ETF Taxation on profits due to exchange rates

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bluecabbage

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Can someone please confirm the following for me to the best of their knowledge...

  • Is there any difference from a taxation point of view in profits generated from an ETF investment due to currency fluctuation and not the price? i.e. ETF price has dropped but investment is in profit due to exchange rates.
also
  • Can I offset a loss in shares against tax owed on profits from an ETF investment?

Thanks
 
If you send Euro to a dealing account and FX to US$ purchase an ETF at a price of say $1 per unit and then subsequently sell at a price of $1 per share you will not have made a taxable profit on the ETF but if in the meantime the US$ has appreciated against the Euro then yes you will have made a taxable gain on the FX element of the transaction.

Secondly if you have a made a loss on securities (CGT) you can offset this against gains on certain ETFs provided that these are not materially the same as an Irish fund.

So for example some US ETFs would qualify but you categorically can’t offset losses against a UCITs ETF.
 
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Sorry to reopen this old thread, but I wonder what happens if you sell for example a sterling denominated UCITS ETF and have a profit on the fund itslef (41% tax) and at the same time the Sterling appreciates vs the Euro. Do you need to compute the two asset classes separately for tax purposes? Eg 41% on the fund profit, and 33% CGT on the currency profit ? Or tax @ 41% on the total profits generated (translated in euros)

Thanks
Henning
 
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Your gain on the ETF is calculated using the euro exchange rates on the date of sale

If you keep the proceeds in a bank account denominated in a foreign currency, then there is no tax on any further exchange gains or losses until you convert the foreign currency to euros. And even then...
 
Thanks I lived in the UK and bought two accumulating ETFs when sterling was very low. That was a few days after the Brexit vote a couple of years ago just before I moved back to Ireland. I sold them last year at a time when the Sterling was much higher. I never converted them into euros I left them in the sterling broker account and plan to buy more this year always in stelring, but if I translate all into euros, I made almost half the overall "gain" from the Sterling getting stronger. I know it's just a paper gain since I haven't converted them into euros but I came across two previous posts

https://www.askaboutmoney.com/threads/etf-taxation-on-profits-due-to-exchange-rates.230444/

and

Tax triggered with currency fluctuation

Hello, I wonder if someone can give me a bit of guidance and see if my calculations and timings below are right. This is just an example. So I’m not considering the real world with the exemptions etc. I have a U.S. trading account, and I would like to check if the scenario below is correct...
www.askaboutmoney.com

they both mention that you need to take the sterling denominated amount at sale, and the sterling denominated amount at purchase as well, transofrm all into euros, and do the subtraction: sale price minus purchase price and pay tax on this overall gain in euros. If I do that it means that also my currency profit is taxed at 41% and cannot avail of the 33% rate and the 1270€ CGT expemtion. So I did some more reserach but I'm still left with some doubts.
 
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That's the way it goes - holding assets in a foreign currency always leaves you open to exchange rate gains and losses.

Some you win, some you lose
 
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