Key Post The Tax Treatment of ETFs for Irish residents

mojoask

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As Revenue are "withdrawing" guidance, does this mean US domiciled ETFs are now subject to deemed disposal rules, regardless of when they were purchased? If you bought said ETFs more than 8 years ago, where do you stand?
 

joe sod

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1,471
As Revenue are "withdrawing" guidance, does this mean US domiciled ETFs are now subject to deemed disposal rules, regardless of when they were purchased? If you bought said ETFs more than 8 years ago, where do you stand?
im in the same position in that i have held some US domiciled ETFs for some years now, some over 8 years. Nobody including revenue it seems have a definite opinion given that they are not even definitive on what makes a particular ETF included in gross roll up. Because it was clear they were not gross roll up investments when I bought them and because I have been paying tax on dividends from them throughout then they are still taxed like shares as before, (in my humble opinion).
Im no expert by the way but because revenue have not given any clear indication of any change in their status, they simply removed their previous clarification that US domiciled eTFs were not gross roll up investments . However they have not stated that their status has changed either and they have not given a clear definition of what now constitutes a gross roll up ETF and what doesn't. Therefore I am taking the position that they are still taxed like shares because that was the clear directive from revenue back when I bought them and that is still the only concrete definition
 

joe sod

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Because it was clear they were not gross roll up investments when I bought them and because I have been paying tax on dividends from them throughout then they are still taxed like shares as before, (in my humble opinion).
I just had a look at the history of the gross roll up regime in Ireland, they were introduced in year 2000 in order to bring Irish funds into line with their European counterparts that were also being traded on the ifsc in Dublin.

However when they were introduced in 2000 existing funds that had been bought previous to this continued to be taxed under the previous regime, basically dirt tax at 22% on income distributed just like savings accounts.

Because US domiciled etfs were likewise purchased under a previously existing tax regime and because income tax has been paid on them throughout, there is a compelling case that that continues. Revenue has already created the precedent anyway when they first introduced gross roll up that previously purchased funds continued to be taxed as before
 

Sarenco

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6,898
Because US domiciled etfs were likewise purchased under a previously existing tax regime and because income tax has been paid on them throughout, there is a compelling case that that continues.
Not really.

There has been no change to the tax regime applicable to ETFs. All that's happened is that Revenue is withdrawing its guidance as to how it views ETFs that are domiciled outside the EU.

IMO the tax treatment of US-domiciled ETFs is now too uncertain to warrant continuing to hold these securities from the end of this year. Others may take a different view.
 

Zebedee

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180
I agree.

As Marc pointed out earlier, there is an oblique reference to investment trusts in the Revenue note. I use U.K. investment trusts and worry that there may be a challenge to the current tax treatment (eg taxed the same as ordinary shares).
 

mojoask

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204
Not really.

There has been no change to the tax regime applicable to ETFs. All that's happened is that Revenue is withdrawing its guidance as to how it views ETFs that are domiciled outside the EU.

IMO the tax treatment of US-domiciled ETFs is now too uncertain to warrant continuing to hold these securities from the end of this year. Others may take a different view.
Unfortunately I've come to the same conclusion. Unless there's any convincing evidence to the contrary, I'll be selling my US ETFs before the year end.
 

joe sod

Registered User
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1,471
I appreciate that input and that most people are erring on the side of caution became they are unable to ascertain how revenue will decide the taxation of us domiciled etfs in the future.
However I don't think that is an acceptable situation, it is one thing to decide not to buy a security because you are unsure of its taxation status in the future. It is quite another to sell an existing security which previously had a clear taxation code but has not been replaced by a new taxation code.

This is actually bordering on tyranny because the people in control are changing things as they go along, there doesn't seem to be an arbitration process to settle disagreements with revenue either, the UK hmrc have an arbitration process.

So much for Ireland making a big deal about holding onto the 12.5% corporation tax rate for so long because they prided themselves on the"consistency" of the Irish taxation system
 
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