Access to Index Funds

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I would like to start investing in some index funds. I hope to invest E3000 a month in Emerging Markets, Total World Stocks and a Retirement Fund linked to my age (30).

I have found these funds on American sites such as Etrade and Zecco. My plan was to open an account with one of these US trading sites and divide the money equally into each of these funds.
I was hoping someone with a bit more experience in investing could give me some advice.
Firstly is this the best way to get access to these funds?

Secondly; what are the tax implications? Will Uncle Sam tax any gains I make in the US and then will I have to pay additional tax with the Irish Revenue?
Or will Uncle Sam not tax me as I will not be a resident in the US and let me sort out my own tax affairs with the Irish Revenue.

Lastly; when do you pay tax on investments? Is it at the end of every year or just when you sell the stocks??

Is there a better way to get access to board based international index funds for an Irish Investor?

Any advice would be much appreciated.
 
Exchange Traded Funds (ETF) represents your best method of implementing this strategy here in Europe.

For a good example of ETFs offered on the London stock exchange visit the [broken link removed], in addition you'll also find some background information about ETFs there.

I would also recommend "The ETF Book" as a good read on this subject, although you need to remember that it has a US view of the world, so does not address issues of currency risk and so on...

You will be subject to income tax on the dividends on paid by an ETF, so for your purposes it is best to seek out ETFs that reinvest the dividends rather than pay them out.

You will also be subject to capital gains tax when you dispose of your holdings in an ETF. But since you are investing in index, buy and hold over the long term is a fine option.

Any European execution only brokerage account that allows access to the London, Frankfurt or Zurich exchanges should be enough to allow you invest in any set of index funds you care to consider.

Good luck with that,

Jim.
 
Ah Jim if only it were that simple.

Unfortunately ireland doesn't have the same tax system as switzerland!
 
Marc said:
Ah Jim if only it were that simple.

Unfortunately ireland doesn't have the same tax system as switzerland!
Click to expand...

If there is something wrong in the post please point it out, so that the OP may have the benefit of your knowledge.....

Jim
 
Certainly.

Investment funds that are substantially similar to Irish unit funds are subject to exit tax and not income tax or capital gains tax.

The domicile of the fund is critical for the assessment of the tax status of the fund.

Consequently it isn't possible to engage in activities such as tax loss harvesting as one would in the USA for example or bed and breakfasting gains as one would in the UK.

The complexity of the tax treatment of offshore funds puts these investments out of the reach of many investors in Ireland who would otherwise benefit from the typically lower costs.

Researching tax friendly investment funds from the perspective of an Irish resident investor is a time consuming and relatively complex task which in our experience is beyond the capabilities of many diy investors.

Many therefore end up with the offerings of Quinn or rabo rather than say vanguard who won't deal directly with Irish residents.
 
Thank you Marc for your input,

And what are you views of the offerings of Quinn and Rabo??
 
Marc said:
Certainly.

Investment funds that are substantially similar to Irish unit funds are subject to exit tax and not income tax or capital gains tax.

The domicile of the fund is critical for the assessment of the tax status of the fund.

Consequently it isn't possible to engage in activities such as tax loss harvesting as one would in the USA for example or bed and breakfasting gains as one would in the UK.

The complexity of the tax treatment of offshore funds puts these investments out of the reach of many investors in Ireland who would otherwise benefit from the typically lower costs.

Researching tax friendly investment funds from the perspective of an Irish resident investor is a time consuming and relatively complex task which in our experience is beyond the capabilities of many diy investors.

Many therefore end up with the offerings of Quinn or rabo rather than say vanguard who won't deal directly with Irish residents.
Click to expand...

Hi Marc,

Lets try and stick to my original post, in it I refer to ETFs not US Funds and to the best of my knowledge Exit Tax refers to US Funds and has nothing what so ever to do with ETFs traded on the major European stock exchanges, is this correct???

With respect to ETFs an Irish investor can expect to pay income tax on dividends paid by ETFs and Capital Gains Tax on the disposal shares in such a fund, is this correct??

It's been a long time since I provided tax and financial services advise in Ireland, but I seriously doubt that it is beyond the ability of this OP to deal with the tax implications of say buying ETFs on the London stock exchange!

Jim (Switzerland)
 
Nope

Exit tax applies to ETFs on european exchanges.

And as I explained etfs are subject to exit tax and not income tax and capital gains tax subject to domicile of the fund.

As for complexity there were a whole bunch of ETFs without uk distributor status that had punititive tax treatment in the uk recently and noone seemed to be aware of it.

