Tax Treatment of Irish Domiciled ETFs

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taytoman

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I see that there is an article in todays Irish Times about tax treatment of ETFs. Says that capital losses on ETFs cannot be offset against other ETF capital gains. (correct?). Also says that dividends on ETfs are taxed (correct?)

This also raises issue in my mind of whether capital gains on ETfs can be offset against capital losses on shares.

I have 5K in capital losses on irish shares. If I invest say 5K in ETFs, and sell then for 10K, do I pay capital gains tax???
 
Today's IT says:

[broken link removed]

ETFs: Tax treatment


  • Exchange Traded Funds (ETFs) may be listed on the Irish Stock Exchange like a normal share but they are not. They have their own rule son tax liabilityExit Tax: In tax terms, ETFs are more like a unit fund than a share. Investors will have to pay exit tax at 28 per cent on any gains when the capital is withdrawn from the fund.
  • Dividends: dividends paid by an ETF are subject to tax at the rate of 25 per cent.
  • Capital Gains Tax: The capital gains tax regime does not apply to ETFs. Most importantly, especially in current circumstances, investors cannot carry forward losses in the same way they would with normal equities.
  • Dividend Withholding Tax: Applies differently, depending on the jurisdiction in which the fund is domiciled. It can be difficult to reclaim. Investors should check funds’ domicile which, for many, is Dublin.
  • Tax Returns: Investors in an Exchange Traded Fund are obliged to file an annual tax return declaring their interest in the ETF.
 
Sorry

Maybe if I can clarify what I'm asking, which is'nt fully clarified in IT article, with an example

Joe Bloggs sells his bank shares and has a capital losses of 10K.
He buys 10K worth of ETFs and they double in 5 years to 20K, and he sells them at 20K

Q.-Is he liable for the 10K capital gain on the ETF, or can he offset this 10K capital gain on ETFs against the previous 10K capital loss on the bank shares so he has no CGT liabiity?
 
No, you can not offset the capital loss on the shares against the gain on the ETF. The two gains are liable to tax under different regimes.

Capital gains on shares are liable to CGT

ETF are like funds and Irish funds are subject to Exit tax on all gains when encashed/sold. Also the 8 year rule applies as well.

Foreign ETFs are treated differently as foreign fund companies are not subject to deducting and remitting Exit tax. The taxpayer has to do the calculations himself. The correct way to do this is not very clear nor can I find definite answer anywhere on the revenue.ie web-site.
 
jpd said:
No, you can not offset the capital loss on the shares against the gain on the ETF. The two gains are liable to tax under different regimes.

Capital gains on shares are liable to CGT

ETF are like funds and Irish funds are subject to Exit tax on all gains when encashed/sold. Also the 8 year rule applies as well.

Foreign ETFs are treated differently as foreign fund companies are not subject to deducting and remitting Exit tax. The taxpayer has to do the calculations himself. The correct way to do this is not very clear nor can I find definite answer anywhere on the revenue.ie web-site.
Click to expand...

Is there any official place to find this information about taxing ETFs?
(I wouldn't want to rely on Irish Times or any Press not officially authorized by the Revenue)
 
It's not just Irish domiciled ETFs which are treated this way; all UCITS funds (which includes most European domiciled ETFs) are NOT taxed under the CGT system. The most "official" expression of this rule is in the Form 11 which clearly distinguishes between shares which are subject to the CGT rules and those which are not - i.e. UCITS compliant shares.
 
Tax treatment of ETF

Is the Fund exit tax still at 25%?
 
If you wrap ETFs in a CFD instrument are they then eligeable for CGT and hence CGT offsets??

What are the major cons with this do people think?
 
How can this article in our national paper of record, not mention the 8 year deemed disposals which apply...
 
Thanks for the above interesting info. In a Irish domiciled ETF does the 25% tax on interest, and the 28% exit tax ,satisfy Revenue. Any liability on a higher rate taxpayer, or liability to pay USC. I presume a non Irish domiciled ETF might be taxed at marginal rate for interest , and under CGT for any gain. Will be grateful for any information on these points. Thanks.
 
ETF

positives
1. low annual fees
2. wide range of companies with minimal reshuffling in funds
3. clear concise fees and reinvestment of dividends possible
4. 1% governmnet levy not applicable (I hope i am correct in this assumption)

negatives
1.unclear tax treatment now and going forward
2.treatement of losses

are these correct assumptions??
 
Tax treatment is not unclear, just messy and complicated

Losses are not offsetable against to other gains.
Gains are taxed at 27%
Deemed redemption every 8 years
Obligation to return gains using form 11/12
 
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