Case study Long Term Investment Options

ClubMan said:
I'm confused - is it not a fact that, right now, most or all ETFs do not qualify for taxation under CGT rules and that there is nothing to indicate that Revenue is going to change this any time soon? Or am I missing something? If anybody responds can they please keep it as simple, jargon free and speculation free as possible. Thanks
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Hi Clubman,

In 2015, Revenue confirmed that, in their view, US ETFs are subject to CGT.

In 2021, they withdrew that guidance, and indicated their general view that the default for collective investment funds is the 41% fund tax regime.

The leading adviser on the subject has issued advice confirming that US ETFs do not qualify as 41% funds under Irish tax legislation and are still subject to CGT.

I hope that helps.

Gordon
 
Thanks @Marc and @Gordon Gekko.
Probably going off topic but (a) I presume that gross roll up means no tax until encashment (and 8 year deemed disposal) at which point 41% of any growth to date is deducted and (b) is there any guidance anywhere on what ETFs are subject to CGT rules rather than the 41% treatment?
Last time I tried to buy US ETFs E*Trade wouldn't let me because I'm an EU citizen and, I think, the relevant info (KIIDs or PRIIPs or something?) wasn't available. Maybe just as well it stopped me if it wouldn't have been tax efficient?
 
ClubMan said:
Thanks @Marc and @Gordon Gekko.
Probably going off topic but (a) I presume that gross roll up means no tax until encashment (and 8 year deemed disposal) at which point 41% of any growth to date is deducted and (b) is there any guidance anywhere on what ETFs are subject to CGT rules rather than the 41% treatment?
Last time I tried to buy US ETFs E*Trade wouldn't let me because I'm an EU citizen and, I think, the relevant info (KIIDs or PRIIPs or something?) wasn't available. Maybe just as well it stopped me if it wouldn't have been tax efficient?
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No, you’ve got to get tax advice in relation to each type basically. There is no guidance. I’ve seen the underlying tax advice though via my parents’ portfolio, which has US ETFs in it.

Yes, 41% tax on exit, on distributions, plus the 8 year rule and losses nonsense.

You’re spot on - US ETFs don’t produce KIIDs so can’t be sold to retail investors other than as part of a discretionary managed portfolio.
 
Steve00 said:
I am a Davy client as per previous & via my advisor. I presume this would be a straightforward process even though I would have no desire to actively manage buying/selling etc so would probably want my broker/advisor/friend to manage on my behalf. Couldn’t see myself having anything other than a buy & hold strategy in such a scenario. Again presumably I would need to include such matters eg dividends in my annual tax return. Presumably Davy etc liaise re: this with my accountant when preparing annual return ?.
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The 1% levy on investments is with insurance companies and does not apply to the Davy fund platform. The 41% taxation does though. With mid level 6 figures and obviously a high earner, I am surprised Davy haven't had you up to the top floor for a presentation and some petit fours with your coffee ;) .

You can absolutely get someone like Davy to be a discretionary fund manager (DFM) for you and they can buy and sell assets on your behalf. They will produce an Income and CGT report each year for you that you can give to your accountant. Be sure to tell them what you don't want. I have had experiences in the past of them putting their own investment products into client portfolios. Or you can use a DFM like Quilter that don't have any of their own products, they just manage clients money. The overall advantage is that you are taxed under CGT and not exit tax.

You have the income and the structures in place. It is just a matter of efficiency. But from your posts on this tread, it sounds like you are willing to sacrifice some of that just to make things as easy as possible too.


Steven
www.bluewaterfp.ie
 
Marc said:
Take for example the massive SPDR S&P 500 ETF. That is structured as a trust in the lives of a number of people. When the last of these dies, the trust winds up. Not materially the same as an Irish fund. Not remotely the same as an Irish fund.
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It's true that some of the very earliest ETFs, including the SPDR S&P500 ETF, were structured as unit investment trusts with a specified lifetime.

The SPDR S&P500 ETF is scheduled to terminate on the first to occur of (a) 22 January 2118 or (b) the date 20 years after the death of the last survivor of eleven persons named in the trust deed, the youngest of whom was born in 1990.

Is this specified lifetime a sufficient differentiator from the way Irish unit trusts are structured for Revenue to accept that this ETF is not materially the same as an Irish-domiciled ETF that also tracks the S&P500?

I have my doubts but the fact is we simply don't know what position Revenue will take. IMO that uncertainty is reason enough to avoid holding this ETF or any other non-EU ETF.
 
Sarenco said:
It's true that some of the very earliest ETFs, including the SPDR S&P500 ETF, were structured as unit investment trusts with a specified lifetime.

The SPDR S&P500 ETF is scheduled to terminate on the first to occur of (a) 22 January 2118 or (b) the date 20 years after the death of the last survivor of eleven persons named in the trust deed, the youngest of whom was born in 1990.

Is this specified lifetime a sufficient differentiator from the way Irish unit trusts are structured for Revenue to accept that this ETF is not materially the same as an Irish-domiciled ETF that also tracks the S&P500?

