ETFs taxation in ireland

Supercell

https://www.boards.ie/discussion/comment/123235122#Comment_123235122

Exactly this, I'm with Davy and have an AVC PRSA with them. Every month I buy some EQQQ and VUSA, soooo wish they were taxed like shares outside the PRSA as my pension account returns far outstrips my stock picking account with IBKR! With far less stress too.

Geuze

https://www.boards.ie/discussion/comment/123229851#Comment_123229851

Tax relief is available on pension contributions.

Where you place the funds is a secondary issue.

If the fund is within a pension vehicle like a PRSA or a AVC-PRSA, then the pension contributions attract tax relief.

Peregrinus

https://www.boards.ie/discussion/comment/123236365#Comment_123236365

This.

Pension schemes are not an investment class of their own. They are just a tax-efficient vehicle for making investments of a wide range of classes. There are a few restrictions on pension scheme investment but, broadly speaking, most investment classes that are avalailable outside a pension scheme are also available inside a pension scheme — equities, property, bonds, cash, etc. In particular, there is no reason why pension scheme funds cannot be invested in an ETF.

techman1

I heard an investment funds guy on newstalk promoting that industry in Ireland. He made reference to the very high and onerous taxation on funds and ETFs in Ireland and this is contrary to the consensus that people need to be encouraged to invest in productive assets rather than leaving their money on deposit wasting away. Later on he said that Ireland is the domicile of 70% of the entire European ETFS worth trillions of euros. Yet he wasn't asked about the contradiction and anomaly whereby Ireland attracts all this ETF money but then actively dissuades Irish retail investors from taking part in this. Why isn't more pressure put on Irish government by exposing this anomaly by embarrassing them on the international stage

Peregrinus

https://www.boards.ie/discussion/comment/123492509#Comment_123492509

Far from discouraging investment in productive assets, the ETF taxatation regime is intended to produce a (more or less) level playing field as between investing in deposits on the one hand, and in ETFs and managed funds on the other. The ETF taxation is supposed to be the analogue of DIRT.

Nody

https://www.boards.ie/discussion/comment/123492509#Comment_123492509

Because the Irish market is not big enough to matter to them? They are here for tax purposes; not to sell on the local market.

Geuze

AFAIK, exit tax was meant to be DIRT +3%?

So it was 23% years ago.

Then DIRT was increased, so exit tax also rose.

Now DIRT has been cut, but exit tax has been left at 41%.

Bonkers.

dxhound2005

From Raisin Bank.

"As of 2021 (and still the case in 2025), the tax rate for DIRT stands at 33% of your total interest. The DIRT rates for previous years were: 2020: 33% 2019: 35% 2018: 37% 2017: 39% 2014-2016: 41% 2013: 33%."

If it meant to tax interest over 8 years, then there was not a 41 v 33% advantage for DIRT all that time.

This bit is from a pre 2025 Budget submission by Brokers Ireland. It is the only reference to 3% that I can find, and I don't think a 3% link between DIRT and ETF was ever part of any government policy? Life Assurance Exit Tax is another category getting hit by 41%. But in the bigger scheme of things, losing €410 out of €1,000 interest instead of €330 is not the end of the world.

"The LAET and DIRT rates became unlinked from the standard rate of income tax from April 2009 when the rates moved to a rate linked to the then CGT rate. However, by 2014 the DIRT and exit tax rates had both increased to 41% but the CGT rate was and still is 33%. Following Budget 2017 the DIRT rate was reduced in 2% annual steps to the CGT rate of 33% by 2020, but the exit tax rate has remained at 41%. While all rates increased since 2002, the relative position of the LAET rate has disimproved from +3% on DIRT and CGT rates in 2002, to +8% currently:"

techman1

https://www.boards.ie/discussion/comment/123492567#Comment_123492567

ThThat may have been the logic in Irish government land 20 years ago but it is now at odds with the reality of ETFs and investment today whereby nobody else imposes this draconian "deemed disposal " every 8 years regime. Could you imagine the uproar if this was imposed on other assets like property, shares or pension funds. Ireland is a complete outlier here and most especially because it is actually the domicile of all these ETFS worth trillions but other Europeans can happily invest with sensible taxation and no silly "deemed disposal " and all this money is sitting in Irish domiciliary . The government needs to be shown up for this gross inconsistency

PowerToWait

https://www.boards.ie/discussion/comment/123235122#Comment_123235122

Where can I find out more about this? TIA.

