Duke of Marmalade
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If you partially encash your policy you crystallise the Exit Tax payable (less earlier DD down payment) so you don't benefit from future reductions in Exit Tax on the part you have encashed.
41% to 38% reduction in exit tax on life assurance products
- Thread starter Brendan Burgess
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Duke of Marmalade
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No. The rule is still the same. You calculated the tax due on immediate disposal and deduct any tax already paid on account.
Example
2024 unrealised gains 100; 41 paid as an advance of the final actual tax due.
A.
2032 unrealised gains 200; amount due in advance 76 of which 41 has already been paid.
B.
2032 unrealised gains still 100 amount due in advance 38. You have already paid 41 in advance so I presume there is no further payment but nor do I think there is any rebate.
RainyDayFund
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Sigh... Of all thet tweaks this time around, I find this one to be very disappointing. 41% to 38% is derisory, and again no abolition of deemed disposal and no loss offsetting. Process fatigue is definitely setting in here - when will anything structural actually land? Just more short-termism over strategy. Surely encouraging investment and wealth accumulation ultimately strengthens, not weakens, the public finances?
The new implementation plan confirms that the structural fixes (abolish deemed disposal, align to 33%, introduce limited loss relief) are "under consideration", with a Roadmap in early 2026 and in the meantime, just a trim the rate to 38%. What even was the point of the change?
The 41% to 38% change is almost pointlessly symbolic rather than substantive. The real frictions (8-year deemed disposal and inability to offset losses ) still make ETFs a tax‑inefficient structure for long‑term savers. All this does is continue to reward people for veering towards stock‑picking and away from diversified ETF exposure. That’s a mismatch if the goal is broader, safer retail participation.
Against the apparent static revenue cost of meaningful reform, there’s a dynamic revenue upside (and a potentially large one over time) from shifting household savings out of low-yield deposits and into taxable investment activity. Irish households are extremely cash-heavy, and proper reform could shift capital into the tax net.
The current frictions are well-known deterrents and removing them and aligning fund taxation with CGT (33%) plus allowing loss offsets makes funds vastly more attractive relative to deposits, potentially leading to:
Reforming Ireland’s ETF and fund taxation regime isn’t just a giveaway to investors, it’s good fiscal policy and smart economic design over the medium term. The current regime is distortionary and inefficient, and aligning with CGT would not only simplify compliance but also in my opinion boost collection.
This regime we have now wasn’t the result of coherent economic design. It was a patchwork compromise that came from a miserly penny-pinching perspective in 1990s and 2000s when:
To me, the previous Standard Fund Threshold for pensions and the exit-tax / deemed-disposal regime for ETFs stem from the same underlying administrative mindset rather than coherent economic reasoning. Different instruments, same psychology. Both grew out of the Department of Finances defensive fiscal culture of tax now, control exposure, and avoid perceived generosity. Both embody a sort of fiscal Calvinism: the belief that if you make saving "too easy" people will abuse it..
I think it is fair to say that our Department of Finance has historically prioritised certainty of collection (take the tax now) over economic efficiency (encourage more investment later). It has measured success in annual cashflow yield, not lifetime tax yield, and been culturally conservative and wary of anything that might open a hole in the tax base. The irony is that this caution often reduces the base, by discouraging the very investment activity that would later generate sustainable tax streams.
Rather than fiscal containment, let's look towards fiscal enablement - that's how modern, confident economies approach savings policy.
I just assume that politically the optics for this weren't great, with the tax bands not being up for change... but it feels like such a missed opportunity.
Apologies for the rant, this particular budget mode triggered me (perhaps more than I realised) in its small mindedness.
The new implementation plan confirms that the structural fixes (abolish deemed disposal, align to 33%, introduce limited loss relief) are "under consideration", with a Roadmap in early 2026 and in the meantime, just a trim the rate to 38%. What even was the point of the change?
The 41% to 38% change is almost pointlessly symbolic rather than substantive. The real frictions (8-year deemed disposal and inability to offset losses ) still make ETFs a tax‑inefficient structure for long‑term savers. All this does is continue to reward people for veering towards stock‑picking and away from diversified ETF exposure. That’s a mismatch if the goal is broader, safer retail participation.
