Key Post The Tax Treatment of ETFs for Irish residents

I have a query about one aspect of this discussion that is not the main subject, but has come up for me in trying to put some of these principles into practice. In relation to UCITS ETFs and Investment Trusts, I have been able to find ETFs which seem to have very low annual fees (e.g. 0.12%) while most Investment Trusts have much higher annual fees. I have fed some of this information to Cormac's very helpful spreadsheet and, as I thought it might, it makes a big difference after 20 years (i.e., even with the tax differences, the UCITS ETFs come out ahead). Maybe I am misunderstanding the meaning of the fees and the ETF funds actually pay expenses from the fund that are not included in the annual fees, but if the differences in fees are actually so pronounced, it seems like an important factor that is never mentioned in connection with this issue. Maybe someone can explain where I am going wrong, or let me know where I can find Investment Trusts with lower fees.
 
Sarenco said:
My understanding is that the estate effectively steps into the shoes of the deceased investor for exit tax purposes. No?
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Correct. Which results in a spouse being hit with a tax charge on any unrealised gains. Very relevant to the analysis. Yes, the exit tax charge is available for credit against CAT, but that’s only relevant for families who breach the Group A threshold.
 
Prudence,
You’re correct in saying that ETFs can come with lower TERs (cost of ownership). I think, from memory that you can get a solid Investment Trust for approx 0.37-0.5 p.a. Check out the AIC website for this, you can rank by costs. The site justetf will do a similar thing for ETFs.

Not all ETFs are cheaper, mind. The more ‘niche’ and specialised ones are more expensive. The ‘plain vanilla’ ones, as they say, are generally cheaper.

The reason I omitted fees was to avoid another layer of complexity, in an already complex matter. For what it’s worth, I am not a professional, so you would need to check and verify my figures yourself. If anyone here with the relevant expertise wants to endorse or point out any accounting/maths errors in said calculations, it would be most welcome.
 
just a question about 41% exit tax for 8 year deemed disposal. So you either sell or pretend that you sell the ETFs every 8 years and pay the 41% tax. What happens if you move to a different country and change your tax residency while you have Ireland domiciled ETFs? Do you have to pay 41% when you move out of Ireland and change your tax residency or this 8 year pauses and resumes when you move back to Ireland? I read it as second option but couldn't really find any info about it on revenue's documents (maybe I missed it)
 
You’re no longer liable, but ordinary residence needs to be considered also.

(someone remains ordinarily resident until he or she has been non-resident for three full consecutive calendar years)

There’s no question of the clock stopping or anything like that; if you’re out of the system after eight years, you’re out and that’s it.
 
I am aware of this ordinary residents have to pay their taxes back to Ireland (except some circumstances as physical jobs in different country), so if I am not affected by that (meaning 8 year for deemed disposal will be not over even after ordinary residence affect ends), I can just leave Ireland without paying any exit task on my ETFs then? Great, thank you.
 
Cormac said:
Does anirshinvestorgude.wordpress.com allow for tax credits on previous tax paid in the EU UCITS Acc calculations?
Also, in my model, Revenue taxes are, theoretically at least, paid from other funds. This obviously affects matters.
Are my numbers correct? (Even if my assumptions are fanciful!)
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Paying Revenue taxes from other funds is an unfair comparison.

My calculation does take into account exit taxes paid at the earlier deemed disposals. It does this indirectly, but I've verified the calculation is consistent with the detailed revenue guidance. Please shout if you think my calculation is inaccurate.

Also, interestingly you can invest in US ETFs with eToro. I just opened an investment account, deposited cash using my Revolut virtual card and can buy US ETFs e.g. SPY, VTI. I had several comments on my blog to this effect.
 
When paying the exit tax for EU based ETF's online using ROS, under which category is best to submit the electronic payment?

None of the 20 Tax sub-categories seem suitable for Exit tax, so I'm leaning towards the section 'Foreign Income and Assets Disclosure' - even though they are Irish domiciled. The reason being, on the ETF tax manual, they say "Acquisition of an EU ETF must be included on the Form 11 in the Foreign Income section as appropriate."

