ETF 8 year deemed disposal strategy

Okay @Corola, thank you.

If I am to calculate the gains made on the first 12 purchases of 6k, I would need to know how many units were bought during those 12 purchases in year 1.

Okay, the stockbroker platform probably has that information.

And then I use the unit price on 31-Dec at the end of year 8, times the number of units bought during year 1, and compare that to 6k.

Okay, thanks.
 
Protocol said:
And then I use the unit price on 31-Dec at the end of year 8, times the number of units bought during year 1, and compare that to 6k.
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You can use either the unit price on the actual anniversary (1st Jan 2028, 1st Feb 2028, 1st Mar 2028...)

Or to simplify you can choose to use the unit price on the previous mid- or end-year (31st Dec 2027 is the easiest).

Part 27 - Sections 731-747F

www.revenue.ie www.revenue.ie

4.3.1 What gain is taxed?
Where the chargeable event is the ending of an 8-year period, the value of the units at the time less their cost of acquisition (if the investment undertaking so elects, the value of the units at 30 June or 31 December prior to the date of the chargeable event).
 
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I am trying to compare our 41% exit tax with tax regimes abroad.

People say that our 41% exit tax and the deemed disposal at 8 years is crazy.

I am asking what happens in the UK, or elsewhere?


If a person in Leeds buys an EFT on DeGiro, how are any gains taxed?

Does DeGiro report the gains?



@Corola kindly replied above:

"It's self-assessed. In principle the gains are subject to CGT at 20% and the dividends, whether paid out or reinvested, are subject to income tax at up to 39.35%.

Gross roll-up of accumulating funds is not allowed."
 
Thanks.

I have just discovered that people in the UK can hold their savings in an ISA, up to 20k GBP each year, free of CGT or income tax on any gains.

Compare that to here.

Ireland is way too biased towards holding wealth in property.

I can't see the exit tax regime changing a lot, or anything like ISA being introduced, as the Greens/Lab/SocDems and of course PBP would paint that as "making the rich richer".




Hang on, I Thought My ETF Was Tax Free?
The ETF is a financial instrument like a fund, investment trust or stock so is not tax free in all circumstances. In the UK we have the individual savings account (ISA) allowance, which is £20,000 per person. Plus there is the junior ISA, with a limit of £9,000 for each child. A family of four could conceivably invest £58,000 each tax year, and that could all be invested in ETFs. Self invested personal pensions (SIPPs) also act as a tax shield.

The majority of people do not fill all their ISA allowance each tax year. But for those who do, there will be tax implications.

When You Say Tax Free, What Does That Mean?
In this case, if you’re investing in ETFs in an ISA wrapper, you’re shielded from capital gains tax. Dividend income is also received tax free. In an example, you put £20,000 in a global ETF tracker and it rises to £30,000; the tax authorities can’t touch that gain. Likewise, you may get £1,000 a year in dividend income from an income ETF; again you get to keep all of this.
Hold those two taxes in your head until we look at them again later.
 
Far more straightforward (and encouraging) for UK citizens. And this is what I could find re tax treatment in the US from Charles Schwab site.

If you sell an equity or bond ETF, any gains will be taxed based on how long you owned it and your income. For ETFs held more than a year, you'll owe long-term capital gains taxes at a rate up to 23.8%, once you include the 3.8% Net Investment Income Tax (NIIT) on high earners.1 If you hold the ETF for less than a year, you'll be taxed at the ordinary income rate.

1The income threshold for NIIT is $200,000 for single filers or head of household, $125,000 for married filing separately, and $250,000 for married filing jointly or a qualifying widow(er) with a dependent child.

We really do make it inordinately complicated here.
 
If deemed disposal was a real bugbear for me and I had to choose a place to live based on quality of life and the overall tax regime of a Country, I'd prefer to live in Ireland - every time. It's just a wonderful place to live and I'd cope with that one irritating tax.

If anyone has the time, could they do a tax on savings / pensions comparison with a Country with a similar population, in the EU. Like Finland.
 
GSheehy said:
If deemed disposal was a real bugbear for me and I had to choose a place to live based on quality of life and the overall tax regime of a Country, I'd prefer to live in Ireland - every time. It's just a wonderful place to live and I'd cope with that one irritating tax.

If anyone has the time, could they do a tax on savings / pensions comparison with a Country with a similar population, in the EU. Like Finland.
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I wouldn’t go so far as to consider moving country to avail of ETF tax benefits but you’d really have to query why it’s being made so difficult for Irish investors in particular, leaving us little option other than pensions or property for investment- Feels a bit like protectionism no?
 
MelF said:
Feels a bit like protectionism no?
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Not to me, it doesn't.

Just feels like it's not thought out that well and there's no real desire from Government to fix it because not too many are screaming in their faces about it.
 
Protocol said:
Thanks.

