Tax on accumulating ETFs?

Z

Zenith63

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Hi guys,

Does anybody know what the tax implications are of accumulating ETFs now? For instance the "iShares EURO STOXX 50 (Acc)" accumulating ETF.

Firstly is CGT payable at 20% or 23% on disposal, given this is an Irish domiciled fund?

More importantly though how is tax on dividends (or lack thereof given this fund is reinvesting) handled? I'd hope it's ignored and effectively charged through the CGT net on disposal, but I'd like to know for sure?

Thanks!
Philip
 
Firstly, if the fund/ETF doesn't pay dividends, then there is no dividend to be taxed.

Secondly, an ETF is not taxed under the CGT system but treated as a Gross fund with an Exit Tax on disposal - they gain is taxed at 23%
 
You are taxed under gross roll up in most ETFs and definitely those based in Ireland such as iShares.This means tax at 25% on distributions and at (currently) 28% on realised gains or 'deemed' gains at each 8th anniversary of your investment.
As an aside other structures which look & feel like ETFs,including most of the commodity ones which present themselves as ETCs or ETNs are subject to CGT.

There are big and very poorly understood issues around the taxation of ETFs especially the fact that losses forward under CGT cannot be utilised.Also that gains in particular unit-linked funds or ETFs are not off-settable against losses in others.From a taxation point of view ETFs are definitely for Buy & Hold.
 
does anyone have a formal document which outlines the taxation on etfs? and maybe shows computations for the 8 year rule?
 
Thanks Mercman. Do you know if they are docs publically available on their websites? I did a google across davys, goodbodys, campbell o connor, and didnt turn up anything useful...

I have read most of the ETF taxations threads on here over the last five years....and what jpd and Monkstown state agrees with the overall trends from other posters, assuming the ETF is a UCTIS and is domiciled in Ireland (and maybe even if domiciled in Europe).

in particular, other posters say that the Ishares qualifies for this type of treatment, and apparently their (the Ishares) prospectus has a section which confirms that they will handle the 8 year deemed disposal event for you.

Update - I found the prospectus

[broken link removed]

As I read it, if your ishares ETF is kept in a recongised clerance system, the investor must do all the tax returns yourself, otherwise the ETF company will do it for you (including actual encashments and deemed disposal events)
 
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Is it possible to choose ETFs which avoid the 8 year deemed disposal, e.g. If you choose an ETF which is not domiciled in Ireland/Europe or not UCTIS,
 
Hi Mercman,

If you have a copy of a tax guidance document from an Irish broker, I would be very grateful if you could pm me also with details.

Many Thanks,

3CC
 
I would also appreciate it if you have it Mercman - the tax thing has kept me from using ETFs to date so it might help clear it up for me.
 
For the sake of clarity, I am not an accountant and do not represent myself as an adviser in any respect. If anybody wishes to PM me, I'll pass the details of persons that know the taxation parameters of ETFs, coupled with a good grasp of market knowledge.
 
gasman, You will have to speak to your own advisers / stockbrokers regarding the Tax issues. I am not qualified to provide opinions or direction on these issues.
 
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