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ETF's

  • 29-06-2019 10:49am
    #1
    Dempsey
    Registered Users Posts: 20,553 ✭✭✭✭


    Can anyone help me find out which ETF's are easiest to deal with in terms of paying tax?

    Looking to find out the Risk vs Tax Headache


«1

Comments

  • #2
    gavmcg92
    Registered Users Posts: 5,316 ✭✭✭gavmcg92


    Dempsey wrote: »
    Can anyone help me find out which ETF's are easiest to deal with in terms of paying tax?

    Looking to find out the Risk vs Tax Headache

    It's a long read but the below and several other posts on that forum deal with the topic. US domiciled ETFs were the better choice but due to changes in European law, they are no longer available on European platforms. I'm just holding the ones that I managed to buy before the crackdown.

    https://www.askaboutmoney.com/threads/the-tax-treatment-of-etfs-for-irish-residents.199443/


  • #3
    Dempsey
    Registered Users Posts: 20,553 ✭✭✭✭Dempsey


    So if I went onto DeGiro in the morning, i cant buy the US ones?


  • #4
    gavmcg92
    Registered Users Posts: 5,316 ✭✭✭gavmcg92


    Dempsey wrote: »
    So if I went onto DeGiro in the morning, i cant buy the US ones?

    Have you read the link above?
    In particular, many US investment products are now not legally available to residents of EU countries, because as they don’t have an EU-approved KID, they cannot legally be sold to EU residents. Many US ETFs for example can’t comply with EU PRIIPs legislation because parts of the new rules are contradictory to some US financial regulations.

    https://www.iamadvisors.com/how-do-the-new-eu-priips-rules-affect-us-expat-investors/


  • #5
    sk8board
    Registered Users Posts: 3,155 ✭✭✭sk8board


    I was putting together a generic ETF portfolio on degiro last week and thought I'd share the make-up if its of interest to anyone.
    I was looking to average into something relatively generic over the next few years, with the base target of returns over time beating inflation by 2-3% after tax, and paying out some small dividends.

    Some quick context: from a personal perspective, this isn't my only investment in isolation at all, I'm just diversifying my risk profile a bit.

    50% SWRD (Developed markets): (63% US, 8% JPN, 5% UK, 3% FR). annual charge: 0.2%.

    15% EMIM (Emerging Markets): (30% CN, 12% TW, 12% KR). annual charge: 0.18%.

    15% VEUR (Europe): (UK 27%,FR:17%,CH:15%,DE:14%). annual charge: 0.12%. quarterly dividend

    5% IPRP (EU property): (DE:37%,FR24%,SE:10%). annual charge: 0.4%. quarterly dividend

    5% TRET (Global property): (US:57%,JPN:12%,AU:6.5%). annual charge: 0.25%. quarterly dividend

    10% AGGH (Global Bonds): (40% US, 15%JPN). annual charge: 0.1%. avg age 6.9 years


  • #6
    Diarmuid
    Registered Users Posts: 3,981 ✭✭✭Diarmuid


    That looks very close to a Total World Market and some bonds. Why now just buy something like VT and some global bond? Save you a lot on the hassle

    https://investor.vanguard.com/etf/profile/VT


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  • #7
    sk8board
    Registered Users Posts: 3,155 ✭✭✭sk8board


    It’s a fair point.
    Firstly, I couldn’t find VT on degiro, (what’s the code?) so I built the 3 others instead - emerging, developed and EU.
    I know the 60% in US stocks in VT is proportionate to world money markets, but I wanted more in emerging and home markets and a lower % in US.
    Also have 10% reit property etfs, which isn’t part of VT.


  • #8
    Diarmuid
    Registered Users Posts: 3,981 ✭✭✭Diarmuid


    That's true but the beauty of buying one ETF is that your management over time is easier ie calculating dividends for tax, rebalancing every year,. You just buy one ETF and forget about it for the next 10-20 years. I started with the same approach as you but over time I just simplified it as much as possible.


  • #9
    studdlymurphy
    Registered Users Posts: 827 ✭✭✭studdlymurphy


    Do you buy bulk at the start and then sit on it or buy it monthly/weekly or something?


  • #10
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    I dont think it matters whether you buy it bulk at the start or not. What matters is the price (depending on platform) you can ay for each trade. As an example, if you are buying €500 twice a month on DEGIRO, you would be better off, waiting untlil the end of the Month and then spending €1000 in a single trade becuase the trading fee is free (dependent on the EFT in question).


