They will extend the 41% exit tax to cover all ETP's - that is what I am expecting. It is Revenue policy to tap all sources of tax revenue or leakages they find. Dont think for a second they are not aware of this.
There is a troyskyite element in Revenue that sees this as wealth, and therefore it must be taxed as such.
They will extend the 41% exit tax to cover all ETP's - that is what I am expecting. It is Revenue policy to tap all sources of tax revenue or leakages they find. Dont think for a second they are not aware of this.
There is a troyskyite element in Revenue that sees this as wealth, and therefore it must be taxed as such.
Under certain scenarios, gross roll up funds (including UCITS ETFs) can already be more tax efficient than US ETFs for investors with high marginal tax rates.
It has to do with the compounding impact of the tax drag on dividends received on shares (including US-domiciled ETFs) that are subject to income tax/CGT.Can you explain this please?
It has to do with the compounding impact of the tax drag on dividends received on shares (including US-domiciled ETFs) that are subject to income tax/CGT.
So, if you assume that dividends represent a relatively high proportion of total return and are subject to a high marginal tax rate, a gross roll-up fund can be more efficient from a tax perspective.
The principle is discussed here:-
https://www.askaboutmoney.com/threads/is-it-mad-to-pay-off-a-cheap-tracker.193088/page-2
That's right.Thanks for response. Excuse my financial illiteracy, but does this mean that appreciating US-domiciled ETFs cannot be obtained? (And hence dividends are taxed at a high marginal rate?)
That's right.
US-domiciled mutual funds and ETFs are required (by US tax law) to distribute substantially all their net investment income and realised capital gains from their underlying portfolios. So, there's really no such thing as an accumulating US fund/ETF. Dividends received from those funds are subject to income tax in the hands of an Irish investor (which means there is less to reinvest compared to accumulating, gross-roll up funds that are subject to 41% exit tax).
So, shares/ETFs that are subject to income tax/CGT (including US-domiciled ETFs) may be more attractive to an investor with a low marginal tax rate and/or that is carrying (capital) losses forward. On the other hand, gross roll up funds (including UCITS ETFs) may be more attractive to an investor with a higher marginal tax rate and/or that is not carrying losses forward.
Hopefully that all makes sense.
That's right.I think it makes sense. Marginal rate taxation on dividends meaning basically taxed as extra income, not like regular CGT? So with a high income it might be better to have gross roll up funds and just pay the 41%?
No, there is no "double dip" by the taxman.With deemed disposal, however, are you not essentially paying tax twice, once at eight years and then on disposal (provided the ETFs are held longer than 8 years)? Therefore, is this not a substantial disadvantage that outweights the abovementioned benefit?
That's right.
Dividends (net of US withholding tax) received by an Irish investor in a US-domiciled ETF are subject to income tax at the taxpayer's marginal rate. Capital gains are subject to CGT.
No, there is no "double dip" by the taxman.
If the UCITS ETF shares rise in value between the date of the deemed disposal and the date of the actual disposal, then exit tax is only payable on the difference. If the ETF shares fall in value between the date of the deemed disposal and the date of actual disposal, then the taxpayer can apply to Revenue for a refund of exit tax paid as appropriate.
My opinion is that it is not necessarily the case that US-domiciled funds are more tax efficient for Irish investors than UCITs ETFs - it depends on the contribution of dividends to total return that you assume, the marginal tax rate of the investor and whether or not the investor is carrying losses forward.
Did you look at the spreadsheet referenced in the thread that I linked above?
Yes, gross roll-up funds can produce a more favourable tax result but the calculation is very sensitive to the assumptions used regarding the dividend yield, capital gains and the marginal tax rate.Yes, I looked at it. Not sure I understood fully but it basically seems to say that accumulating ETFs did better than US-domiciled, albeit the exit tax rate was incorrectly 36% but even at 41% accumulating ETFs would do better?
That's correct - losses on a gross roll-up fund cannot be offset against capital gains made elsewhere.The other problem however is that in the case of a market downturn, UCITS ETFs that lose their value can't be written off against other capital gains?
I'm not sure that the tax filings are any more complex than CGT returns.And another issue is the complexity of filing tax reports for UCITS as each transaction must be logged.