Against the apparent static revenue cost of meaningful reform, there’s a dynamic revenue upside (and a potentially large one over time) from shifting household savings out of low-yield deposits and into taxable investment activity. Irish households are extremely cash-heavy, and proper reform could shift capital into the tax net.
The current frictions are well-known deterrents and removing them and aligning fund taxation with CGT (33%) plus allowing loss offsets makes funds vastly more attractive relative to deposits, potentially leading to:
- Increased participation in Irish-domiciled ETFs/funds.
- Higher volume of realised capital gains over time.
- More dividend receipts, subject to DWT and income tax.
Reforming Ireland’s ETF and fund taxation regime isn’t just a giveaway to investors, it’s good fiscal policy and smart economic design over the medium term. The current regime is distortionary and inefficient, and aligning with CGT would not only simplify compliance but also in my opinion boost collection.
This regime we have now wasn’t the result of coherent economic design. It was a patchwork compromise that came from a miserly penny-pinching perspective in 1990s and 2000s when:
- unit trust and life assurance exit tax frameworks were adapted from insurance products, not capital markets.
- the civil service was risk-averse and focused on preventing tax deferral rather than promoting investment.
- retail participation in funds was tiny, so officials viewed it mainly as a niche avoidance risk, not a macroeconomic lever.
To me, the previous Standard Fund Threshold for pensions and the exit-tax / deemed-disposal regime for ETFs stem from the same underlying administrative mindset rather than coherent economic reasoning. Different instruments, same psychology. Both grew out of the Department of Finances defensive fiscal culture of tax now, control exposure, and avoid perceived generosity. Both embody a sort of fiscal Calvinism: the belief that if you make saving "too easy" people will abuse it..
I think it is fair to say that our Department of Finance has historically prioritised certainty of collection (take the tax now) over economic efficiency (encourage more investment later). It has measured success in annual cashflow yield, not lifetime tax yield, and been culturally conservative and wary of anything that might open a hole in the tax base. The irony is that this caution often reduces the base, by discouraging the very investment activity that would later generate sustainable tax streams.
Rather than fiscal containment, let's look towards fiscal enablement - that's how modern, confident economies approach savings policy.
I just assume that politically the optics for this weren't great, with the tax bands not being up for change... but it feels like such a missed opportunity.
Apologies for the rant, this particular budget mode triggered me (perhaps more than I realised) in its small mindedness.
Mathematician
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Excuse my ignorance, but are ETFs the same thing as 'equivalent offshore funds'? If so, the reduction in tax is only costing 2.3 million in a year. Or are other categories involved as well?
fistophobia
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Based on this budget change... Some people may emigrate, or decide not to live here.
I am tempted to move abroad, wait for 3 years and sell units. I am heavily invested in ETFS, before they became popular.
I am tempted to move abroad, wait for 3 years and sell units. I am heavily invested in ETFS, before they became popular.
Is this a derisory change? Yes. Are they encouraging anyone to invest while the DD regime remains in place? No.
However, to sound a note of (cautious) optimism... in a budget where the 'fiscal space' was limited, one where an effective tax-rise was imposed on PAYE earners, the Govt still found the 'space' to reduce one of the taxes on investing. You have to ask the question, why make a change at all this year, with the constraints they imposed on themselves?
It's no accident that it was announced with reference to the SIU. The European Commission is applying its influence. In response to the Draghi report, they have been very vocal about the need to incentivise investing. The Commissioner in charge was interviewed this week in the FT to that effect "Brussels wants to put more of Europeans’ €10tn in savings to use by urging member states to offer tax incentives for investment accounts" (Brussels wants Europe’s savers to put more money into the stock market)
This is the first time in a long time anything has changed with regard to the investment regime in this country. It's a far cry from what Draghi and the Commission are saying is needed, but it's a start, and they've indicated there's more to come. I'm willing to reserve judgement for now and see what they deliver.