I have my doubts but the fact is we simply don't know what position Revenue will take. IMO that uncertainty is reason enough to avoid holding this ETF or any other non-EU ETF.
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Actually, you know what I’m done with this site and you can thank this person
 
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Steven Barrett said:
The 1% levy on investments is with insurance companies and does not apply to the Davy fund platform. The 41% taxation does though. With mid level 6 figures and obviously a high earner, I am surprised Davy haven't had you up to the top floor for a presentation and some petit fours with your coffee ;) .

You can absolutely get someone like Davy to be a discretionary fund manager (DFM) for you and they can buy and sell assets on your behalf. They will produce an Income and CGT report each year for you that you can give to your accountant. Be sure to tell them what you don't want. I have had experiences in the past of them putting their own investment products into client portfolios. Or you can use a DFM like Quilter that don't have any of their own products, they just manage clients money. The overall advantage is that you are taxed under CGT and not exit tax.

You have the income and the structures in place. It is just a matter of efficiency. But from your posts on this tread, it sounds like you are willing to sacrifice some of that just to make things as easy as possible too.


Steven
www.bluewaterfp.ie
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Thanks Steven

I well remember going into Davy at the height of the Celtic Tiger with a substantial cash sum to look to invest & be given the distinct impression that they couldn’t be bothered. It was the time of financial/financial advisor madness in hindsight & I suspect they felt there was plenty more fish in the sea !. With all the ‘free money’ around I suspect we may well be entering into a similar period. Hold on to one’s hat.

I bought into the Davy fund structure some years later via my advisor &, as per initial post, I have been happy with performance thus far including 8 year tax payment.

Interesting you say about not having the 1% levy via this process which is useful in itself.

I will make further enquiries of my advisor on this and more before proceeding further. If I have learned anything over the years that might be useful to others is to take one’s time with all such decision making; be prepared to say no +/- change one’s mind mid-stream & be aware that one way or the other people are trying to make money out of your money. That’s fine too; I never mind paying for a good service or product if it delivers value to me.

Really useful thread personally. Thank you
 
Steve00 said:
I well remember going into Davy at the height of the Celtic Tiger with a substantial cash sum to look to invest & be given the distinct impression that they couldn’t be bothered. It was the time of financial/financial advisor madness in hindsight & I suspect they felt there was plenty more fish in the sea !. With all the ‘free money’ around I suspect we may well be entering into a similar period. Hold on to one’s hat.

I bought into the Davy fund structure some years later via my advisor &, as per initial post, I have been happy with performance thus far including 8 year tax payment.

Interesting you say about not having the 1% levy via this process which is useful in itself.

I will make further enquiries of my advisor on this and more before proceeding further. If I have learned anything over the years that might be useful to others is to take one’s time with all such decision making; be prepared to say no +/- change one’s mind mid-stream & be aware that one way or the other people are trying to make money out of your money. That’s fine too; I never mind paying for a good service or product if it delivers value to me.

Really useful thread personally. Thank you
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While there are still plenty of advisors who are still creaming as much money they can get off their clients, there has been a shift in how others operate by moving to a fee basis. Under the fee basis, it doesn't matter to the advisor if you put in €100,000 or €500,000, he is paid the same. Problem is, there is no qualification or title to distinguish one from the other.


Steven
www.bluewaterfp.ie
 
Made sense at the time Gordon. Still does. My own terms & eyes wide open you can rest assured. Never feel that one bad experience at anything should preclude further engagement.
 
Steve00 said:
Made sense at the time Gordon. Still does. My own terms & eyes wide open you can rest assured. Never feel that one bad experience at anything should preclude further engagement.
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It’s where we differ I guess. An experience like yours plus recent events would make me run a mile.
 
Steve00 said:
I invest annually in a repeat high end bespoke de-risked EII mechanism which has & continues to work well for me.
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Care to expand on this?

I too am an EIIS investor. I feel it is an excellent vehicle if you have the spare funds and have the tax liability you wish to stake off. And you are investing and helping native companies to grow (so there is a slightly altruistic element to this (to offset the risk)).

I use a variety of direct investments to individual companies via EII (The Sunday Business Post has a supplement usually in mid-November) or via a fund (like BVP) or via a financial advisor or via a third party (Green Crowd, SparkCrowd Funding).

I continue to be amazed that there is no central website for people interested in EIIS investments where we could review the pool of what is on offer at present.

You are in an enviable position. Kudos on getting to that place.
 
872117 said:
Care to expand on this?

I too am an EIIS investor. I feel it is an excellent vehicle if you have the spare funds and have the tax liability you wish to stake off. And you are investing and helping native companies to grow (so there is a slightly altruistic element to this (to offset the risk)).

I use a variety of direct investments to individual companies via EII (The Sunday Business Post has a supplement usually in mid-November) or via a fund (like BVP) or via a financial advisor or via a third party (Green Crowd, SparkCrowd Funding).

I continue to be amazed that there is no central website for people interested in EIIS investments where we could review the pool of what is on offer at present.

You are in an enviable position Kudos on getting to that place.
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In have also invested in EIIS direct, funds like BVP and Spark and agree that it was strange there was not an easy way to see all available options. So I have attempted to produce this at EIIS.Investments . I hope all those interested in EIIS find it helpful. I will endeavour to keep it it current. Any feedback, missing opportunities, recommendations for improvements are welcome.
 
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