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ETFs taxation in ireland

  • 25-01-2023 10:52am
    #1
    Registered Users Posts: 8


    The high rate of tax (41%) , deemed disposal after 8 years, hinders the Irish investors ability to tap into the world of ETF investments. 


    I came across a report on revenue regarding the taxation of EU and Irish domiciled ETFs. 


    It also states that ETFs domiciled else were are not taxed the same, instead are treated as stock, in terms of taxation. See link below.


    My question is, how to find these ETFs ? Or can they even be purchases from Ireland? 


    https://taxinstitute.ie/wp-content/uploads/2022/01/Revenue-Paper-on-Exchange-Traded-Funds-TDM-27-01a-03_.pdf 



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Comments

  • Registered Users Posts: 19,421 ✭✭✭✭cnocbui


    If you can find a platform that allows you to buy Australian shares, I'd imagine they would let you buy the many ETFs in that market.



  • Registered Users Posts: 193 ✭✭dumb_parade


    Firstrade is one platform I’m aware of that allowed you to trade us etfs with normal ctg rules applying



  • Registered Users Posts: 672 ✭✭✭techman1


    An article in the independent yesterday said that minister mcgrath is doing a review of the whole exit tax deemed disposal regime in relation to etfs. Maybe they are going to simplify it so that etfs are taxed the same as shares



  • Registered Users Posts: 70 ✭✭thedarksh1te




  • Registered Users Posts: 377 ✭✭Saudades


    US ETF's are now also taxed at 41% since 01.01.23.



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  • Registered Users Posts: 672 ✭✭✭techman1


    There is no concrete rule regarding them, revenue just removed their previous clarification that they were taxed under CGT, so they just threw the whole thing into doubt again

    It looks like the minister mcgrath wants the whole thing simplified as it is resulting in too much money sitting on deposit as People are petrified of getting caught with wrong taxation bracket for simple investments. No other European country has this complicated taxation regime for simple etf investments



  • Registered Users Posts: 852 ✭✭✭SnowyMuckish


    Keep us updated on any further info here! I’ve been looking to invest in ETFs for the last few years but the tax is so complicated I didn’t know where to start!



  • Registered Users Posts: 20,147 ✭✭✭✭dxhound2005


    I doubt if that is a very big consideration for the Minister. Taxation on EFT's would not be what has led to €150 billion being in bank deposits, along with vast amounts more in the Credit Unions and State Savings.

    Those funds will move whenever it suits the people holding them to do so. Probably never in many cases judging by how many accounts go dormant. But if there was a significant surge into EFT products, would this be a good thing?



  • Registered Users Posts: 19,421 ✭✭✭✭cnocbui


    When you ask about whether it would be a good thing, are you suggesting government's make that determination for investors and act accordingly?



  • Registered Users Posts: 20,147 ✭✭✭✭dxhound2005


    The only thing which might make a big volume of money move is if the banks removed their guarantee (it is not a government guarantee). They have already tried to stop the inflow by making interest rates zero. The government giving more favourable tax treatment to EFT's is not going to make much difference.

    On these forums some people are very critical of those who leave large amounts languishing in deposit accounts. But what would happen if €100 billion arrived into the stock markets in the next year? Would that help the economy?



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  • Registered Users Posts: 672 ✭✭✭techman1


    Well then why are they doing a review of this taxation at the behest of the minister so soon after the last revenue review? Obviously because many people are not happy with it and it explicitly mentioned in the article that large sums of money are remaining uninvested because of this.

    Low interest rates on savings accounts is a completely separate issue .I don't understand why you are posting on this page anyway about etfs when your gripe is really about low interest rates on savings accounts



  • Registered Users Posts: 1,105 ✭✭✭Viscount Aggro


    I read somewhere, they will not change the 41% exit tax, as it's too costly to do, and it exists to protect the life / pensions industry in Ireland.

    Unit funds sold through IBA brokers all deduct 41% at source. A lot of unit funds also have an ETF version traded on exchanges. If ETFs were taxed differently, there would be a huge outflow of money to passive funds.

    They also don't want people investing on their own, want to keep it all in pensions and unit funds.



  • Registered Users Posts: 9,327 ✭✭✭Shedite27


    Life/Pensions industry are on the same side as ETF investors here, they're lobbying to bring exit tax rate down to 33% too, they don't like that DIRT on savings and CGT on shares are lower than 41% on their policyholders. It should be streamlined that the same rate applies to gains on...

    • ETF's
    • Shares
    • Bank Deposits
    • Investment Accounts

    Don't forget Life companies are levied 1% on all premiums too. Sort out the deemed disposal issue and we're all on the level playing field.



  • Registered Users Posts: 1,105 ✭✭✭Viscount Aggro


    Life companies are NOT on the same playing field... thats my point.



