ETF Tax Queries - Technical Points

[AAAContributor]

Hello All,

Looking for some clarification on the following points from anyone with experience in these matters:

1. Vanguard Total World Stock ETF
https://institutional.vanguard.com/iippdf/pdfs/FS3141R.pdf

As far as I understand, Capital Gains Tax (33%) is the applicable rate on any gains, and not the rate applying to Offshore Funds (41%). I also presume that the quarterly dividends on this fund are subject to income tax + USC + PRSI and not the Offshore Funds rate of 41%. Am I correct on these assumptions?

2. iShares STOXX Europe 600 UCITS ETF (DE)


As far as I understand, losses on this fund cannot be offset against gains elsewhere in an investor's portfolio. However, what I am unclear on is intra-fund tax accounting. I have seen elsewhere on another thread, a poster imply that each and every investment in a single UCITS fund is treated as a discrete investment and units sold at a loss cannot be offset against units sold at a profit. This was contradicted by another poster (apologies I cannot locate the thread). I just want to be 100% clear on this point. Take this example:
Buy 1,000 units @ €36.00 =€36,000
Buy 1,000 units @ €37.00 =€37,000
Sell 2,000 units @ €36.75 =€73,500
Net Profit =€500
Tax on Gain =€205

If each purchase is treated as a discrete investment for tax accounting, that would mean the units purchased @ €36 would realise a gain of €750, attracting tax at 41% of €307.50. This works out at a tax rate of 61.50% relative to the net profit. I presume this is absurd but would like to be 100% clear just in case.

3. Deemed Disposal
If an investor pays tax to Revenue under the 8th year anniversary rule via the self-assessed tax route (Form 11), and subsequently realises a loss on the eventual sale, what is the procedure for seeking a rebate? Does anyone have any experience on this? Assume the investor is using ETFs and not life products where this is handled by the provider. Is there a specific rebate form to be filled out or does Form 11 have a section to offset this amount against tax due in the particular year?


I am sure these queries are addressed in the Tax Manuals on the Revenue website but the relevant ones have been down for awhile due to updating.

Thanks for your help.

 

[jpd]

1. This would seem to be an ETF designed for the american market and not available to retail investors in the EU
2. In the example you give, as the sale is for the total holding, the total purchase cost would be allowable so the net income would be € 500
If you only sold a partial amount you can use FIFO or an average cost imho. Treating each purchase as a separate investment works for the deemed Disposal rule
3. When you fill in the Form 11 you would have enter the loss on disposal - showing zero tax due and then you enter the tax you paid on the deemed disposal as a credit at the end of the form - I did this once years ago and would have to search my archive to see exactly where I put the tax on the deemed disposal. The tax is repaid or deducted from other income tax due

 

[AAAContributor]

jpd - Thanks for your response. Further to your points:

1. Availability to EU investors ceased due to PRIIPs regulations commencing January 2018. But parking this access issue for a moment, as regulations can change, or an Irish investor may have already built up balances pre-PRIIPs. Assuming this, is it fair to say that Vanguard ETFs listed in the US, fall under CGT treatment and not the exit tax under Offshore Funds?

3. Did Revenue or an adviser direct you to execute it this way or is there anything from the Revenue website advising of this approach?

 

[jpd]

1. hard to say - that's how they were taxed (CGT) but who knows? It is unlikely they become available in the EU

3. It was many years ago and the form is not the same. I'm pretty sure I asked where to put the tax I had paid on the deemed disposal and was told where to put it. The best bet is to ask to submit an Enquiry - but don't leave it too late as you might have to ask 2 or 3 times to get a definitive answer. A call can work but you have to get the right agent

I would have to search through my archives and even then as the form is no longer the same, not sure that would help