Which ETF for €100 a month?

[franc82]

I think it's pretty clear based on the actual figures quoted above that buying is the sensible choice over renting.

However, if I wanted to put the blinkers on and think that Robert Kiyosaki is God almighty when it comes to making financial decisions in Ireland, I'd look at his base advice that 'assets are something that put money in your pocket, whereas liabilities take money out of your pocket'.

Now, still thinking of Robert Kiyosaki as the only show in town when it comes to financial advice, I consider my house a liability. However, the need to rent is also a liability - and a much, much, much bigger liability at that, with no end-date in sight.

If one were to want to TRULY follow the Robert Kiyosaki bandwagon in Ireland, they would probably buy the house and look to avail of the, very generous, €14,000 rent-a-room scheme. If Robert himself knew the tax system here in Ireland, I'm sure he'd advise that buying is the way to go.

A lot of his advice is also based on taking on lots of 'good debt' to invest in assets. Have you approached any of the banks here in Ireland looking to take on debt to invest in the stockmarket, or anywhere else? When you do, let us know how you get on

Back to the original topic, I'm in agreement with most on the thread - no ETF is worth investing €100 a month into given the Irish tax system. I've had lots of tax returns to deal with, both in the UK and Ireland. Given how complicated they can get when you've multiple income sources, I'd need to be expecting returns far in excess of any other investment options to invest in an ETF here.

Given that you have done several tax returns in Ireland and in the UK, could you please explain a little bit more how the deemed disposal tax is computed at year 16 and 24?

@Corola did a brilliant job to lay out a table for that, could you confirm that it is the correct way of doing it?
Given that I will be investing in ETFs on TradeRepublic anyway, could you confirm if the tax is to be paid when filling Form 11 or 12?
Also if I earned some interest in December 2023 on Trade Republic, do I have to file my Form 11 or 12 for this year reporting that?
Where in those forms should we input those incomes?

With regards to Robert Kiyosaki many people here just dismiss him straight away without even arguing his point. Dan Malone is an Irish qualified account who is also on the same view. Just YouTube his page if you want.

Actually @Corola what do you think of this ETF: iShares Smart City Infrastructure UCITS ETF USD (Acc) ISIN IE00BKTLJC87
It has a slightly higher TER of 0.40% but the results seem decent so far, would love to have your thoughts on it.

 

[ronaldo]

Given that you have done several tax returns in Ireland and in the UK, could you please explain a little bit more how the deemed disposal tax is computed at year 16 and 24?

I can not because my tax returns have only involved cryptocurrency gains and income, employment and rental income, dividends, options trading income and capital gains tax.

I would't touch anything requiring deemed disposal treatment with a bargepole. I'll stick to my options wheel strategy going forward and wouldn't so much as open a factsheet on any ETFs whilst current rules persist.

If you're dead set on investing in ETFs, you're probably going to get more advice on the UK forums, where it's a lot more worthwhile investing in them - due to lack of deemed disposable as well as ability to invest within an ISA.

I believe the monevator website, with lots of advice geared towards UK investors, has some breakdowns of ETF-based portfolios.

 

[Fortune]

Given that you have done several tax returns in Ireland and in the UK, could you please explain a little bit more how the deemed disposal tax is computed at year 16 and 24?

@Corola did a brilliant job to lay out a table for that, could you confirm that it is the correct way of doing it?
Given that I will be investing in ETFs on TradeRepublic anyway, could you confirm if the tax is to be paid when filling Form 11 or 12?
Also if I earned some interest in December 2023 on Trade Republic, do I have to file my Form 11 or 12 for this year reporting that?
Where in those forms should we input those incomes?

With regards to Robert Kiyosaki many people here just dismiss him straight away without even arguing his point. Dan Malone is an Irish qualified account who is also on the same view. Just YouTube his page if you want.

Actually @Corola what do you think of this ETF: iShares Smart City Infrastructure UCITS ETF USD (Acc) ISIN IE00BKTLJC87
It has a slightly higher TER of 0.40% but the results seem decent so far, would love to have your thoughts on it.

I just looked up Dan Malone. He's a former accountant and currently a content creator, who partners with some online investment platforms. Bit of a conflict of interests there. He's recently been advocating for cash returns from some of the online platforms that beat traditional banks deposit interest rates. Oh, he also has affiliate partnerships with them. Hmmm, no affiliate partnerships or agencies with mortgage lenders......

 

[Fortune]

I just looked up Dan Malone. He's a former accountant and currently a content creator, who partners with some online investment platforms. Bit of a conflict of interests there. He's recently been advocating for cash returns from some of the online platforms that beat traditional banks deposit interest rates. Oh, he also has affiliate partnerships with them. Hmmm, no affiliate partnerships or agencies with mortgage lenders......

Oh, and he has a disclaimer: "Any information I provide is purely for entertainment....."

 

[Innisfree]

I do think it's worth referring to the Irish Personal Finance flowchart that is hosted on the irishpersonalfinance subreddit - not sure if the community here agrees with that, but it seems pretty logical to me.

Worth noting that it's only the very last step in it that suggests investing in ETFs/shares/whatever.
Everything before that is more important. Max pension. Buy a house. Overpay mortgage to reduce those interest costs (which in itself is a risk free, tax free return).

I invest in ETFs, (VWCE only) although having filed my first form 11, I can definitely see why people would be wary - and that's long before I have to worry about deemed disposal. I'm hoping that this regime will be changed buy then.

 

[franc82]

I do think it's worth referring to the Irish Personal Finance flowchart that is hosted on the irishpersonalfinance subreddit - not sure if the community here agrees with that, but it seems pretty logical to me.

