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

• Press Release - https://www.gov.ie/en/press-release...-update-on-review-of-funds-sector-in-ireland/
• Funds Sector 2030: A Framework for Open, Resilient & Developing Markets: Progress Update - https://www.gov.ie/en/publication/2...-update-responses-to-the-public-consultation/

• an examination of the taxation regime for funds, life assurance policies and other related investment products, with the goal of simplification and harmonisation where possible; and to do so with a net revenue-raising or neutral mandate;
• an examination of the regimes for Real Estate Investment Trusts (REITs) the Irish Real Estate Funds (IREFs) and their role in the property sector, including how they support housing policy objectives; and
• the use and scope of the Section 110 regime, both in the context of the property sector and more generally so as to ensure that the regime is fit for purpose and meeting agreed policy objectives.

2. Taxation of investment products
2.1 Overview
The majority of submissions received addressed the questions posed on the taxation of investment products. Of the 140 responses submitted by private individuals, a considerable number of these were concerned exclusively with taxation. More specifically, many submissions by private individuals referred to the taxation regime for Exchange Traded Funds (ETFs). The submissions convey a general perception that the taxation of investment products, and of ETFs in particular, is a major barrier to increasing retail investor participation in Ireland. These views were also reflected in the submissions received from industry participants and the Central Bank which highlighted the apparent disconnect between Ireland’s role as a global hub for the funds industry and the low levels of domestic household investment into investment funds.

Click to expand...

2.2 Issues raised in submissions
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. Both industry and individual respondents highlighted the benefits, to investors and to the real economy, of increasing retail participation in capital markets . The following issues were consistently raised as impediments to increasing levels of retail investment:
The complexity of the taxation regime for investment products with different tax treatments applying depending on product, domicile and tax residence
The challenges of administering the deemed disposal regime (for both industry and, in the case of ETFs, the individual retail investor)
The tax treatment for Irish investors investing in Irish ETFs Many respondents also highlighted concerns that investment decisions by Irish investors are largely driven by tax considerations rather than the individualneeds of the investor. Others offered the view that the complexity of the taxation of investment income and gains in Ireland is likely to make compliance a significant challenge for retail investors.

Click to expand...

2.3 Proposals raised in submissions
A significant number of changes to the tax regime were suggested by both industry and individual respondents. Many of these focused on the need to simplify and harmonise the taxation of investment funds. However, the scope and ambition of the suggested changes ranged conside rably, from a reimagined system of taxation for investment products to discrete and specific amendments to tax legislation. Among the proposals raised most frequently were:

 Reform the Investment Undertakings Tax (IUT) regime
o Abolish the 8-year deemed disposal rule
o Move IUT from deduction at source to a self-assessed basis
o Provide for loss relief under the IUT regime

 Introduce a reduced IUT rate for investments in ESG projects
 Reform the taxation of ETFs
 Align the tax rates applying to savings and investment products
 Develop a tax-free/tax-advantaged retail savings and investment product

Click to expand...

TheJackal said:

The Funds Review Team will consider further progress updates, consultations and industry events as we continue to progress in our work to report to the Minister for Finance by summer 2024. The submissions received will be published at a later stage in the Review process.

Click to expand...