  • #11
    jive
    Registered Users Posts: 5,762 ✭✭✭jive


    Static M.e. wrote: »
    I dont think it matters whether you buy it bulk at the start or not. What matters is the price (depending on platform) you can ay for each trade. As an example, if you are buying €500 twice a month on DEGIRO, you would be better off, waiting untlil the end of the Month and then spending €1000 in a single trade becuase the trading fee is free (dependent on the EFT in question).

    Calculating the tax bill after the 8 year deemed disposal rule would be a pain in the nuts if buying weekly. I just buy in a lump every few months to make things easier. Monthly would also be alright but I’d avoid buying weekly.


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  • #12
    sk8board
    Registered Users Posts: 3,155 ✭✭✭sk8board


    Diarmuid wrote: »
    That's true but the beauty of buying one ETF is that your management over time is easier ie calculating dividends for tax, rebalancing every year,. You just buy one ETF and forget about it for the next 10-20 years. I started with the same approach as you but over time I just simplified it as much as possible.

    Which world index did you buy and is it on degiro? I couldn’t find any of the more obvious ones, to buy from here.


  • #13
    Cute Hoor
    Registered Users Posts: 1,788 ✭✭✭Cute Hoor


    Diarmuid wrote: »
    That looks very close to a Total World Market and some bonds. Why now just buy something like VT and some global bond? Save you a lot on the hassle

    https://investor.vanguard.com/etf/profile/VT

    You can't buy VT on Degiro because Vanguard don't provide KIDs for US domiciled funds to European based investors.

    Heres a good link
    https://www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331


  • #14
    antimatterx
    Registered Users Posts: 2,649 ✭✭✭antimatterx


    jive wrote: »
    Calculating the tax bill after the 8 year deemed disposal rule would be a pain in the nuts if buying weekly. I just buy in a lump every few months to make things easier. Monthly would also be alright but I’d avoid buying weekly.

    Isn’t the deemed disposable only on certain ETFs

    A side note, deemed disposable is a stupid role, how the hell can you come up with something like that. Why do you have to pay tax every 8 years in assets you don’t sell. Fair enough dividends, but rules like this make Ireland a less attractive place for financiers to reside


  • #15
    sk8board
    Registered Users Posts: 3,155 ✭✭✭sk8board


    Cute Hoor wrote: »
    You can't buy VT on Degiro because Vanguard don't provide KIDs for US domiciled funds to European based investors.

    thanks, thats what I figured. I'm happy with what I've put together so.


  • #16
    Viscount Aggro
    Registered Users Posts: 1,144 ✭✭✭Viscount Aggro


    De giro - can anyone tell me what dividend with holding tax they charge, on UCITS etfs ?

    Example is an ETF with an Irish ISIN in the name.
    Because the way dividends are taxed was changed in the budget.
    From JAN 2020, its 25% tax at source.
    From JAN 2021, the broker has to look up your tax return, and tax the payments at your marginal tax rate. That should be fun.


  • #17
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


    So is it that ETFs can be bought but not from a US exchange but only a european and in euro ? I see s&p 500 iShares and vanguard are to be gotten on degiro but only in euro. Also doesn't say if the dividends are re invested or I dont see it anyhow.


  • #18
    themossinator
    Registered Users Posts: 126 ✭✭themossinator


    I think you can buy Vanguard ETFs on Tradestation


  • #19
    JimmyVik
    Registered Users Posts: 5,368 ✭✭✭JimmyVik


    Sorry if this is a silly question.
    Im really confused about the tax on ETFs. Everything I read just gets too complicated for my little brain.

    I bought €10,000 "iSHR S&P500 B A" on Degiro a while ago and miraculously if I sold today would make about €1000 profit. Would I have to pay tax on that profit?
    Am I allowed to make any profit on that ETF without paying tax on it?

    The dividends are reinvested into that fund, so I wouldnt be receiving dividends.

    And could I use my capital gains tax allowance of €1270 per year, so that I didnt have to pay tax?


  • #20
    iAcesHigh
    Registered Users Posts: 447 ✭✭iAcesHigh


    JimmyVik wrote: »
    Sorry if this is a silly question.
    Im really confused about the tax on ETFs. Everything I read just gets too complicated for my little brain.

