Irish taxation of US ETFs for non-Irish-domiciled person

Discussion in 'Exchange Traded Funds (ETFs)' started by Martyn, 15 Feb 2018.

  1. Martyn

    Martyn Registered User

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    I have been reading and learning a lot about ETFs and I am sufficiently convinced to invest in one or more US ETFs because gains and income would fall under the CGT taxation regime: CGT of 33% on gains above the CGT allowance and income taxes (income tax, PRSI and USC) on income such as dividend distributions. I know that there will be US withholding tax deducted from any dividend distributions too.

    I was born in the UK and grew up there for the rest of my life until moving to Ireland a few years ago. As such, I understand myself to be non-domiciled in Ireland. As mentioned, I moved to Ireland and I am certainly tax resident here now.

    Since I am non-domiciled in Ireland, I understand that I am liable to income taxes (income tax, PRSI and USC) on foreign income such as dividend distributions from US ETFs only if I 'remit' that income back into Ireland. In other words, I understand that if I instruct my (as-yet-unchosen) broker to reinvest any distributions, I will not be liable to Irish income taxes on that at that time or in that tax year - in fact not until when (or if) I remit that income back into Ireland.

    Of course, if I do later remit income and/or gains back into Ireland I will quite correctly be liable to income taxes and/or CGT on that.

    I am interested to hear whether others understand the above in the same way that I do.

    I am also not clear whether I would have to submit a tax return each year, even though I would not be remitting the income back to Ireland. (I know I would have to submit a tax return for the relevant tax year when I did later remit income or gains.) I am a PAYE worker so I would not normally have to submit a tax return but I am not sure whether making the above investment would require me to even though there would be no Irish tax arising from it in 'normal' years (as I say, unless I remit some or all of it).

    Comments welcomed!
     
  2. Sarenco

    Sarenco Frequent Poster

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  3. Marc

    Marc Frequent Poster

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    Last edited: 7 Jun 2018
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    Last edited: 7 Jun 2018
  4. Gordon Gekko

    Gordon Gekko Frequent Poster

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    What you’re proposing is eminently achievable; however there are only a couple of advisors here in Ireland who can do it. An account for a non-dom is set up so capital, income, and capital gains are segregated across a matrix of accounts in another jurisdiction. In addition, most regulated fund investments don’t qualify for the remittance basis so there has to be tax and investment oversight in relation to the account; however, US ETFs do qualify as you’ve highlighted. As I understand it, the Central Bank intend to allow Irish residents to continue to invest in US ETFs based on a number of submissions; a common sense approach basically.

    How much is are you considering investing?
     
  5. Sarenco

    Sarenco Frequent Poster

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    It's not up to the Central Bank.

    PRIIPs (including US-domiciled ETFs) cannot be made available to retail investors in the EU without a KID being produced. That's the law; there's nothing the Central Bank can do about it.
     
  6. Gordon Gekko

    Gordon Gekko Frequent Poster

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    All I can say is that it’s being looked at.
     
  7. Martyn

    Martyn Registered User

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    Thanks, all, for your replies. Much appreciated. It's good to prompt an interesting discussion.

    I had previously seen the referenced thread regarding US ETFs no longer being purchasable in Europe and read it all, but I had not yet seen the further posts on it this week, so thanks.

    Marc, thank you for outlining the pitfalls. In response to the first four...

    1) I'm not disputing that they would, but how could Revenue have any right to tax a remitted capital gain as income rather than at the CGT rate?
    2) Yes, I was planning to use a US online broker who accepts Irish residents.
    3) But I didn't think I needed an adviser. Or do I?
    4) I was under the impression I would be able to purchase US ETFs via a US broker.

    This will only be the start of my investing journey. To date I suppose I have been a very cautious saver, keeping money only on deposit but moving it to seek best interest rate. Of course I'm well aware of the impact of both DIRT and inflation. I was planning to start with €5k to buy into 'the market' (a market) but then I plan to have saved a similar amount with which to do the same again by the end of this year, a similar amount again next year, etc.

    I also have just over £70k Sterling in a UK Cash ISA (interest paid tax free, but current rate is still low at 0.75%) which I am thinking I may wish to invest a portion of in the future to try to get it to work and grow better. So I am not quite at the €100k investor level, but I am not that far away either.
     
  8. Gordon Gekko

    Gordon Gekko Frequent Poster

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    If one operates a single investment account containing original capital, income, and capitals gains, and one remits money into Ireland, the rules deem the worst thing to come first. So income in that case.
     
  9. Martyn

    Martyn Registered User

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    Ah, I see, thanks.
     
  10. Marc

    Marc Frequent Poster

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    Last edited: 7 Jun 2018
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    Last edited: 7 Jun 2018
  11. Martyn

    Martyn Registered User

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    Hi Marc, thanks for this. I thought that because I am non-domiciled in Ireland and I have never remitted anything from that Cash ISA into Ireland (not a penny) I was not liable to any tax on it. Are you saying that because it's a bank account the rules are different from other types of foreign income?
     
  12. Gordon Gekko

    Gordon Gekko Frequent Poster

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    You’re okay on the basis of being a non-dom.
     
  13. autboy

    autboy Registered User

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    Hi, we are in a similar situation as a non-domiciled couple tax resident in Ireland. As a married couple we have maximised our pension contributions into 100% global equities. We have a monthly surplus of €2,000 and would like to know more about passively investing in equities (ETF or index fund) outside of Ireland to maximise any tax benefit. Is the US the only option or could the ETF/fund be based in another EU country?

    @Martyn - can you share any update on your experience?