  • Registered Users Posts: 1,105 ✭✭✭Viscount Aggro


    Besides, it's not a big area for Irish private investors because of the tax treatment. People are pushed into investment trusts, which are limited.

    I am invested in ETFs, in a big way.



  • Registered Users Posts: 15,230 ✭✭✭✭Supercell


    I've an AVC so ETF's are treated just like shares in that. Surprised to see how few ETF's there are compared to IT's (which is a fraction of what I can get on Degiro and many seem to be arbitarily unbuyable, for example I can buy SMT but not HGT (its "restricted") for reasons only clear to Davy . Might be Davy having a crap selection though. Can only buy UK and Ireland shares/ETF's/IT's with huge transaction fees in it. Ireland the land where property is the only thing anyone thinks of investing in...

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Registered Users Posts: 1,105 ✭✭✭Viscount Aggro


    SMT.

    I warned a friend about buying this.

    It's volatile, holds unquoted, illiquid securities.



  • Registered Users Posts: 2,551 ✭✭✭Yellow_Fern


    I can buy US domiciled ETFS on Tastyworks. It works fine. The wire fees are not so bad. Not sure about the tax though. It is a mine field but if anyone wants to go down this road, PM me and I can give you a referral code for a bonus.



  • Registered Users Posts: 110 ✭✭kennedmc


    I find this confusing as hell I'm looking to put some money into US ETFs.

    If I understand correctly:

    I use my Degiro account to buy VUAA ticker Accumulating (Similar to Vanguard S&P - VOO) that is domiciled in EU I would pay 41% tax on gains. After 8 years I would pay tax on gain even if I hadn't sold?!

    Seems very harsh!



  • Registered Users Posts: 672 ✭✭✭techman1


    Yes it's crazy, in other words you can't invest in ETFS in Ireland essentially. The crazy thing is that many of these ETFS domicile in Ireland for the tax advantages. So the government gives the investment funds big tax breaks but crucifies irish investors that want to invest in these funds



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  • Registered Users Posts: 110 ✭✭kennedmc


    Thanks yes that seems about right supporting the big guys!

    • If you don’t sell your ETF – then every 8 years you will be “deemed” to have sold it and will be liable for tax at 41% on any gains in the preceding 8 years. This means you will have to find the funds to pay the tax even if you haven’t sold them. This will put a lot of people of ETFs.

    Reading up abit more on this -lifted above from Money Guide Ireland. If I invest €100K and after 8 years I have made a gain of €100K I will have to stump up a 41K tax bill?!!!

    If I paid the 41K tax and then 6 months later the value of the ETF fund dropped by 50% (and thus my unrealised gain) do revenue give me a refund.

    How is approach of "deemed to have sold something" even legal? I wonder has it ever been legally challenged as it seems like some made up nonsense!



  • Registered Users Posts: 9,327 ✭✭✭Shedite27


    Yeah deemed disposal was invented in the recession times when Ireland was skint as a way of getting some tax revenue now rather than wait till the person actually sold it. Totally legal. If you feel strongly against it they're doing a consultation on it currently and you should make a submission.


    One way around it is to buy an investment trust that mirrors the ETF, for example S&P500 is available as the JP Morgan American Trust (available on Degiro etc). That's classes as a share so no deemed disposal (and only 33% CGT).




  • Registered Users Posts: 110 ✭✭kennedmc


    Thanks will check it out on DeGiro.

    Interesting re the framework although not sure if I have the expertise to make a submission here :D



  • Registered Users Posts: 2,551 ✭✭✭Yellow_Fern


    What I do is use a self directed PRSA pension to get invest in Vanguard Global Stock Index Fund (IE00B03HCZ61).



  • Registered Users Posts: 110 ✭✭kennedmc


    Thanks Yellow_Fern. I need to do some research here! Can you DM what platform / business supports this in Ireland?



  • Registered Users Posts: 15,230 ✭✭✭✭Supercell


    double post, please delete

    Post edited by Supercell on

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Registered Users Posts: 15,230 ✭✭✭✭Supercell


    Its available on my Davy PRSA AVC account :


    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Registered Users Posts: 12,881 ✭✭✭✭Geuze


    I am curious, do DeGiro report holdings of ETFs to the Irish Revenue?



  • Registered Users Posts: 386 ✭✭willycat


    Curious as to think to "forget" reporting ETFs and avoid paying the tax? Just remember that all brokers ask for your tax residency and, for Ireland, your PPS number when registering. DeGiro has your PPS number, so does any other broker you deal with.



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  • Registered Users Posts: 53 ✭✭adriant900


    How are ETFs taxed within a company? Exit tax or CGT or corporation tax?



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