There is no notion of "adding back the tax" if you buy directly via a trading platform. You either:Is there a difference method to use when calculating Deemed Disposal tax depending on if it's through a Life Insurance product or if bought directly via a trading platform yourself?
There is no notion of "adding back the tax" if you buy directly via a trading platform.
You either pay the tax from your other cash funds and your ETF remains untouched, so there is no tax deducted from it to add back in.
Or you raise money by selling specific shares of the ETF (on a FIFO basis), which creates realised gains or losses, and you have fewer shares remaining at the next disposal. A realised gain creates another tax liability.
In both cases you claim a credit for the tax already paid on the remaining shares, but you don't add anything back because each share is distinct and its gain is relative to its purchase price.
It's not the case that adding the tax back results in a higher overall tax bill. It's just that the example in the link only works for ETFs under unrealistic circumstances. If you sell shares of the ETF on exactly the Year 8 and Year 16 anniversaries, for exactly the same amount as you need to pay in tax, then you will have the same result.2 - The actual method used to calculate the DD tax by adding the previous tax back to the fund value results in a higher overall tax bill compared with the method used on a trading platform ETF.
But the realistic scenario is:
- in Year 8 the deemed disposal anniversary comes due at a price of €X per share
- your tax return isn't due until the following Year 9 when the price has moved to €Y per share
- you sell a number of shares Z at price €Y to raise enough money for the deemed disposal tax
- which creates an actual disposal (on top of the deemed disposal) of those shares that has another amount of tax due
- which leaves you with fewer shares than you started with
- and possibly some residual cash if (Y x Z) doesn't exactly match the tax due
The main difference is with ETFs the tax is never paid directly from the fund, it's always paid separately by you. Either with cash you already had on the side, or cash you received by selling shares of the ETF.
Yes it's much easier to leave the fund intact. But as long as you consider each tranche of shares you've sold as a separate calculation it's not insurmountable.I think the easier option, if you can afford to obviously, would be to just pay the Deemed Disposal tax from your own cash and avoid that extra complexity.
Exactly, that's the point that I made here recently but people argued that money is fungible (it isn't). The other advantage of paying your due tax separately is to maximize compounding. It is one of the many reasons why I wouldn't recommend investing in actively managed funds as they deduct money from the fund to pay for the tax.Yes it's much easier to leave the fund intact. But as long as you consider each tranche of shares you've sold as a separate calculation it's not insurmountable.
I know alot of people like to give out about "brexit Britain " but I the areas of personal investment and personal wealth generation it is way ahead of us. 12000 pounds per year CGT tax free and tax free ISAs, we can only dream of such products. So if you are a worker looking to rent a reasonably priced apartment and build up savings, the UK or NI is the place to be. However if you are unemployed and have no intention of working, welfare Ireland is the place to be.Is there any realistic chance of the tax situation in Ireland becoming less complex anytime soon? At times it is so frustrating and makes me miss living in Northern Ireland where I could invest directly with Vanguard for low fees. It feels like the people of Ireland are forced into investing in property & pension AVC's as the only way of building wealth. I was thinking about investing in Vanguard V60A ETF through Trade Republic's monthly savings plan, but the complicated tax system has totally put me off.
That's being cut to £3,000 this year. It's already cut to £6,000 since last year.12000 pounds per year CGT tax free
From what I see and hear, there isn't any political appetite to change the tax system for ETF investors. The tax is complicated on purpose in order to deter people who could be tempted to look elsewhere for potential gains.Is there any realistic chance of the tax situation in Ireland becoming less complex anytime soon? At times it is so frustrating and makes me miss living in Northern Ireland where I could invest directly with Vanguard for low fees. It feels like the people of Ireland are forced into investing in property & pension AVC's as the only way of building wealth. I was thinking about investing in Vanguard V60A ETF through Trade Republic's monthly savings plan, but the complicated tax system has totally put me off.
but this was a sop to the life assurance investment companies when Revenue bought in the deemed disposal rule - by deliberately making it complicated, they assured that a lot of investors would give up DIY and instead use the life assurance investment products along with the fees associated
There was no concern about treating investors fairly - the Irish life assurance investment industry has more clout than any number of individual investors, unfortunately
There is alot more money sitting on deposit today doing nothing than there was in 2006, people arguably have alot more cash today, so that does not explain anything.2006 was the year before The Crash so people were flush with money
Exit tax only applies to Irish resident taxpayers - the rest of the world pay tax in their country of residence
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