Hi all,
I have been investing in Rabodirect funds regularly over the past year, buying different sets of funds every month, but I have been concerned from day 1 about the tax implications. RaboDirect have very recently published the following notice on their web site:
- To "include details of your gains correctly", does this mean that you must declare your *purchases* each year on your annual tax return?
"You also pay tax on the increase in the value of the fund on the expiry of a period of 8 years from the date of the initial investment" - I know it is seven years away! but the idea is as an education fund for my two toddlers in 15+ years:
- Is this a new rule? I never heard of this before.
- Assuming I do not sell - How do I know/remember when 8 years has elapsed - will Rabo be responsible for this? Especially where I am making 2-3 transactions per month. The Rabo interface does not give very good transaction information.
- do I have to do a very precise calculation? or does it balance out on eventual sale.
- Do you think that Rabo will have to deduct this automatically, by the time we get to 8 years?
- Should all Rabodirect customers be advised to keep very accurate records now? (especially the muppet with the boat?)
Thanks for any advice...
I have been investing in Rabodirect funds regularly over the past year, buying different sets of funds every month, but I have been concerned from day 1 about the tax implications. RaboDirect have very recently published the following notice on their web site:
I would appreciate if this could be explained a little better by someone:What are my tax obligations as a RaboDirect Investor?
RaboDirect will not be responsible for making any tax deductions on investments. All investors are solely responsible for submitting their tax returns in line with current revenue requirements. Growth Funds operate on a roll-up basis for tax purposes. By investing through these Funds, you only pay tax on the realisation of your investment. You also pay tax on the increase in the value of the fund on the expiry of a period of 8 years from the date of the initial investment, and for each subsequent 8 year period. This only applies where there has been no realisation of you investment prior to the 8 year period. Where there is a realisation of your investment after the expiry of an 8 year period, a credit is available for the tax you paid on the expiry of the 8 year period against the tax you pay on the total gain on the realisation of you investment. The tax rate applicable is the standard rate of tax (currently 20 per cent) plus 3 per cent on any gains made on units in the funds.
You should note that this rate will apply only if you have included details of your gains correctly in your return of income made to your Inspector of Taxes; otherwise, the tax rate applicable will be your marginal rate of tax. This compares favourably with investing, for example, directly in equities. With direct equity investment you are liable each year to tax at the marginal rate (currently up to 42 per cent) on any income you receive from such investments. Your tax liability is deferred until you choose to dispose of your units and you are responsible for the payment of the tax to the Revenue Commissioners.
- To "include details of your gains correctly", does this mean that you must declare your *purchases* each year on your annual tax return?
"You also pay tax on the increase in the value of the fund on the expiry of a period of 8 years from the date of the initial investment" - I know it is seven years away! but the idea is as an education fund for my two toddlers in 15+ years:
- Is this a new rule? I never heard of this before.
- Assuming I do not sell - How do I know/remember when 8 years has elapsed - will Rabo be responsible for this? Especially where I am making 2-3 transactions per month. The Rabo interface does not give very good transaction information.
- do I have to do a very precise calculation? or does it balance out on eventual sale.
- Do you think that Rabo will have to deduct this automatically, by the time we get to 8 years?
- Should all Rabodirect customers be advised to keep very accurate records now? (especially the muppet with the boat?)
Thanks for any advice...