Exit tax (before 8 year anniversary of 1st purchase) on monthly ETF purchases

Jimmy2times9999

Registered User
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Hi,

Newbie to posting, Lurker for years.

Tax question on monthly ETF purchases, that I can't find an exact answer to.

I want to accumulate ETF purchases monthly, and sell after 7 years, so before the deemed disposal 8 year rule kicks in.


How will the tax be calculated?

Is it 41% exit tax on the total profit in the 7 years?

Or

A separate calculation for each month (84 calculations (7*12))?
 

Steven Barrett

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4,065
Even when cashed in before 8 years is up?

That's a pain!

The tax after 8 years is called deemed disposal i.e. it's not an actual disposal but you calculate the tax due at that time. If you cash in before that, it is an actual disposal. All transactions will have a different profit, so separate calculations have to be done to see what those profits are. If the monthly investment amounts are small enough, you are better off investing through an insurance company and they will look after the tax for you.

Steven
www.bluewaterfp.ie
 

Jimmy2times9999

Registered User
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15
The tax after 8 years is called deemed disposal i.e. it's not an actual disposal but you calculate the tax due at that time. If you cash in before that, it is an actual disposal. All transactions will have a different profit, so separate calculations have to be done to see what those profits are. If the monthly investment amounts are small enough, you are better off investing through an insurance company and they will look after the tax for you.

Steven

Yes, I could go through an insurance company. However, then there's extra fees.

Any recommendations for low fee insurance companies?
 

Eeyore

Registered User
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139
Is it 41% exit tax on the total profit in the 7 years?

Or

A separate calculation for each month (84 calculations (7*12))?

These are the same. The total profit over the 7 years is the profit on each of the individual purchases over the 7 years added together. This amount will be calculated by your broker when you sell so its really not that complicated.
 

Paul O Mahoney

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1,098
The tax after 8 years is called deemed disposal i.e. it's not an actual disposal but you calculate the tax due at that time. If you cash in before that, it is an actual disposal. All transactions will have a different profit, so separate calculations have to be done to see what those profits are. If the monthly investment amounts are small enough, you are better off investing through an insurance company and they will look after the tax for you.

Steven
www.bluewaterfp.ie
So, an unrealised gain is taxed , well that's ........... how can this be justified?
Is this just here or is it the same in Europe?
And what happens is its a loss, is that carried forward or realised and written off against other classes of tax?
 

Jimmy2times9999

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15
These are the same. The total profit over the 7 years is the profit on each of the individual purchases over the 7 years added together. This amount will be calculated by your broker when you sell so its really not that complicated.

The calculation isn't the exact same though. I'd prefer to do this myself unless fees are cheap with a broker. That's why I'd like to have all the information clear beforehand.

A simple enough spreadsheet will do the trick I'd imagine.
 

Sarenco

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6,891
The total profit over the 7 years is the profit on each of the individual purchases over the 7 years added together.
The point is you have to track the price at which you purchased and sold each individual batch of shares (less commissions), which is an administrative nightmare.
This amount will be calculated by your broker when you sell so its really not that complicated.
Brokers don’t do their clients’ tax calculations.
 

Marc

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1,506
This is a really bad idea
You have to file a tax return annually for each purchase as well as track the gains on each contribution separately
Our analysis indicates that a life company regular saving plan with a high equity content makes sense for small regular savings once you have prioritised and maximised pension contributions and debt repayment
 

Jimmy2times9999

Registered User
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This is a really bad idea
You have to file a tax return annually for each purchase as well as track the gains on each contribution separately
Our analysis indicates that a life company regular saving plan with a high equity content makes sense for small regular savings once you have prioritised and maximised pension contributions and debt repayment

What's a really bad idea?

Does investing in an low fee ETF (eg Vanguard) in a low cost broker such as Degiro make as much sense (or better) than a life company regular saving plan?

Assume pension is maxed and debt is small.
 

RedOnion

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6,024
Aren't each potential ETF monthly purchase treated seperately for tax reasons?

If it was a 41% cut off the total profit after 7 years I'd be chuffed btw!
After 7 years, isn't the total profit the sum of the profits on your monthly investments over the 7 years?

Sorry, I must be missing something really obvious.
 

Marc

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1,506
let me preface this by saying I do have some sympathy here with people who see what your average American, Australian or British investor is able to do but, and I say this having researched this topic in a professional capacity for the last decade that you will run yourself ragged with frustration trying to make any sense of the rules.

Every single account I’ve had for oh say the last 30 years aggregates the holdings so that you have capital (total paid) value (total of holdings) net gain or loss.

I’ve never seen a service which allows you to treat each monthly contribution as a separate investment and while I’m at it remind you to file your tax return the following year for each purchase and remind you not to purchase etfs in different legal structures or you won’t be allowed to offset losses against gains, and calculate a notional gain on the 8th anniversary of each separate holding.

its because of this, specifically in a Irish context, that buying regular investments in an ETF is, as I said, a “really bad idea”
 

Gordon Gekko

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5,570
Agreed. If someone wants to invest on a monthly basis, the life company route makes most sense. Cue whinging about fees. Sometimes it’s not possible to have one’s cake and eat it.
 
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