    I bought €10,000 "iSHR S&P500 B A" on Degiro a while ago and miraculously if I sold today would make about €1000 profit. Would I have to pay tax on that profit?
    Am I allowed to make any profit on that ETF without paying tax on it?

    The dividends are reinvested into that fund, so I wouldnt be receiving dividends.

    And could I use my capital gains tax allowance of €1270 per year, so that I didnt have to pay tax?

    I had similar question HERE and answer is everything but simple. In short, yes you need to pay taxes probably between 33% or 41% (USA vs EU) and you should have disclosed it on the year you bought some ETF shares. Great article about taxes on ETFs: HERE


  • #21
    JimmyVik
    Registered Users Posts: 5,368 ✭✭✭JimmyVik


    iAcesHigh wrote: »
    I had similar question HERE and answer is everything but simple. In short, yes you need to pay taxes probably between 33% or 41% (USA vs EU) and you should have disclosed it on the year you bought some ETF shares. Great article about taxes on ETFs: HERE




    Thanks for that. Thats me out of ETFs so.


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  • #22
    Tar.Aldarion
    Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 60,082 Mod ✭✭✭✭Tar.Aldarion


    JimmyVik wrote: »
    Thanks for that. Thats me out of ETFs so.

    Don't think there is any better option tbh


  • #23
    Sorolla
    Registered Users Posts: 996 ✭✭✭Sorolla


    A1JX52 is the best there is.
    One ETF and nothing else.
    Buy and hold.
    Stay the course for at lease 15 years.

    The best advice I can offer.


  • #24
    JimmyVik
    Registered Users Posts: 5,368 ✭✭✭JimmyVik


    Sorolla wrote: »
    A1JX52 is the best there is.
    One ETF and nothing else.
    Buy and hold.
    Stay the course for at lease 15 years.

    The best advice I can offer.


    I went for this one

    EAM | IWDA | IE00B4L5Y983 | EUR





    Accumulating, so no dividends to worry about.
    Just want a fire and forget investment.


  • #25
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    Sorolla wrote: »
    A1JX52 is the best there is.
    One ETF and nothing else.
    Buy and hold.
    Stay the course for at lease 15 years.

    The best advice I can offer.

    Are you not better off with the Acc version rather than distributing? I've read you should pay less tax.


  • #26
    HillCloudHop
    Registered Users Posts: 105 ✭✭HillCloudHop


    Is there much point in buying an ETF considering the deemed disposal rule will destroy most of your gains if you're planning to hold longterm?


  • #27
    Tar.Aldarion
    Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 60,082 Mod ✭✭✭✭Tar.Aldarion


    keeping 60% of gains is better than 0% gains.


  • #28
    Heraclius
    Registered Users Posts: 733 ✭✭✭Heraclius


    Static M.e. wrote: »
    Are you not better off with the Acc version rather than distributing? I've read you should pay less tax.

    Would the accumulating ETF be seen as purchasing another block of an ETF each time a dividend is reinvested? Would you need to keep track of each reinvested dividend and pay tax after 8 years on that too?


  • #29
    ryanch09
    Registered Users Posts: 380 ✭✭ryanch09


    Heraclius wrote: »
    Would the accumulating ETF be seen as purchasing another block of an ETF each time a dividend is reinvested? Would you need to keep track of each reinvested dividend and pay tax after 8 years on that too?


    As far as I know you don't actually get extra 'shares' of that ETF, so there's nothing for you to track, I could be wrong though, I started investing in accumulating ETFs in July 2020 and haven't seen anything to indicate that I got any extra shares from reinvested dividends, I think the reinvestment is just reflected in the overall price of the ETF (I am open to correction from anyone if I'm misunderstanding)


  • #30
    cowboyjoe
    Registered Users Posts: 96 ✭✭cowboyjoe


    Bought 3 ETF's thru DeGiro that are accumulating and based out of Dublin last year, in April 2020. No investment in anything else since. I plan to hold for the long term 10-20 years as fund for the 3 small kids.

    My question is do I need to notify revenue I bought these ETF's? Even though I have no intention of disposal. I am well aware of the deemed disposal exit tax after 8 years.


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  • #31
    HillCloudHop
    Registered Users Posts: 105 ✭✭HillCloudHop


    Could you use Investment Trusts as an alternative to ETFs?
    Have to pay management fees, but taxed as a stock and no messy deemed disposal rule.


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