The cross-over point where exit tax works out better is at a lower dividend rate than you'd think. Some good analysis here - https://anirishinvestorsguide.com/2018/10/27/taxation-of-etfs-in-ireland/I would have assumed that most people invest in ETFs primarily for capital returns and that dividend returns subject to income tax would be marginal in the greater scheme of things?
How about applying the exit tax regime to regular shares and US ETFs as well, to even the playing field?An ETF is just another company the same as Eir or Kappa Smurfit and is not a fund as offered by the insurance industry
Anyway, my point is why on earth would I invest in an Irish or EU ETF when I can just go onto my E-Trade account and invest in a US ETF (e.g. SPY, VOO, IVV etc.) and thus opt for CGT?
Are E-Trade just ignoring the PRIIPs regulations then?
The dividend environment is pretty low at the moment, c. 2%. In these circumstances the tax on dividend is better than gross roll up.For an investor with a high marginal tax rate, an ETF that is subject to income tax/CGT won't necessarily produce a better after-tax return than an ETF that is subject to exit tax.
It depends on the respective contribution of dividends and capital gains to the total return over the holding period.
They aren't subject to PRIIPs regulations as they are in the US. You are investing in a different jurisdiction, so you are subject to their rules, not the EU's.
What if the capital gain is low or negative over your holding period?The dividend environment is pretty low at the moment, c. 2%. In these circumstances the tax on dividend is better than gross roll up.
I haven't run the numbers on that scenario. I might do it for one of my blogs over the next few weeks.What if the capital gain is low or negative over your holding period?
The rationale is that in the absence of the rules, investors could buy accumulating ETFs, roll their investments up for ever, and never pay tax.
US ETFs have to distribute, hence Revenue’s concession on those and some others.
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