JakubFranek
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TL;DR - Czech citizen moving to Ireland, possibly for several years. How to legally avoid exit tax on ETFs (which I already invested in while in CZ)?
Hello,
I am a 23y/o student from the Czech Republic moving to Ireland in July for a 1 year long work internship. After that I am going to return for 1 year to CZ to finish my studies, but its possible I will get an offer from the Irish employer and there is a chance I might return to Ireland for a longer period of time afterwards.
Before learning about the Irish tax laws I started investing this year (simply buying index ETFs such as IWDA monthly on DEGIRO). Czech Republic has extremely comfortable tax laws which I plan to exploit (accumulating ETFs are exempt from all tax after holding them for more than 3 years), however Irish law seems to be absolutely horrendous regarding UCITS regulated ETFs (41% exit tax with 8 year deemed disposal).
When I first started studying the matter it almost seemed that as a non-domiciled citizen I could simply never remit the invested money into Ireland (which I wouldn't do anyway, as I plan to hold the ETFs into retirement), but I learned that UCITS funds such as those ETFs I invest in are Irish domiciled, therefore they don't count for the remittance tax basis and I would have to tax them anyway by the nature of being Irish tax resident.
I assume this would not be a problem if I were to never return after the internship, due to losing tax resident status in 2021. However if I were to come back to Ireland, I would become ordinary resident quite soon (starting in 2022). As my investments started in March 2019, I guess the 8 year rule would imply that in order to avoid the exit tax, I would have to stop being ordinary resident by 2027. Therefore I would have to leave the country by the end of 2023 so that I would stop being ordinary resident in 2027, right? Is this a sound and legal way of avoiding this tax?
Also, just to make sure I understand the law properly, let's imagine that I invested in Irish domiciled ETF in August 2011 and I moved to Ireland for the same internship in July 2019, becoming tax resident for 2019 and the 8th anniversary of my earliest investment being August 2019. Does that mean I would have to pay the 41% exit tax based on the investments right away in 2020?
Thanks a lot for any answers.
Have a great day
Jakub
Hello,
I am a 23y/o student from the Czech Republic moving to Ireland in July for a 1 year long work internship. After that I am going to return for 1 year to CZ to finish my studies, but its possible I will get an offer from the Irish employer and there is a chance I might return to Ireland for a longer period of time afterwards.
Before learning about the Irish tax laws I started investing this year (simply buying index ETFs such as IWDA monthly on DEGIRO). Czech Republic has extremely comfortable tax laws which I plan to exploit (accumulating ETFs are exempt from all tax after holding them for more than 3 years), however Irish law seems to be absolutely horrendous regarding UCITS regulated ETFs (41% exit tax with 8 year deemed disposal).
When I first started studying the matter it almost seemed that as a non-domiciled citizen I could simply never remit the invested money into Ireland (which I wouldn't do anyway, as I plan to hold the ETFs into retirement), but I learned that UCITS funds such as those ETFs I invest in are Irish domiciled, therefore they don't count for the remittance tax basis and I would have to tax them anyway by the nature of being Irish tax resident.
I assume this would not be a problem if I were to never return after the internship, due to losing tax resident status in 2021. However if I were to come back to Ireland, I would become ordinary resident quite soon (starting in 2022). As my investments started in March 2019, I guess the 8 year rule would imply that in order to avoid the exit tax, I would have to stop being ordinary resident by 2027. Therefore I would have to leave the country by the end of 2023 so that I would stop being ordinary resident in 2027, right? Is this a sound and legal way of avoiding this tax?
Also, just to make sure I understand the law properly, let's imagine that I invested in Irish domiciled ETF in August 2011 and I moved to Ireland for the same internship in July 2019, becoming tax resident for 2019 and the 8th anniversary of my earliest investment being August 2019. Does that mean I would have to pay the 41% exit tax based on the investments right away in 2020?
Thanks a lot for any answers.
Have a great day
Jakub
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