ETFs and capital gains tax

galway_blow_in

Frequent Poster
Messages
1,418
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 ?
 

Sarenco

Frequent Poster
Messages
5,495
am i right in saying that gains made on etf,s cannot be measured against previous investments which resulted in losses going forward ?
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.
is it also the case that investment trusts do facilitate previous losses which can minimise capital gains tax on the sale of funds ?
UK incorporated investment trusts are subject to the same CGT regime as any other publicly traded shares.
 

galway_blow_in

Frequent Poster
Messages
1,418
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.

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 ?
 

galway_blow_in

Frequent Poster
Messages
1,418
Yes. The exit tax rate is 41%.
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 ?
 

Sarenco

Frequent Poster
Messages
5,495
just checked out this etf which is listed on the nyse , it also covers the eurozone , i cannot tell if its domiciled in the usa
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.
 

Sarenco

Frequent Poster
Messages
5,495
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 ?
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.
is it also the case that you cannot use any previous losses on asset sales against this 41% exit tax ?
Again, these funds are not subject to CGT so prior losses are not relevant.
 

galway_blow_in

Frequent Poster
Messages
1,418
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.
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
 

Sarenco

Frequent Poster
Messages
5,495
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
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
 

galway_blow_in

Frequent Poster
Messages
1,418
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
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
 

Sarenco

Frequent Poster
Messages
5,495
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
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.
 

Sarenco

Frequent Poster
Messages
5,495
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.
 

joe sod

Frequent Poster
Messages
686
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.
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.
 

landlord

Frequent Poster
Messages
871
No, Vanguard also has a range of Irish domiciled funds.
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
 

galway_blow_in

Frequent Poster
Messages
1,418
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.
i dont suppose the forum rules allow suggestions of eurozone based investment trusts , hopefully with as much liquidity as city of london ?
 

Marc

Frequent Poster
Messages
1,042
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
 
Top