‘gets up early in the morning’ by the Irish system which has been designed to crucify anyone trying to get ahead and reward hand over fist anyone who wants to do nothing.

    To add further insult, this massive middle finger is given to you by some lazy useless parasitic civil servant in Revenue who is guaranteed a free fat pension paid for by you and which of course is predominately invested in tax tree Index Fund ETFs with no deemed disposal.

    The whole philosophy on taxing ETFs is absolute bonkers and makes no sense. Yes, ok if you don’t tax the dividend income annually on accumulating ETFs then fair enough implement deemed disposal but stay the F away from disturbing ETFs with deemed disposal, tax the dividends as income and capital gains as capital gains.

    it would not surprise me, if next year they extend deemed disposal to individual stocks given how spiteful the Irish government is to domestic investors.

  • Registered Users Posts: 700 ✭✭✭techman1

    "it would not surprise me, if next year they extend deemed disposal to individual stocks given how spiteful the Irish government is to domestic investors."

    I doubt they could do that, they are on fairly shaky ground as it is trying to include US domiciled etfs in the deemed disposal regime. There is something stopping them from being explicit about whether US domiciled etfs are actually "deemed disposal" investments or not. Its up to the individual investor to make that call themselves

    If they were to try and bring in deemed disposal for individual shares well then they would have to include alot of other assets like property etc. As it is ireland is a complete outlier in Europe with this "deemed disposal ". If they tried to cast the net on this wider they could frighten the horses especially regarding FDI. American executives would baulk at this and refuse to relocate to ireland or skilled employees would refuse to relocate to ireland

    Post edited by techman1 on

  • Registered Users Posts: 9,361 ✭✭✭Shedite27

    I'd obviously love to pay less tax, but this is so politically unpopular right now, there isn't a hope of it changing. SF would have a field day if FF/FG tried to change it for those that can afford to invest. And SF could never do it in power as it'd be seen as taking away money from those on low incomes to give to those on high incomes.

  • Posts: 0 [Deleted User]

    Wouldnt you better off with an 8 year DD accumulating ETF rather than paying tax on your distributing ETF dividends each year? With the 8 year accumulating ETF all your dividends are accumulating and compounding tax free over the 8 years...and then you pay tax on what would be a higher amount than a distributing ETF where you would be paying tax on your dividends each year, missing out on the tax free compounding.