ETFs and capital gains tax

Discussion in 'Exchange Traded Funds (ETFs)' started by galway_blow_in, 9 Jun 2017.

  1. galway_blow_in

    galway_blow_in Frequent Poster

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    just a quick question , am i right in saying that gains made on etf,s cannot be measured against previous investments which resulted in losses going forward ?

    is it also the case that investment trusts do facilitate previous losses which can minimise capital gains tax on the sale of funds ?
     
  2. Sarenco

    Sarenco Frequent Poster

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    It depends where the ETF is domiciled.

    Broadly speaking, US domiciled ETFs are subject to the same CGT regime as any other publicly quoted shares so losses can be carried forward. Irish/EU domiciled funds/ETFs are not subject to CGT - they are subject to a special exit tax regime.
    UK incorporated investment trusts are subject to the same CGT regime as any other publicly traded shares.
     
  3. galway_blow_in

    galway_blow_in Frequent Poster

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    thank you

    the etf i have in mind is VEUR which is domiciled in ireland , so were one to invest in this etf for perhaps five years , you would be subject to an exit tax upon any sale ? , do you know what this exit tax rate is ?
     
  4. galway_blow_in

    galway_blow_in Frequent Poster

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  5. Sarenco

    Sarenco Frequent Poster

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    Yes. The exit tax rate is 41%.
     
  6. galway_blow_in

    galway_blow_in Frequent Poster

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    just been reading a thread from a while back which is related to this very topic , posters mentioned paying a 41% exit tax after eight years , is that if you sell within the eight years from when your purchased or if you hold for longer than eight , were you to sell after two years , would you still be subject to a 41% exit tax ?

    is it also the case that you cannot use any previous losses on asset sales against this 41% exit tax ?
     
  7. Sarenco

    Sarenco Frequent Poster

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    Yes, that is a US-domiciled ETF.

    Bear in mind that dividend payments made to the ETF on its underlying holdings will be subject to withholding tax. The withholding rate varies from country to country - it's 25% in Germany, 30% in France.

    The ETF, in turn, will withhold (US) tax on any dividends paid to you at a rate of 30% (15% if you complete a W8-BEN). You can claim a credit for this withheld (US) tax in your (Irish) tax return. However, you can't claim a credit for the (French, German, etc.) withholding tax suffered by the ETF itself.
     
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  8. Sarenco

    Sarenco Frequent Poster

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    Yes.

    Irish/EU-domiciled accumulating funds are subject to a "gross roll up" tax regime with a 41% exit tax and a "deemed disposal" every eight years.
    Again, these funds are not subject to CGT so prior losses are not relevant.
     
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  9. galway_blow_in

    galway_blow_in Frequent Poster

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    thanks again , it appears the U.S domiciled etf is the obvious choice , the witholding tax im not worried about , can work within tax treaty rules and claim back what is due
     
  10. Sarenco

    Sarenco Frequent Poster

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    Well, bear in mind that you can't claim a credit for any withholding tax suffered by the ETF itself.

    I wouldn't agree that a US domiciled ETF is the obvious choice in every circumstance - have a look at my discussion with Fella in this regard on this thread:-
    https://www.askaboutmoney.com/threads/is-it-mad-to-pay-off-a-cheap-tracker.193088/page-2
     
  11. galway_blow_in

    galway_blow_in Frequent Poster

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    are you familiar with the city of london investment trust , very long track record of dividend increases , conservative in nature , quite liquid , would you compare it favourable to one of those u.s domiciled etf,s , i realise its uk based but most of the companies operate globally
     
  12. landlord

    landlord Frequent Poster

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  13. Sarenco

    Sarenco Frequent Poster

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    No, Vanguard also has a range of Irish domiciled funds.
     
  14. Sarenco

    Sarenco Frequent Poster

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    Yes, I am familiar with City of London IT. It's a high income investment trust that invests almost entirely in UK companies and employs a modest level of leverage.
     
  15. galway_blow_in

    galway_blow_in Frequent Poster

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    do you view it favourably ?
     
  16. Sarenco

    Sarenco Frequent Poster

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    Well, forum rules don't allow discussion on individual stocks but if you are looking for diversified, high yielding exposure to the UK stock market it is certainly a good candidate.
     
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  17. joe sod

    joe sod Frequent Poster

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    Thanks for that I had been wondering about that myself , witholding taxes deducted within the ETF. However there is no way to avoid that if you own french or german shares outright or within an irish domiciled etf, or within a UK investment trust, I presume its not just an issue with US domiciled etfs. I know you can get back some of the dividend holding french or german shares outright but it is a tedious and bureacratic process.
     
  18. landlord

    landlord Frequent Poster

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    Ok thanks Sarenco.

    Sarenco. I am still looking for a US domiciled ETF that does not pay dividends. Is it still the case that these are not available? Thanks
     
  19. galway_blow_in

    galway_blow_in Frequent Poster

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    i dont suppose the forum rules allow suggestions of eurozone based investment trusts , hopefully with as much liquidity as city of london ?
     
  20. Marc

    Marc Frequent Poster

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    Whilst an Investment Trust is listed as a single company, it is an investment company and is therefore closer to a "fund" than a "share".

    I'd be happy to lock Brendan in a cupboard if he argues we can't consider an Investment Trust is a fund.

    On an earlier point. US Domiciled ETFs have to pay dividends. No point in looking for an accumulation fund