I have just discovered that people in the UK can hold their savings in an ISA, up to 20k GBP each year, free of CGT or income tax on any gains.

Compare that to here.

Ireland is way too biased towards holding wealth in property.

I can't see the exit tax regime changing a lot, or anything like ISA being introduced, as the Greens/Lab/SocDems and of course PBP would paint that as "making the rich richer".
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Yes ireland is crazy, it also explains the property shortage as so much money is held in property as the taxation of property is so favourable and also the devastating effects of property crashes on irish economy as so little money is invested in shares and etfs diversifying the risks compared to our peers. The financial crash was bad for many countries but devastated ireland, were it not for EU, UK and imf riding to our rescue ireland would be like Argentina
 
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GSheehy said:
If deemed disposal was a real bugbear for me and I had to choose a place to live based on quality of life and the overall tax regime of a Country, I'd prefer to live in Ireland - every time. It's just a wonderful place to live and I'd cope with that one irritating tax.

If anyone has the time, could they do a tax on savings / pensions comparison with a Country with a similar population, in the EU. Like Finland.
Click to expand...
You could choose Northern Ireland and have the best of both worlds, I'm giving it serious consideration myself
 
Comparing the tax treatment of holding world equity ETFs versus Bershire Hathaway versus Investment Trusts

(1) world equity ETF
  • I see AMC as low as 0.20%
  • Gross roll-up until year 8
  • 41% exit tax and deemed disposal


(2) Berskire Hathaway
  • No div to declare on Form 12
  • 33% CGT
  • Not as diversified as a world equity ETF

(3) Investment Trusts
  • are these on DeGiro?
  • are they as diversified as a world equity ETF?
  • 33% CGT
 
Investment Trusts have dividends to declare, and have their own management charges and stamp duty.

Typical diversification levels:
- Conglomerates <100 holdings
- Investment Trusts <500 holdings
- World equity ETFs >3500 holdings
 
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GSheehy said:
Not to me, it doesn't.

Just feels like it's not thought out that well and there's no real desire from Government to fix it because not too many are screaming in their faces about it.
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Isn't the Review of Funds due to report later this year so something may change.
 
whiz said:
Isn't the Review of Funds due to report later this year so something may change.
Click to expand...

Funds Sector 2030: A Framework for Open, Resilient & Developing Markets

Progress Update: Responses to the Public Consultation December 2023 193 submissions - 140 of them from individuals.
www.askaboutmoney.com
There was a broad consensus from those that submitted a response to the public consultation that the taxation of investment products was overly-complex and in need of reform.

The Funds Review Team is considering a range of options in order to meet the objective of simplification and harmonisation.
 
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I think the main problem is the tax is too high, remember this is based on a tax that was around 20-25% up to 2014. 41% I think is just what happened to be the higher income tax rate at the time during our economic emergency.

I think we'd accept deemed disposal if the tax was closer to 20%.

This video was interesting on various but not all european rates.

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Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.
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Note it doesn't include Denmark which tends to be Ireland's closest competitor for taxes.

I just noted CGT type taxes from that video (hope acceptable to list the content creator's content) - I recommend watching it, dividends can be the same rate or higher - left them out as dividends can be avoided.

Low taxes
Greece - no tax on UCITS ETFs
Bulgaria - no tax
Cyprus - no tax
Slovakia - no tax after holding 1 year
Croatia - no tax after holding 2 years
Czech - no tax after 3 years
Hungary - 10% after 3 and 0 after 5 years
Belgium - no CGT - some transaction taxes
Slovenia - 25% < 5 year, 5-19 years 20% 10-15 years 15% 0% > 15 years

Moderate
Romania - 10% on CGT and 1% over 1 year but some social insurance
Lithuania - 15%
Poland - 19%
Estonia & Latvia 20%

High taxes
Netherlands - no CGT but there is a wealth tax - 32% on notional return?
possibly excludes your first 57,000 euro of wealth
Spain - 19 - 26%
Italy - 26% + 0.2% wealth tax
Germany - 26.375%
Austria - 27.5% - complicated though and you can instead pay taxes via imcome tax if that tax is lower.
Portugal - 28% but also can choose income tax if lower
France - 30% but also can choose income tax if lower

Ireland - 41% + deemed disposal

I'll add Denmark as that will be the one Revenue will use as their pet/sole example

My understanding is CGT in Demark is 42% howver there is (an ISA type account?) Aktiesparekonto which is taxed at 17% but limited to around 13,000 euro.
Also they do what looks like an annual deemed disposal.
 
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ashambles said:
I think we'd accept deemed disposal if the tax was closer to 20%.
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It needs to be at least as high as CGT otherwise no one would invest in anything else. And it should be 1-2% higher than regular CGT to compensate for the deferral of dividend tax under gross roll-up.

Bear in mind many countries do tax the dividends in an ETF, including the UK and US.
 
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