Please see below some further clarification from our website re tax treatment: [broken link removed]
scroll down to 'Tax'. Apologies for the length of the post.
Why are RaboDirect funds taxed differently to some other Irish funds?
All funds offered through RaboDirect are sold as either Undertakings for Collective Investments in Transferable Securities (UCITS) or SICAVs, a UCITS set up in Luxembourg. A UCITS is a type of fund structure that is freely marketable within the European Union. 20 of the 23 funds available through RaboDirect are Luxembourg based SICAVs. In these circumstances, the investor must self-assess themselves for Irish tax in respect of any increase in value on the investment on the disposal of the investment or on the eighth anniversary of the investment. Each investor must make the necessary timely returns to the Revenue in order to avail of the necessary tax benefits outlined above.
3 of the 23 funds available through RaboDirect are Irish UCITS. Irish UCITS are usually taxed at source. This means that the fund administrator collects and pays over any tax liability to the Revenue on behalf of the investor. However there are a number of exceptions to this rule and one of these is where the funds are held in a recognised clearing system. The units in the Irish UCITS offered by RaboDirect are held in a recognised clearing system. In a clearing system the details of the underlying investor (customer) are not available to the administrators for the purpose of making tax deductions at source. As a result, the investor must again self-assess themselves for Irish tax in respect of any increase in value on the investment on the disposal of the investment or on the eighth anniversary of the investment. Each investor must make the necessary timely returns to the Revenue in order to avail of the necessary tax benefits as outlined above.
What happens if I sell one RaboDirect fund and invest in another?
Investor is liable to pay tax on the increase in value of the investment when they are selling one RaboDirect fund and investing in another. There is no exemption on the tax payment if investors decide to buy another RaboDirect fund. From a tax point of view they are considered separate transactions
What is my tax liability if I buy units in the same RaboDirect fund at different times and then sell some of these units?
While Revenue do not have a preference for the method of calculation used, First in, First Out (FIFO) is the most common method of calculating the tax charge where a person hold units in the same fund which have been purchased at different dates. FIFO is where the units bought at the earlier date are considered to be disposed of first. The example below illustrates how FIFO works:
For example
2005 bought 100 units in X fund @ €1 per unit
2006 bought 100 units in X fund @ €2 per unit
2007 sold 150 units in X fund at @ €3 per unit
Total Gain =
150 units @ €3 (sold in 2007)= €450
So following the FIFO rule
100 units (bought first in 2005) @ €1= €100
Then
50 units (of the 100 units bought in 2006) @ €2= €100
Total amount liable for tax is the gain made from the transaction so
€450-€200= €250
Therefore the investor is liable to pay tax on the €250 gain he made
This example is for illustrative purposes only.
This is only a general tax summary. Individual circumstances may differ. The tax situation may change in the future. Taxation is a complicated issue and we recommend that you seek advice from a tax adviser.
