Tax on bonds

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franc82

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Am I correct in thinking that capital gain made on Bonds are not subject to the 41% exit tax?

I would like to know more about the taxation about bonds in general. I am about to buy a few bonds on trade republic on discounts. I know that the coupons will be subject to the marginal tax rate, but the capital gain will not be subject to the 41% exit but the CGT with the 1270 euros exemption?

For instance, if I buy a bond issued by Romania for 1000 euros at a discount price of 800 euros. If I keep it until maturity, then I will not have to declare the CGT on the gains made on the bond given that it falls below the 1270 euros exemption?

Is the rule the same for a bond issued by a US company as well?
 
franc82 said:
For instance, if I buy a bond issued by Romania for 1000 euros at a discount price of 800 euros. If I keep it until maturity, then I will not have to declare the CGT on the gains made on the bond given that it falls below the 1270 euros exemption?
Click to expand...
If it is the only gain you have that year - Yes

If you have total gains on other investments that year over €1,270 - No

The exemption is per year, not per investment.
 
The word "gains" refers to capital gains.

Irish bonds are exempt from CGT on capital gains.

The coupon income is subject to normal income tax.
 
I think the references above to "Irish bonds" should say "Irish government bonds". Also, if you invest in foreign bonds, I imagine that in some cases there is a risk of also being taxed in the foreign country.
 
how about zero coupon US government bonds? Buy at a discount, get back the par on maturity...?
 
Going back to this, are you sure there’s a cgt gain on US Bond maturing when bought at a discount? (Zero coupon bonds)

Gain is reported as interest income code 01 on IRS form 1042-S.
Looking for correct place to put on Revenue Form 11.
 
TravisT said:
Going back to this, are you sure there’s a cgt gain on US Bond maturing when bought at a discount? (Zero coupon bonds)

Gain is reported as interest income code 01 on IRS form 1042-S.
Looking for correct place to put on Revenue Form 11.
Click to expand...
In the CGT section because it’s a CGT event.
 
Thanks Gordon G. Trust you on that , but is there anything on the revenue site I can reference on this? IRS consider it 'imputed interest'. Tax free in US it seems...
 
chat gpt tells me below.. is it correct?

  • Taxable Income in Ireland:
    • As an Irish tax resident, you are liable to Irish tax on your worldwide income and gains, including any returns from U.S. investments like zero-coupon bonds.
  • Annual Accrual of Interest:
    • Zero-coupon bonds do not pay periodic interest but instead are issued at a discount and redeemed at face value.
    • In Ireland, you are taxed on the annual accrual of interest or "imputed interest," even though no cash payment is received until maturity. This is referred to as "taxation on an accrual basis."
  • Capital Gains Tax (CGT):
    • If the bond is classified as a capital asset, any gain realized upon redemption or sale of the bond may also be subject to Capital Gains Tax.
    • However, the portion of the gain attributable to the imputed interest already taxed as income may not be subject to CGT to avoid double taxation.
  • Tax Treaty Considerations:
    • The U.S.-Ireland tax treaty typically exempts interest on U.S. Treasury securities from U.S. withholding tax for Irish residents.
    • This means you should not face double taxation, but you need to report and pay the appropriate taxes in Ireland.
  • Filing Requirements:
    • Include the annual imputed interest in your Irish tax return under the relevant category of income (e.g., "foreign income").
    • If the bond is sold before maturity, calculate the accrued interest portion separately to ensure correct reporting for income and CGT.
 
Wrong - there is no annual accrual of interest. There is no interest - the clue is in the name "zero"
 
Interesting angle. I presume that if a corporation issued a zero coupon bond there would be taxable imputed income, otherwise it would be a crude tax reduction scam. I would also presume that this accrual of interest would be hard coded from inception and would not vary with market movements, these being regarded as capital.
Now the TB31 is not so much a zero coupon bond as a bond with zero coupons, i.e. issued at c. par when the interest rate happened to be zero.
 
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