Geuze

https://www.boards.ie/discussion/comment/123500789#Comment_123500789

By reading the websites of the main providers of pensions.

Irish Life

New Ireland

Zurich

etc.

Francie Barrett

https://www.boards.ie/discussion/comment/123499904#Comment_123499904

Amazing that here we are in 2025 and this terrible piece of taxation still hasn't been abolished. The government should be trying to help ordinary people save and invest small amounts of money instead of heavily penalizing them with some of the most draconian taxation in all of Europe.

techman1

With the hames they have made of the rental property market trying to tie landlords into under market rents and banning them from selling, I'm wondering is there any link between the two, if they make ETF investing comparable with rest of world, all the owners of rental properties would be chomping at the bit to exit property for other investments like ETFs .

The good thing is that the government taxation on foreign funds and multinationals is now under the eye of EU and trump, so the obvious contradiction between onerous taxation on domestic investors versus international funds and ETFs could come into sharp focus

MayoSalmon

https://www.boards.ie/discussion/comment/123504785#Comment_123504785

The government doesnt care one iota about you

Supercell

The Irish Times (pay walled) is suggesting some changes to ETF taxation in the coming budget. read into that whatever you like!

I'm expecting to be disappointed, hoping to be delighted.

Probably something very complicated and staggered over the next few years is my guess.

Supercell

So disposal tax down to 38% on ETF's, no mention of Deemed Disposal changes (so far from what i can see).

So all in all, a big FU to retail investors. Let them eat cake.

almostover

https://www.boards.ie/discussion/comment/123885715#Comment_123885715

It's crazy alright to have a tax that discourages people to invest for their future and at the same time bring in an auto enrolment pension scheme.

HGVRHKYY

I could not despise Paschal any more, the man is an absolute scumbag towards intelligent savers and investors in this country and continues to condone taxation policies that actively inhibit and even act as a disincentive for individuals to try investing. Meanwhile they speak about a pension crisis and the necessity for auto enrollment. So many people are having their long-term financial prosperity held back by this crowd, and they're supposed to be our most right leaning economic parties? Such a disgrace.

techman1

I can't understand how pascal donohue gets such light treatment in the media compared to other politicians. He is a hugely disappointing minister and should have been gone 5 years ago. He is completely out of touch and disinterested in modern financial affairs and the lives of younger workers and investors. He still thinks it's the 90s but without the music. He would be too left wing even for keir starmer labour party

1373

https://www.boards.ie/discussion/comment/123887842#Comment_123887842

Politicians and the media don't want to be seen pushing the cause of people who get up and work and have a few euros for investing . The bums have to be appeased

thenuisance

From what I hear the reason for the different taxation of ETFs is that they allow gains to be accumulated within the fund tax free. That means that you can be making gains on untaxed gains as time goes on. The Revenues view is that after 8 years you're making a level of compound gain that should be taxed. Talking to a more savvy friend he said that to maximise your return you keep the ETF right up to the 8 year line - he reckons that Revenue worked this out very carefully and then added a fairly generous chunk of profit. His view was that after 5/6 years you're doing well.
I have a small amount in an ETF that pays a great dividend and yet still seems to be growing quite well. I always viewed it a relatively safe, conservative investment for the risk averse. If it doesn't suit you then you can go anywhere from Savings Certs to start-up funds. There's a wide range out there.
I think the Revenue have been pushing against any change in the tax regime as all sorts of investment vehicles are getting chucked into ETFs and they are concerned that it's creating the potential for tax loopholes. There's also the view that the tax breaks should be for investors who genuinely take risks, preferably in Irish economic activity.

HGVRHKYY

https://www.boards.ie/discussion/comment/123890974#Comment_123890974

There is no excusing it, if revenue do their job properly then there are no tax loopholes, people will pay their taxes when they're due - revenue would have access to these regulated financial institutions to check accordingly - and the tax should only be due when individuals choose to sell and realise a gain, not when some socialist minded imbeciles think we have accumulated enough of a gain for them to justify forcing their grubby little waster hands on our profits. We are fairly capitalist when it comes to corporations and companies, and yet very heavy handed and punitive and forcefully redistributive when it comes to individuals who actually use their brain and time to better themselves and attempt to improve their lives and financial situations. Easier access to ETFs without the ridiculous deemed disposal limiter is literally the simplest measure they can take to help us as a population to reduce the damage from the looming pension crisis, but certain cretins in power feel entitled to impede us instead.