I guess as long as Revenue get their cut, they can't really penalise you for making payment/declaring under the wrong category can they?

I won't worry about the declaration form until 2021, but I see the general consensus is to declare via Form 11, Section 322, payment taxable at 41% - so I'll probably go for this section too.

However, there is only enough space on the form to declare one product. I've sold multiple products.
Do Revenue need to know the ticker symbol of every fund bought and sold? I guess I could include a separate page - sure what's one extra page on the already 44 page document.

And just to double check my assumption is correct on one of the investments - Fundsmith Equity - is the tax due on this one 41% Exit tax, or 33% CGT? It's not exchange traded, but I'm still assuming as it's a fund, it's still 41%.
 
Lisboa said:
When paying the exit tax for EU based ETF's online using ROS, under which category is best to submit the electronic payment?

None of the 20 Tax sub-categories seem suitable for Exit tax, so I'm leaning towards the section 'Foreign Income and Assets Disclosure' - even though they are Irish domiciled. The reason being, on the ETF tax manual, they say "Acquisition of an EU ETF must be included on the Form 11 in the Foreign Income section as appropriate."

I guess as long as Revenue get their cut, they can't really penalise you for making payment/declaring under the wrong category can they?

I won't worry about the declaration form until 2021, but I see the general consensus is to declare via Form 11, Section 322, payment taxable at 41% - so I'll probably go for this section too.

However, there is only enough space on the form to declare one product. I've sold multiple products.
Do Revenue need to know the ticker symbol of every fund bought and sold? I guess I could include a separate page - sure what's one extra page on the already 44 page document.

And just to double check my assumption is correct on one of the investments - Fundsmith Equity - is the tax due on this one 41% Exit tax, or 33% CGT? It's not exchange traded, but I'm still assuming as it's a fund, it's still 41%.
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Hi,

Did you figure out the answer to this?

Thanks
 
Brendan Burgess said:
This is a very long thread which I find very confusing.

Any volunteers to do a summary? Or maybe it exists on some other website?

If so, start a new thread. It does not have to be perfect. You can edit it based on the feedback. It would be something like the following. Read back through the thread to see what questions come up most often.

Avoid investing in non US domiciled ETFs because of the tax treatment.
What do do if you already hold them.

The tax treatment of US domiciled ETFs.
Dividends - US withholding tax etc.
the $60,000 issue

You can invest in any part of the world, as long as the ETF is domiciled in the US.

Which is the best broker to deal with

Alternatives
UK Investment Trusts
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brendan

we completed a detailed analysis of all these issues

viewer.joomag.com

Global Wealth Tax Guide 2020 v1.0

This guide sets out the issues Irish Resident and Domiciled investors should consider in order to ensure that their investment portfolio is the most suitable for their particular requirements. We summarise Personal and Capital Taxes in Ireland along with the taxation of different fund...
viewer.joomag.com viewer.joomag.com

We can access both US and Canadian
ETFs for clients looking to pick up the tax advantages

We also have some U.K. investment trust portfolios for specialist requirements such as non domiciled remittance tax planning

However, none of the options are open to DIY investors
 
As far as I am aware exchange trade commodities like SLV and GLD the ishares Silver and Gold etfs are actually exchange traded commodities and not included in the gross roll up regime like most other etfs. Therefore you can buy them and the tax treatment is the same as ordinary shares, no deemed disposal and loss relief apply. Is this correct?
 
There are generally structured as Trusts and lightly regulated or not regulated at all - caveat emptor

Make sure you read the prospectus carefully and fully understand the risks

And they do not come under the ETF regime usually
 
Is SLV a debt instrument ? That's not what I understood from the prospectus
 
Why are european domiciled etfs classed as funds and taxed under the "gross roll up" regime but US domiciled etfs ( excluding the recent revenue e-brief for simplicity) classed as shares and taxed under CGT rules like shares.
What is the factor that distinguishes these ETFs from revenue's point of view, I was under the impression it was because US domiciled ETFs are required to pay out their dividends rather than rolling them up in the ETF but many European ETFs also pay out dividends, What is it that differentiates them from irish taxation perspective ?
 
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