Roadmap for the SIA - do not discuss other issues

[RainyDayFund]

What is IUT and how would these affect attracting international investment funds?

IUT = Investment Undertaking Tax (exit tax).
LAET = Life Assurance Exit Tax.

I didn't get that bit myself. Still thinking about it.

It also made me raise an eyebrow. I have no idea how local IUT/LAET changes would affect attracting international investment funds. Why would allowing an Irish resident retail investor to offset ETF losses against ETF gains materially affect whether BlackRock, Vanguard, State Street or JPMorgan domicile a UCITS fund in Dublin? Makes no sense, and yet that is the text directly from the Roadmap (p27, §5.2.4).

 

[Nordkapp]

@nest egg I hear you, but once you mention taxes people’s eyes glaze over, and I already do our annual tax returns and am steadfastly trying to simplify our taxes.
This PIA will fail if it requires the individual make a tax return, then brokerages don’t want to do that either.

 

[Duke of Marmalade]

It also made me raise an eyebrow. I have no idea how local IUT/LAET changes would affect attracting international investment funds

Makes no sense, and yet that is the text directly from the Roadmap (p27, §5.2.4).

I ran that section past Gemini and Copilot. They both interpret it as requiring the fund to look through to its own trading and report losses to its Irish investors.
Clearly that is baloney and the Roadmap is doing a three card trick here.
It would be very easy to incorporate a provision whereby by self assessment an Irish taxpayer could claim back at least IUT/LAET if not CGT.

 

[messyleo]

How long might it take providers to get this up and running once details are formally announced post budget? Could we be looking at another year?

You would have to think it is in their interest to get to market first/early to get most of the business - I know you can switch provider in theory but many will have the usual inertia

 

[Fortune]

but many will have the usual inertia

It'll be people going into the bank who get nabbed by the "financial advisor" who get signed up to Irish Life or New Ireland at top rates of commission. I think it's those two who have the deals with the banks.

 

[cremeegg]

Just trying to understand the mechanism.

I can invest up to a limit (maybe €20k) per annum, of my taxed income.

I will need to pay the providers fee.

The fund builds up over the years through contributions and investment gains, until it hits the limit (maybe €100k) and then I start to pay tax (maybe 1%) each year on the amount in excess of this limit.

yr 1 start: contribution €20k. Gain €1k. ending balance €21k
yr 2 contribution €20k Gain €2k. ending balance €43k
yr 3 contribution €20k Gain 3k. ending balance €66k
yr 4 contribution €20k Gain 4k. ending balance €90k.
yr 5 contribution €20k Gain 5k. ending balance €115k Tax payable €1,150

(all gains after providers fees)

Is this what we understand ?

 

[Connard]

Just trying to understand the mechanism.

I can invest up to a limit (maybe €20k) per annum, of my taxed income.

I will need to pay the providers fee.

The fund builds up over the years through contributions and investment gains, until it hits the limit (maybe €100k) and then I start to pay tax (maybe 1%) each year on the amount in excess of this limit.

yr 1 start: contribution €20k. Gain €1k. ending balance €21k
yr 2 contribution €20k Gain €2k. ending balance €43k
yr 3 contribution €20k Gain 3k. ending balance €66k
yr 4 contribution €20k Gain 4k. ending balance €90k.
yr 5 contribution €20k Gain 5k. ending balance €115k Tax payable €1,150

Is this what we understand ?

Yes but your tax calculation is wrong. It is 1% of the balance over the limit. So, it would be 1% of 15k which is €150.

 

[joe sod]

The fund builds up over the years through contributions and investment gains, until it hits the limit (maybe €100k) and then I start to pay tax (maybe 1%)

I hope thats the case it needs to be at least 100K , they better not make it something ridiculous like 30K as was mentioned before in another thread a few months ago.

 

[irishfinanceguy]

Imagine with inflation how quickly 100k limit evaporates in value if they dont increase the limit regularly. Look at tax banding, one wouldnt be hopeful.

 

[Connard]

I hope thats the case it needs to be at least 100K , they better not make it something ridiculous like 30K as was mentioned before in another thread a few months ago.

I can't see it being that high. This is the really annoying thing about this "announcement" they haven't really told us anything that we didn't already know as far as I can see. The really important details such as the limits and the tax rate are left out. Why even bother with this announcement?

 

[Protocol]

This PIA will fail if it requires the individual make a tax return, then brokerages don’t want to do that either.

Yes.
At the moment, reporting the gains on an ETF requires submitting a Form 11.

The simplification of the tax compliance and reporting is just as important as the tax rate.