However, to sound a note of (cautious) optimism... in a budget where the 'fiscal space' was limited, one where an effective tax-rise was imposed on PAYE earners, the Govt still found the 'space' to reduce one of the taxes on investing. You have to ask the question, why make a change at all this year, with the constraints they imposed on themselves?
It's no accident that it was announced with reference to the SIU. The European Commission is applying its influence. In response to the Draghi report, they have been very vocal about the need to incentivise investing. The Commissioner in charge was interviewed this week in the FT to that effect "Brussels wants to put more of Europeans’ €10tn in savings to use by urging member states to offer tax incentives for investment accounts" (Brussels wants Europe’s savers to put more money into the stock market)
This is the first time in a long time anything has changed with regard to the investment regime in this country. It's a far cry from what Draghi and the Commission are saying is needed, but it's a start, and they've indicated there's more to come. I'm willing to reserve judgement for now and see what they deliver.
I think the frustration is in the speed and slow process. What you said makes a lot of sense though.
Ultimately an ISA would make a lot of sense and solve the issue for a lot of people but I’m not sure that’s even on the cards.
There has been talk for a number of years now about changes. The 3% rate increase could be left at that if there is more uncertainty at future budget time or moved again by future governments.
I think if DD was removed it would be more permanent.
People are getting older. If this takes another 3 to 5 years to change that’s a lot of time lost for what should be a long term investment.
I was holding out for clarity but I think I will buy a bit now with the hope any change will apply to what I buy.
Ultimately an ISA would make a lot of sense and solve the issue for a lot of people but I’m not sure that’s even on the cards.
There has been talk for a number of years now about changes. The 3% rate increase could be left at that if there is more uncertainty at future budget time or moved again by future governments.
I think if DD was removed it would be more permanent.
People are getting older. If this takes another 3 to 5 years to change that’s a lot of time lost for what should be a long term investment.
I was holding out for clarity but I think I will buy a bit now with the hope any change will apply to what I buy.
As ever, you should be wary of the tax tail wagging the investment dog! But, admittedly, all this LAET/DD/ETF messing is why I prefer direct equity investments in recent years because of the simpler and preferential CGT treatment:
What to do with a million euros?
Personal details Your age: 49 Your spouse's age: 54 Number and age of children: 2 aged 9 and 14 Income and expenditure Annual gross income from employment or profession: €30,000 (state job) Annual gross income of spouse/partner: €60000 (state job) Pension: have maxed AVC’s (should I also...
www.askaboutmoney.com
Irish Investment Tax Comparison: ETF vs CGT Structure
Using the new 38% exit-tax rate analysis (effective January 2026) | 8-year horizon | €100 initial investment
Two Investment Routes Compared:
Option 1: Luxembourg S&P 500 ETF
• Gross return: 9.625% p.a. (1.25% dividend + 8.75% growth)
• US withholding tax: 30% on dividends → only 0.875% compounds
• Exit tax: 38% on all gains at year 8 (deemed disposal)
Result after 8 years:
• Net value: €167.32
• Annualized return: 6.65% p.a.
Option 2: UCITs eligible fully collateralised swap-based ETP “No-Dividend” tracking the S&P 500 total return index
• Gross return: 10% p.a. (100% capital growth, zero dividends)
• No income tax drag
• CGT: 33% on disposal
Result after 8 years:
• Net value: €176.62
• Annualized return: 7.37% p.a.
The Bottom Line
The CGT structure wins by €9.30 (5.6% more) and delivers c0.72% higher annual returns.
Why the gap exists:
Lower tax rate (33% vs 38%)
No US withholding/ income tax eating into compounding. Irish funds would lose 15% rather than 30% but would still then pay 38% on the net $85 received with no credit for DWT paid in the USA.
CGT only applies when you sell (no forced deemed disposal) and no CGT on death.
Note: While the new 38% rate is an improvement from 41%, the structural advantages of capital-growth products remain significant for Irish investors.
Figures assume €100 investment, 8-year hold, S&P 500 returns. Not financial advice.
