prelim tax on Rabo investment fund gains

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asksm

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For Rabo investment funds that had to be sold in April 2017 does preliminary tax need to be paid in Oct 2016 on any gains? I don't know if investment fund gains are treated differently w.r.t. prelim tax compared to other income sources.
 
From the Revenue website

To avoid interest charges, you must pay an amount of Preliminary Tax that is at least one of the following:

  • 90% of the tax due for that year ie 2017
  • 100% of the tax due for the preceding year ie 2016
  • 105% of the tax due for the pre-preceding year ie 2015 (this option only applies where you pay by direct debit - it does not apply if the tax due for the pre-preceding year was nil).
Click to expand...

So the answer is a qualified "No, but maybe 90% of it "
 
Exit tax at a rate of 41% is payable on any gain. Not income tax, preliminary or otherwise.
 
The Exit tax is classed as an income tax and is returned as such on Form 11. Thus the preliminary tax rules apply especially in the case of funds where the Exit tax is not deducted by the company when the payment is made.
 
Sorry @jpd but that is not correct.

Any gain should be reported to Revenue on line 322(c) of Form 11 and is subject to exit tax at a rate of 41%.

That's it - there's no preliminary tax payable.
 
I sent an enquiry on this to revenue and this was the reply!

It still doesn't answer the question if fund exit tax is classified as income tax.

"Dear Sir, If these gains are chargeable to Income Tax, then the liability on these would have to be included as part of your Preliminary Tax payment due in October, 2017."
 
The Rabo funds would be considered "equivalent" offshore funds and any gain arising on a disposal is subject to exit tax @41% (as set out in para 4.1.4 of the note linked by jpd).

Any gain arising on the disposal of a "non-equivalent" offshore fund would be subject to CGT.

Preliminary income tax is not relevant in either scenario.
 
I sent another enquiry to revenue:
"My understanding is that the gain from the sale of units in the investment funds are subject to an "exit tax" of 41%. Is this exit tax considered to be "income tax" and should be included in preliminary tax?"

This was the response:
"Dear Sir, As this is part of your final liability to Income Tax then it should be included in your Preliminary Tax payment. "

This appears to close the issue and clarify that tax on these gains should be included in preliminary tax.
 
It makes absolutely no sense to me that any tax arising on the disposal of an investment would be relevant to the preliminary income tax rules.

I wonder would Revenue's advice be the same for exit tax deducted at source by an Irish life company?
 
This just shows what a mish-mash the current rules are - I suspect that the Irish Life companies deduct the tax when you make a disposal or a deemed disposal and send it to Revenue ASAP. As it is so difficult to get it right, I don't think they will be coming after you for penalties and interest.
 
I was also in the same boat with the sale of Rabo Investment funds. After spending a while looking through the possible ways to pay the exit tax, I'm still not certain what the correct method was.

Could anyone let me know where I should have declared the income, should I have used Form 12 to declare 'Non PAYE Income' and what is the correct type of income to list it as.

Thanks
 
Ok I see there is still confusion about Offshore investment funds. I had a query on here last year about a Global Real Estate Euro P accumulation fund which is based in Luxembourg and is classed as a SICAV fund.
Last year I had to pay a very large sum of tax on this fund at 41% due to the eight year deemed disposal rule. I paid this tax for year 2015 in October 2016 as required. This sum was way above the preliminary tax that I had already paid in October 2015. Then this summer of 2017 I received a bill for interest for underpaying preliminary tax. So it looks like the correct amount of preliminary tax should be paid on the sale of this fund.
My accountant hasn't a clue about this tax so I did up the figures myself after getting some guidance from another accountant along with what I could find out on the internet. This year again I have to pay tax on the sale of part of the fund during 2016 . Tax is due on any profit I made above the new valuation that I established due to the eight year deemed disposal requirement.
I know it is a long shot but does anyone know if I can deduct tax credits and things like Medical Expenses from the tax due on this fund.
The reason I ask is that I have seen this mentioned on a tax advice website and it states that personal tax credits can be deducted from this tax liability.
Again my accountant doesn't know but when he checked why on the ROS calculations, he said the Revenue mustn't have allowed it on the system. I have almost 20,000 Euro of medical expenses for 2016 and practically no other income declared.
 
Forgive me if I am wrong, but I think if you are a PAYE worker you would pay the tax due next year? I understood only self employed and those with predictable incomes who regularly file would normally pay preliminary tax in advance? I could be incorrect though.
 
phanteon said:
. So it looks like the correct amount of preliminary tax should be paid on the sale of this fund.
Click to expand...

Remember the "correct" amount of preliminary tax is
1) 90% of actual tax due
OR
2) 100% of tax paid in current year

If you underpay the 90%, you can be charged late fees and penalties, so if you use this option, be sure that you are estimating your tax correctly
 
Thanks jpd.
I should have paid 100% of the tax that I had payed the previous year. That would be the best option as it can be difficult to predict tax due on a volatile fund.

Can you help me with my query about offsetting tax credits against tax due on this fund?
 
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