 

[Protocol]

hope thats the case it needs to be at least 100K , they better not make it something ridiculous like 30K as was menti

The tax-free amount is between EUR 20k and 30k in Poland and Sweden.

I will bet now that it won't be anywhere near 100k here.

That would be an own-goal to PBP, SD, SF, who would scream "tax cuts for the rich".

 

[ashambles]

The Swedisk KF (not ISK) pays the taxes for you, however they have a clear scheme regarding getting the cash for that tax.

Is seems it varies by provider, some give you an alert that the tax is due - so you've a window to add cash if you want. It seems while they handle the tax, you can choose to pay it by depositing extra cash if needed. That's much simpler than paying the taxman - but not entirely different.

Also the providers have a clear method to choose an asset to sell if it comes to it.

Se upp med skattemissarna på kapitalförsäkringen

Den som har ett sparande på kapitalförsäkring under 150 000 kronor ska från och med nu inte betala någon skatt. Men det finns vissa saker att se upp med på

www.nordnet.se

What happens if you do not have cash in the account is that the bank forcibly sells the largest holding to cover the tax on returns. First, mutual fund units are sold, then shares.

 

[confused87]

Where are people getting the idea of 100k tfa. Not a hope it will be more then 30k and I'd be shocked if annual contribution limit was above 25k. We will get the worst aspects of the isa and isk.

 

[Connard]

Where are people getting the idea of 100k tfa. Not a hope it will be more then 30k and I'd be shocked if annual contribution limit was above 25k. We will get the worst aspects of the isa and isk.

Same. I can't see it being anywhere near 100k.

 

[Premos]

I also think that there is no chance that it will be anything close to 100k or 20k per year per person.

 

[ClubMan]

Where are people getting the idea of 100k tfa

Like all other figures mentioned so far - pure speculation, conjecture and guesswork.

 

[Slippers]

I am very keen to hear the finer details when they are announced. My confidence is low that this will be a good product to grow a meaningful nest egg over a decade or two.

Already noted in other posts - From the get go, opposition parties have jumped on the "a tax break for the rich." I don't believe a sufficient effort was made or backbone shown to shut that down, and now most likely we will now be given a product that really only benefits those just starting out in life earning small pay packets. A benefit that lessens as they advance in career and pay.

For those of us further along in our careers, reasonably financially literate, saving meaningfully, as we understand the long term gain of living below our means,...well we can go and get stuffed.

I suspect we will continue to remain a country where growing wealth passively is shunned, and a continued skewed effort will be made to close the gap between society's classes. Skewed effort achieved by holding back/pulling down middle class and upper classes via taxes and a poor array of vehicles (outside of pension) for our consciously gathered savings.

#Letsjustbegettingbytogether

 

[Connard]

I am very keen to hear the finer details when they are announced. My confidence is low that this will be a good product to grow a meaningful nest egg over a decade or two.

Already noted in other posts - From the get go, opposition parties have jumped on the "a tax break for the rich." I don't believe a sufficient effort was made or backbone shown to shut that down, and now most likely we will now be given a product that really only benefits those just starting out in life earning small pay packets. A benefit that lessens as they advance in career and pay.

For those of us further along in our careers, reasonably financially literate, saving meaningfully, as we understand the long term gain of living below our means,...well we can go and get stuffed.

I suspect we will continue to remain a country where growing wealth passively is shunned, and a continued skewed effort will be made to close the gap between society's classes. Skewed effort achieved by holding back/pulling down middle class and upper classes via taxes and a poor array of vehicles (outside of pension) for our consciously gathered savings.

#Letsjustbegettingbytogether

Yeah I reckon the annual and tax free limits will be relatively small just to avoid it being criticised as being a tax cut for the rich. Bonus points if an opposition TD says it is a tax cut for Michael O'Leary or Denis O'Brien. The government should be highlighting that there are plenty of people out there who have money to save and invest who aren't rich. They could have even commisioned a poll on it to have data to back it up. Get a breakdown of age groups and how much they save/invest in a year. When the opposition call it a tax break for the rich then just throw the data at them that says a large percentage of people in their 30s/40s are saving around that much a year. A lot of those people would be your voters. Are you saying all of them are rich? Maybe they will do this when it gets fully announced in the budget.

 

[mmclo]

a product that really only benefits those just starting out in life earning small pay packets.

Despite the lack of clarity and overall disappointment, that is not necessarily a bad thing; when all is said and done, getting young people to think about investing, gaining experience, and getting a tax break serves the longer-term policy goals. As for older people missing out, I hear you, but that is the case for many new policy initiatives.