1373

https://www.boards.ie/discussion/comment/123890974#Comment_123890974

If revenue were very careful to work all this out I'd be asking who came up with the idea of not allowing losses to be put against other gains. Most countries have incentives to invest, Ireland have incentives not to invest in the safer of all investments , ETF

Peregrinus

https://www.boards.ie/discussion/comment/123892396#Comment_123892396

What would be the policy justification for incentives to invest in "the safest of all investments"? Tax incentives are tools to get people to do things they are otherwise reluctant to do. Why would people be reluctant to invest in ETFs?

amacca

https://www.boards.ie/discussion/comment/123900777#Comment_123900777

They might be reluctant to invest in ETFs because tax policy makes them less attractive than other investments like individual shares, investment trusts...

The saying goes ...don't let the tax tail wag the investment dog....and generally that's probably a good policy....one would be unwise however (moreso than a lot of other tax jurisdictions) to not consider the taxation and make it a big part of your decision making process in Ireland...

It should be simplified and aligned with whats there for equities (33% cgt)…it's clearly a load of higgledy piggledy bolox that has been slowly tinkered with at the edges and developed into an unwieldy unjustified mess....I can't see any reason why gains on a single equity are taxed at 33%, likewise an investment trust, diversified conglomerate etc...but an etf now 38 used to be 41 and 8 year deemed disposal + no offsetting of losses against gains on another etf etc

Then there's the tax free threshold of 1270 euros, the conversion from 1000 pounds unchanged for decades etc etc....its an anachronistic mess that should be simplified and streamlined and could well lead to more returns for the exchequer if it was....

It's culture/mindset lack of imagination, inertia, people with their own fiefdoms etc etc.....

Peregrinus

I think the issue is that an EFT (or other managed fund) is buying and selling shares and securities all the time. If those were direct investments then the investor would be making gains (and/or losses) and paying the CGT involved. Similarly the EFT is receiving dividends and distributions which, if the investor invested directly, would be subject to income tax.

If you ignore gains and income until the investor disposes of the shares in the EFT, that's a signficant deferral of tax. Plus, income received by the ETF gets taxed as a gain to the investor, at the (generally lower) CGT rate.

The net effect would be that those who invest via ETFs or similar would be substantially tax-advantaged over those who invest directly in the underlying shares and securities. There's no obvious policy reason for conferring such an advantage on them.

As I understand it, the deemed disposal mechanism is, or at least started out as, a (crude) attempt to offset or at any rate reduce this tax advantage. Tax on income/gains can only be deferred for (at max) 8 years, and on average is deferred for about 4 years. And the new 38% rate looks like a compromise between the 33% CGT rate that direct investors would pay on gains and the 40% plus USC that they would pay on income.

daithi7

https://www.boards.ie/discussion/comment/123903576#Comment_123903576

Thanks for that, and that may well be officialdom's explanation alright - but let's face it, it's still a load of codswallop!!

Just tax etfs with cgt, allowingwrite offs of losses, etc like any other investment. Simples.

P.s. no wonder there is a looming pension crisis, and billions of retail savings in the banks doing sfa!!

Peregrinus

It's simple, but it's unfair, since it penalises people who invest directly in shares and securities that they have selected themselves. And I can't think of a public policy case for doing that.

daithi7

Does anyone know if an investment vehicle might exist, where you put your money into say a foreign trust, or investment holding company, that invests through ETFs, etc in a tax friendly jurisdiction say, abs accumulates there. Then you would only pay tax on these invested monies when you redeem funds back into Ireland say, by selling shares in the investment trust or company, say, or as income maybe?

It would be like having an offshore pension for all intents & purposes, with taxes only paid on redemption. Do such things exist?

Peregrinus

https://www.boards.ie/discussion/comment/123903685#Comment_123903685

Short answer: No.

They've thought of this wizard wheeze already. If you invest in an ETF or similar pooled investment vehicle that is established outside Ireland, then obvioulsy that fund is not going to do them whole deemed disposal thing every eight years, or withhold any Irish tax when you finally do sell your holding. So instead the obligation is imposed on you.

Irish tax law deems you to dispose of, and reacquire, your investment in the foreign fund every eight years, whether you actually do that or not. You're liable to pay tax at (now) 38% on the accrued gain since the last deemed disposal eight years before (or since you acquired your investment in the fund, if this is the first deemed disposal). It'd a self-assessment thing; you have to make a tax return, assess yourself to tax, and then pay it.