yellowmoose
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why can't they do the same as they do in other jurisdictions?
41% Exit Tax - Will we see Budget 2026 changes
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Steven Barrett
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I just make it look simple.
Steven Barrett
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That is the point. Revenue only ever envisaged life companies paying the tax. It is now apparent that they outsourced the collection of these taxes to life companies and don't have the know how to do it themselves.
Steven Barrett
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The Revenue have no sight of the gains made by individuals with investments with life companies. They get a cheque each month from the life companies. From past ministerial questions, they are not able to distinguish between deemed and actual disposals.
But how will Revenue know? The same as with everything else, they go to the source. They can and will ask platforms for a list of their Irish investors and can do an audit there.
It would be a simple way of keeping everyone happy. Accumulating ETFs are subject to deemed disposal, distributing ones aren't. It is reasonable to expect that you pay some levels of tax each year and not just accumulate for decades, it's not a pension. US domiciled ETF make dividend payments which are subject to taxation each year.
fistophobia
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Its not that simple.
A list of Irish investors? As with equities, the individual owners are held within nominee / omnibus accounts.
Even the custodian bank cant see into such accounts.
Distributing UCITS are subject to the same exit tax on dividend payments.
A list of Irish investors? As with equities, the individual owners are held within nominee / omnibus accounts.
Even the custodian bank cant see into such accounts.
Distributing UCITS are subject to the same exit tax on dividend payments.
Every jurisdiction does it differently:
- US forces ETFs to pay dividends, so that would be the end of accumulating funds.
- UK pretends the ETF did actually pay dividends, so you have to calculate the "deemed dividend" each year.
- Germany you make an annual pre-payment of tax that is credited against your final gain.
- Many have an allowance with no taxes on gains/investments below a certain amount.
I assume they are weighing up all the options.
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Why then did revenue muddy the waters a few years ago saying that US domiciled etfs were no longer automatically taxed under CGT. Surely the very fact that they pay out dividends and you pay tax on the dividends every year should have excluded them from deemed disposal. That should have been the simple test .
I suspect they did have the knowhow, but that guy retired
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They get a half yearly payment along with some data; nothing that could identify an individual or any gain they made. They also get an annual return from all life companies of all gross payments made to customers from life policies. This does include individual names and addresses. Weirdly, this also does not allow them to identify gains made.
There isn't a satisfactory answer to this question. The rules around ETFs are very simple... for Revenue since they don't have to do calculate anything themselves and lump all sorts of different funds into the same tax regime, where the onus is on the investor to figure it out correctly.
They could have removed the guidance around US-domiciled ETFs to encourage investment in Irish-domiciled funds?
Id say you are getting close to the truth here, because so many Irish people were explicitly seeking out US domiciled ETFs because of more favourable CGT tax rather than deemed disposal they had to make them less attractive. Probably something to do with the huge amount of money invested in Irish domiciled ETFs by everyone else . Maybe it was an aberration that didn't sit comfortably with them that Irish investors were seeking out US domiciled ETFs, they needed to muddy the waters again.
What difference does it make to Revenue which type of ETF people invest in?
Better to grow the domestic funds sector than the US one.
One of the ironies pointed out in the Fund Sector 2030 report was "Ireland is a leading domicile for investment funds yet has very low direct retail participation. Building retail participation is important to ensure savings for retirement and other needs throughout investors’ life stages, and to build a pool of savings which can be invested in the economy."
And potentially raise more tax revenue through deemed disposal and 38% on Irish funds than CGT/income tax at 33%/52% on US ones.
One of the ironies pointed out in the Fund Sector 2030 report was "Ireland is a leading domicile for investment funds yet has very low direct retail participation. Building retail participation is important to ensure savings for retirement and other needs throughout investors’ life stages, and to build a pool of savings which can be invested in the economy."
And potentially raise more tax revenue through deemed disposal and 38% on Irish funds than CGT/income tax at 33%/52% on US ones.
But aren't many or most of these Irish domiciled ETFs like brass plate operations or US multinational IP licensing fees run through Ireland that warp GDP but don't actually reflect underlying productivity of the economy?
Yes, the actual investment in Irish companies inside those ETFs is tiny, but having the funds domiciled here brings second order benefits to the economy. From the same report:
Ireland’s funds industry was built on a strong offering of fund administration and fund servicing. The funds industry also generates significant wider activity, forming an important ecosystem that includes legal, audit, advisory and other professional services firms.
Ireland’s funds industry was built on a strong offering of fund administration and fund servicing. The funds industry also generates significant wider activity, forming an important ecosystem that includes legal, audit, advisory and other professional services firms.
yellowmoose
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Regina Doherty: The EU wants a big bang to turn Irish savers into investors
business post article (paywall)
business post article (paywall)
Good to see mention of both the SIA (EU version of an ISA) as well as taxes on ETFs called out in the article.
"...this time a blueprint for a European Savings Investment Account, inspired by similar models in the UK and Sweden. Were it to work, such an account would need to be easily accessible to the largest number of people, allowing them to invest as much or as little as they want, on a regular basis, in a tax efficient way, without a lot of red tape obligations, and based on achieving the best possible return for the investor."
"ETF exit taxes need to be aligned with capital gains. Both need to become less onerous. And the deemed disposal rule urgently needs to go."
Introducing an ISA/SIA account, where investments grow tax-free means the whole CGT vs Exit Tax becomes academic, this makes it a higher priority in my mind. While I welcome both changes, if they really want to promote investing, a tax-advantaged account is much more likely to move the needle on this, than fiddling with the tax treatment of ETFs, for the simple reason that it's much easier to explain to your average punter.
Capital gains taxes also need to be reduced and indexation re introduced in order to account for inflation. Dirt taxes need to have inflation deducted first aswell, that would mean no tax on savings because deposit rates barely compensate for inflation anyway. We are way over taxed on investments and work in this country. The government need to be called out on all these stealth taxes
I keep say a tax free saving / investment wrap solves a lot of problems especially in relation to public perception. Set a limit of €6k per year or so and you remove the issue of this being a benefit for the wealthy. Of course that would benefit young people more than those who already have large savings.
Like a UK ISA so?
Individual Savings Accounts (ISAs)
Types of ISA available, the tax-free ISA allowance, withdrawing money and transferring ISAs.
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