Using the new 38% exit-tax rate analysis (effective January 2026) | 8-year horizon | €100 initial investment
Two Investment Routes Compared:
Option 1: Luxembourg S&P 500 ETF
• Gross return: 9.625% p.a. (1.25% dividend + 8.75% growth)
• US withholding tax: 30% on dividends → only 0.875% compounds
• Exit tax: 38% on all gains at year 8 (deemed disposal)
Result after 8 years:
• Net value: €167.32
• Annualized return: 6.65% p.a.
Option 2: UCITs eligible fully collateralised swap-based ETP “No-Dividend” tracking the S&P 500 total return index
• Gross return: 10% p.a. (100% capital growth, zero dividends)
• No income tax drag
• CGT: 33% on disposal
Result after 8 years:
• Net value: €176.62
• Annualized return: 7.37% p.a.
The Bottom Line
The CGT structure wins by €9.30 (5.6% more) and delivers c0.72% higher annual returns.
Why the gap exists:
Lower tax rate (33% vs 38%)
No US withholding/ income tax eating into compounding. Irish funds would lose 15% rather than 30% but would still then pay 38% on the net $85 received with no credit for DWT paid in the USA.
CGT only applies when you sell (no forced deemed disposal) and no CGT on death.
Note: While the new 38% rate is an improvement from 41%, the structural advantages of capital-growth products remain significant for Irish investors.
Figures assume €100 investment, 8-year hold, S&P 500 returns. Not financial advice.
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I’m sorry. What is a Synthetic “No-Dividend” S&P 500?
Yes. I’m not sure what that is either.
I know some people use investment trusts to try to get around exit tax issues but these bring their own issues (high amc, potential underperformance, discounts to nav, having to pay marginal tax on dividends (payable for most trusts). Or some try US ETFs if they can buy them (no KID - so most brokers do not offer) and there is tax uncertainty.
Is there something else out there (for non stock pickers)?
I know some people use investment trusts to try to get around exit tax issues but these bring their own issues (high amc, potential underperformance, discounts to nav, having to pay marginal tax on dividends (payable for most trusts). Or some try US ETFs if they can buy them (no KID - so most brokers do not offer) and there is tax uncertainty.
Is there something else out there (for non stock pickers)?
CharlieMac
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Least I'm not the only one who had to Google what option 2 was about.
This came up before. There's another name for them. I found this info on Synthetic ETFs.
Doesn't sound like they should be recommended. I wonder if there any consensus about them on AAM?
This came up before. There's another name for them. I found this info on Synthetic ETFs.
Doesn't sound like they should be recommended. I wonder if there any consensus about them on AAM?
Irish-domiciled ETFs are taxed as if they were 'equivalent offshore funds'.
Irish investment funds and ETFs, equivalent offshore funds, and managed funds from life assurance companies are affected by the change in rate. The total impact is 40M (Table 1).
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The DIY/retail investor probably shouldn't buy derivatives.
The higher return from synthetic ETFs comes with additional counterparty and collateral risk.
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Raskolnikov
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People my age (mid 40's) will have lived their entire professional career under varying degrees of exit tax and deemed disposal. While the people in charge have been writing their reports and making their recommendations, it'll soon be too late.
I spend 10 years in Canada availing of tax free savings and index funds. So I know what I’m missing. I presumed Ireland would have something similar but didn’t let the tax man wag where I wanted to live.
I remember the introduction of Tax Free Savings Accounts there (you can invest in it). It brought the idea of investing to the common man. No tax implications and limited to $5k a year so something to aim to max out.
Pity it’s the kind of thing a minister didn’t pickup on on a Patrick’s Day visit.
Why choose a Luxembourg ETF instead of an Irish one where it would be 15% for the analysis?
Why use this as the comparison when a key benefit of ETFs is the lower tax on dividends?
Why use 8 years when a key issue with ETF investing is the negative impact of deemed disposal on investments longer than 8 years?
Wolframius
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My take is that they wanted to introduce a little change to see if the opposition would pick it up.