hughpearse
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I am a PAYE worker and I am trying to find investments on Degiro which accumulate (pay no dividends, aka Scrip Dividends) so that income tax cannot be applied at the marginal rate (20/40%) and I can avail of compounding through retained earnings. I also want to avoid the gross roll up (deemed disposal) every 8 years, and I would like CGT to be applied at the standard rate of 33% instead of the special rate of 41%. Also I would like to be able to offset losses against gains. I know its a lot to ask...
I have found a few different places on the revenue website giving guidance on this. The interesting items I could find to reduce Tax are:
Can anybody confirm if I am approaching this problem correctly? How can I get diversification and pay less tax? I don't want to buy individual shares because then I will have crazy transaction fees with my broker. I would love if someone could send me some ISINs to investigate which don't incur a lot of tax.
Edit: found a nice summary of the tax for different securities
I have found a few different places on the revenue website giving guidance on this. The interesting items I could find to reduce Tax are:
- Purchase shares. Simple but diversification will cause high transaction fees from my broker
- Invest in offshore funds which fall outside of chapters 2&4 747AA (eg, Luxembourg unregulated fund, SCS/SCSp), see Tax and Duty Manual Part 27-04-01 (§4.2) - revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-04-01.pdf
- Invest in ETFs domiciled in non-EU OECD country (not the USA as they are required by US law to pay dividends): UK, Switzerland, Norway, (Liechtenstein? its an EEA member, Guernsey its UK... ish?), Turkey, see Tax and Duty Manual Part 27-01A-03 (§3) - revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-01a-03.pdf
- Invest in trusts out of the UK - no explicit revenue rules available
- Invest in a "tax transparent" vehicle like a Common Contractual Fund (CCF) or Investment limited partnership (ILP) so it's as though I purchased the shares themselves. See Notes for Guidance: Finance Act 2020 Part 27: Unit Trusts and Offshore Funds (§739i) revenue.ie/ga/tax-professionals/documents/notes-for-guidance/tca/part27.pdf
- Hold the ETFs in a CFD account, according to revenue CFDs are capital assets to which the capital gains tax rules apply and loss relief is available. Cost is approx 1.5% above base rates. revenue.ie/en/tax-professionals/historic-material/ebrief/2007/no-362007.aspx
- Invest in synthetic non-EU OECD (eg USA) ETFs which accumulate to circumvent DWT, as it doesn't hold the assets directly as it uses a swap-based model. Can still buy US ETFs in the EU if you sell a Put Option, however synthetic ETFs are not common in the USA.
- Funds
- ISIN LI0030512359 (Liechtenstein) - Top World Equity EUR
- ISIN GB00B4M5NH84 (UK) - iShares Emerging Markets Equity Index Fund (UK) L Acc
- ISIN GB00B87JKQ15 (UK) - Close FTSE TechMark X Acc
- ISIN GB0008838707 (UK) - Close FTSE TechMark Fund A Acc
- ETFs
- ISIN NO0010257801 (Norway) - DNB OBX ETF
- ISIN CH0492935355 (Switzerland) - UBS ETF (CH) MSCI Switzerland IMI Socially Responsible (CHF) A-acc
- Trusts
- ISIN CA1358251074 (Canada) - Canadian General Investments, Ltd (GBP) CGI
- ISIN GG00B2QQPT96 (Guernsey) - BH Global Limited GBP BHGG
Can anybody confirm if I am approaching this problem correctly? How can I get diversification and pay less tax? I don't want to buy individual shares because then I will have crazy transaction fees with my broker. I would love if someone could send me some ISINs to investigate which don't incur a lot of tax.
Edit: found a nice summary of the tax for different securities
- gillenmarkets.com/featured_articles/oeics-investment-trusts--etfs-demystifying-the-terminology.cfm
- gillenmarkets.com/featured_articles/tax-issues-for-irish-residents.cfm
- pwc.ie/industries/asset-management/insights/irish-alternative-funds-industry-overview.html
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