This is a much more complicated subject than many people realise hence my intervention.
 
The technicalities on ETF taxation have prevented me from DIYing ETFs...I know others are DIYing it, but I am not definite that Revenue even know themselves about the taxation on them.

Marc, are you willing to share the name of same basic index tracking funds which IYO are beneficial for a long term investor based in Ireland?
 
Marc said:
Certainly.

Many therefore end up with the offerings of Quinn or rabo rather than say vanguard who won't deal directly with Irish residents.
Click to expand...

Marc, Is this really true ?
According to the their prospectus at

https://www.vanguard.co.uk/uk/portal/How_to_invest/ireland-open-account.jsp?tab=Retail_role#


"You can buy, sell or exchange Shares on a daily basis directly from:
Vanguard Investment Series plc-Vanguard Emerging Markets Stock Index Fund
c
⁄o J.P. Morgan Administration Services (Ireland) Limited
JPMorgan House
International Financial Services Centre
Dublin 1
Ireland
Telephone: 353-1-612-3226
Fax: 353-1-612-3067
Email: [email protected]
Hours of Business: 9.00 a.m. to 5.00 p.m. (Irish time) Monday - Friday.
Minimum Initial Subscription
Investor Shares - $100,000 or €100,000
Institutional Shares - $500,000 or €500,000
Pound Sterling Shares - £100,000"
 
I guess you could try. Everyone I have spoken to has been knocked back.

Remember the link is vanguard.co.uk and the UK market is different to Ireland. Just because the funds are based here doesn't make any difference.

But let's assume you could deal direct the minimum investment per fund is €100000

Assuming a typical allocation in a portfolio of say 5% to some asset classes this would be fine if you had around €2m to invest.
 
Marc said:
Many therefore end up with the offerings of Quinn or rabo rather than say vanguard who won't deal directly with Irish residents.
Click to expand...


meadow said:
Marc, Is this really true ?
According to the their prospectus at

https://www.vanguard.co.uk/uk/portal/How_to_invest/ireland-open-account.jsp?tab=Retail_role#


"You can buy, sell or exchange Shares on a daily basis directly from:
Vanguard Investment Series plc-Vanguard Emerging Markets Stock Index Fund
c
⁄o J.P. Morgan Administration Services (Ireland) Limited
JPMorgan House
International Financial Services Centre
Dublin 1
Ireland
Telephone: 353-1-612-3226
Minimum Initial Subscription
Investor Shares - $100,000 or €100,000
Pound Sterling Shares - £100,000"
Click to expand...

Marc said:
I guess you could try. Everyone I have spoken to has been knocked back.

Remember the link is vanguard.co.uk and the UK market is different to Ireland. Just because the funds are based here doesn't make any difference.

But let's assume you could deal direct the minimum investment per fund is €100000

Assuming a typical allocation in a portfolio of say 5% to some asset classes this would be fine if you had around €2m to invest.
Click to expand...

I called that IFSC number on the vanguard site and they said that they do deal with Irish residents. I have read a few times on this site that Vanguard don't deal with Irish residents so to be honest I was a bit surprised by her reply.

She said that not all of the funds are available but that one I inquired about (Global Small-Cap Index) was.

I asked if this had been a change in policy by Vanguard but she said no, and that they had always been available.

I agree the minimum investment amount is significant but just wanted to clear up the confusion that they are not available to Irish residents.
 
Thanks Meadow, is the minimum 100k per fund, or 100k in total spread across several funds?
 
I would have to agree with Marc here - it is not relevant whether you deal with Vanguard or some other ETF provider or via your stock broking account. What is relevant is that you are Irish resident, and subject to the Irish Revenue rules on ETFs which Marc has articulated as clearly as he can while acknowledging that there remains uncertainty on the taxation of ETFs in certain areas. A common sense approach by investors has to prevail - assume ETFs are treated the same as unit-linked funds from a tax standpoint in general and you won't go too far wrong.

Of course, using a CFD account to buy & sell ETFs allows you to use losses against profits so CFD accounts are sensible if you are buyng & selling frequently. Exchange Traded Commodities (ETCs), like a gold or silver ETC, are not funds so should be taxable as stocks (is my guess) but there has been no Revenue guidance on the issue.

Hope that helps

Rory Gillen
 
I looked at the idea of using CFDs to buy/sell ETFs(so that gains/losses within CGT regime) some time back.

The major drawback is the funding cost charged on the leverage.I suppose if someone has CGT losses forward this may be a price worth paying but in general it would be an expensive way to own ETFs.
 
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