The Roadmap for Deemed Disposal

@Corola Well that certainly makes a difference. Do they pay tax on realised gains like a normal corporation? So why did the original post suggest BH was tax free?
 
Yes, BH pays US corporate tax when it receives a dividend from or sells its shares in Apple for example.

An S&P500 ETF receives dividends (after DWT) and realises gains on Apple without paying tax to Revenue.
 
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irishfinanceguy said:
wait they declare ETF gains under CGT and not DD and get away with it? Can you provide more info regarding this? Is it a US ETF?
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If you have US domiciled ETFs previously they were classed as CGT not DD, however in 2021 revenue then removed the clarification that they were taxed under CGT, then it was up to the investor to decide if they were still taxed under CGT based on some convoluted and undefinable characteristics. However you cannot buy US domiciled ETFs now anyway because they have to provide European documentation which they havn't bothered with as it was really only irish investors that were seeking them out due to their previously favourable taxation in the irish context. Everyone else in europe could just buy the european domiciled ones (most of whom are domiciled in ireland anyway)
 
ClubMan said:
It doesn't.

The Roadmap for Deemed Disposal - don't discuss other issues.

https://www.gov.ie/en/department-of-finance/press-releases/t%C3%A1naiste-simon-harris-and-minister-of-state-robert-troy-publish-roadmap-for-the-taxation-of-retail-investment/ Wider reform of retail investment taxation The Roadmap also sets out the next phase of work on the wider taxation of...
www.askaboutmoney.com
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I was referring to the post that originated this side boreen on BH, not to the Opening Post.
“Djimi Traore” said:
So without deemed disposal then ETFs are used as a vehicle for tax avoidance? Yet I can invest in Berkshire Hathaway shares, watch them grow for decades and see the CGT wiped out on my demise, but that's perfectly fine?
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@joe sod thanks, to those of us who can access us ETFS do you think it's worth the risk? I saw on Reddit Irish personal finance there was discussion re certain type of us ETFS that may fit the loosely defined criteria.
 
Corola said:
An S&P500 ETF receives dividends (after DWT) and realises gains on Apple without paying tax to Revenue.
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This confuses me utterly about ETFs.

I was reading an article in the Economist recently about ETFs. There is trillions invested in them. From memory, half of a lot of indexes, the S&P for example, are held by these tracker funds. One of the reasons is a huge amount of retail investment. A lot of this is quite small, but the sheer numbers makes these index funds huge.

I'm assuming that we can't be the only country in the world which regards ETFs as tax avoidance vehicles. This can't be just a peculiar view that we have come up with ourselves. So does the US government and other governments not mind that Blackrock, Vanguard, Ishares, Fidelity etc. don't pay tax on dividends or do they have a DD in other countries as well and retain investors, unlike us here in Ireland, don't mind paying it. What is the situation with distributing ETFs, many such funds do pay out dividends.

Also, as the ETF is just tracking the index, in what circumstances would it be making gains on selling shares. As it is tracking the weighting of the index would not the gains be largely matched by losses?

I suppose my main question is that we are surely not unique here is regarding distributing ETFs as tax avoidance vehicles. How do other countries deal with this? DD type mechanisms must exist elsewhere also.
 
@irishfinanceguy i don't think its ever been definitively tested yet. Another poster who is a specialist tax adviser said that certain US dom ETFs that he had recomended to his client were also accepted by revenue during an audit. In other words they never challenged the categorisation of those ETFs as taxed under CGT which I thought was interesting.However the specialist would be able to stand over and defend it which an amateur retail guy probably would not be able to if revenue did challenge it. However even if you have a US based brokerage account like etrade and you are living in ireland you cannot buy US dom ETFs even on a US platform because of european documentation necessary, a popup window tells you that product is unavailable if you click buy.
 
Or if one company in the index is bought out by another company in the index, the ETF will realise a gain or loss that wouldn't be matched by anything else.
 
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Fortune said:
First example that comes to mind is when a company is removed from the index.
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But if it is removed from the index entirely that would likely mean that it's shares have fallen in value? Companies are removed because they are now too small for the particular index which would indicate a very significant decrease in value or perhaps the company is insolvent? Rightmove left the FTSE 100 recently due to 40% decrease in share price.
 
Corola said:
Or if one company in the index is bought out by another company in the index, the ETF will realises a gain or loss that wouldn't be matched by anything else.
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Why wouldn't that be matched by other losses? Isn't there a CGT exemption there where one company takes over another company and issues shares in itself to the shareholders of the company it has taken over?

Does that happen a lot?
 
Then imagine it's bought out by another company not in the index, or taken into private ownership.

Remember gross roll-up applies to all domestic funds. An actively managed fund will have a lot more CGT events than a passive fund.
 
I suppose my overall question is that these index trackers /EFTs are now a massive industry that has transformed stock markets and investing. The Economist article opened my eyes to this.

There is literally trillions of shares involved and trillions in value. A signficant portion of shares quote on any decent stock exchange anywhere in the world are now held by these trackers.

What are other countries doing to tackle what we see here as a massive tax avoidance industry? Do other countries see index trackers as tax avoidance vehicles as well? What are they doing to tackle this tax avoidance industry? Are the using DDs as well or are they looking at our system to copy it?

Presumably other countries are using a DD as well. We can't be the only ones who spotted the tax avoidance aspects and we can't have come up with this system ourselves in complete isolation from the rest of the world. Why have DDs elsewhere not stymied the massive growth of these funds among retail investors as has happened here?
 
Corola said:
Then imagine it's bought out by another company not in the index, or taken into private ownership.
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Does that happen very commonly.
Corola said:
Remember gross roll-up applies to all domestic funds. An actively managed fund will have a lot more CGT events than a passive fund.
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I'm only asking about passive index trackers which distribute dividends.
 
TomEdison said:
No, it could be that the shares of another company have risen in value.
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So, the S&P for example must remain at a particular size. If one company's shares increase in value, another company must leave the index to maintain the size of the S&P.

For example, you have three companies in on a stock exchange A, B and C. A and B have a market capitalisation of €1Billion and C has a market capitalisation of 0.9Billion. If A increases in size to €2 .1Billion, C must leave that stock exchange. Is that correct?
 
It must have exactly 500 companies. When a large company like SpaceX joins the index at the top it pushes out the smallest stock at the bottom.

That doesn't mean the small stock made a loss, it just doesn't fit the criteria of the index anymore.
 
Djimi Traore said:
Yet I can invest in Berkshire Hathaway shares, watch them grow for decades and see the CGT wiped out on my demise, but that's perfectly fine?
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I have confirmed that BH is subject to US Corporation Tax (c. 20% ) on received dividends and realised capital gains. So what point are you making?

@Brendan Burgess @Corola Apologies, I was completely misled by Djimi's post. :confused:
 
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