Worth noting that it's only the very last step in it that suggests investing in ETFs/shares/whatever.
Everything before that is more important. Max pension. Buy a house. Overpay mortgage to reduce those interest costs (which in itself is a risk free, tax free return).

I invest in ETFs, (VWCE only) although having filed my first form 11, I can definitely see why people would be wary - and that's long before I have to worry about deemed disposal. I'm hoping that this regime will be changed buy then.

Why would you file a Form 11 if you're only investing in VWCE which is accumulating? I believe you should only do so if you plan to pay for the deemed disposal tax or you want to sell your position. Plus if you are filling Form 11 I believe it is because you're declaring over 5000 euros in gain so you're a big player then. How much are you investing on that ETF out of curiosity?

Again this thread is about investing in ETFs and the tax involved, people keep dragging mortgages into it. It is obvious to me that everyone who had an opinion on that matter has a mortgage and I don't know why they want to portray their decision as a good one. Rather than arguing with Dan Malone's opinion, people just want to critisize his profile instead. They did the same with Remi Sethi, and others.

In Reddit, there is a discussion on whether it is not better off investing rather than overpaying a mortgage. So this is not a clear-cut discussion and it is fairly subjective at the end of the day.

 

[Premos]

Why would you file a Form 11 if you're only investing in VWCE which is accumulating? I believe you should only do so if you plan to pay for the deemed disposal tax or you want to sell your position. Plus if you are filling Form 11 I believe it is because you're declaring over 5000 euros in gain so you're a big player then. How much are you investing on that ETF out of curiosity?

Again this thread is about investing in ETFs and the tax involved, people keep dragging mortgages into it. It is obvious to me that everyone who had an opinion on that matter has a mortgage and I don't know why they want to portray their decision as a good one. Rather than arguing with Dan Malone's opinion, people just want to critisize his profile instead. They did the same with Remi Sethi, and others.

In Reddit, there is a discussion on whether it is not better off investing rather than overpaying a mortgage. So this is not a clear-cut discussion and it is fairly subjective at the end of the day.

You spoke about whether you are better off investing rather than overpaying a mortgage. That is totally a different discussion. It depends on what you get from your investment v. what you are paying as interest. I invested before overpaying my mortgage because my interest was so low for a while that the money was better put elsewhere.

 

[Corola]

He's recently been advocating for cash returns from some of the online platforms that beat traditional banks deposit interest rates.

Well, they do. They're all recommended in the best buys on this site too.

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[Innisfree]

I had to file a form 11 because I sold some ETF units in 2023 and realised a gain. From what I understand, there is nowhere else you can report ETF disposals - so even if you haven't exceeded 5K in non-PAYE income (and I hadn't), you are forced into it. Form 12 / my account / CG1 forms do not have a space which correctly applies a 41% exit tax (or tax on dividends in the case of a distributing ETF).

Anyway, agree that mortgage. etc. is subjective. And the difficulty of ETF tax is also. It's certainly an overhead keeping track of it, and the rate is pretty high, but it's doable with some spreadsheet discipline. I do hope that the reporting is simplified, and deemed disposal disposed of, but I doubt the rate is going to drop.
If anything, the plans are more likely to lead to all savings/investment income being taxed at your marginal rate.

 

[Persius]

Why would you file a Form 11 if you're only investing in VWCE which is accumulating? I believe you should only do so if you plan to pay for the deemed disposal tax or you want to sell your position.

See section 4.1.1 (page 5) of Part 27-04-01: Offshore Funds: Taxation of Income and Gains from EU, EEA and OECD member states. It says:
"Where a person acquires a material interest in an ‘equivalent’ offshore fund in the
EU/EEA/OECD, that person is a chargeable person for that period. This means that
they must file a Form 11 / CT1 as appropriate and must include details of the
offshore fund in that return.".

There was a debate on whether Irish-domiciled ETFs are also treated as offshore funds for the purpose of notifying. Looking at Exchange Traded Funds (ETFs) Part 27-01A-03, it says:
"For further information with respect to the tax treatment of Irish domiciled ETFs refer
to TDM Part 27-01a-02 (Investment Undertakings) and TDM Part 27-04-01 (Offshore
Funds: Taxation of Income and Gains from the EU, EEA and OECD member states);"

So, it's a bit unclear to me whether the obligation to notify Revenue that you purchased an Irish-domiciled ETF via Form 11 is included in section 4.1.1 of 27-04-01 or whether 27-01a-02 is applicable. I've erred on the side of caution and used Form 11 to declare the purchase of Irish domiciled ETFs.
Either way, I believe that the above means that you will have to use Form 11 to declare tax due on actual or deemed disposal.

 

[Gordon Gekko]

“Mortgage etc” is not “subjective”.

If it was, carving a baseball bat from a piece of wood and bludgeoning oneself to death would also be “subjective”.

Someone is taking the ramblings of a few financial self-help shysters and applying them with all the subtlety of a baseball bat to the Irish system.

 

[Corola]

If anything, the plans are more likely to lead to all savings/investment income being taxed at your marginal rate.

If the gains and dividend income (whether paid out or reinvested) on ETFs were separated, with gains taxed CGT and income taxed at your marginal rate, it would satisfy many of the problems with ETFs.

 

[franc82]

So, it's a bit unclear to me whether the obligation to notify Revenue that you purchased an Irish-domiciled ETF via Form 11 is included in section 4.1.1 of 27-04-01 or whether 27-01a-02 is applicable. I've erred on the side of caution and used Form 11 to declare the purchase of Irish domiciled ETFs.
Either way, I believe that the above means that you will have to use Form 11 to declare tax due on actual or deemed disposal.

Interesting. I thought the Form 11 was filled when either the Exit tax or the deemed disposal tax was due?
If I bought some shares from an accumulating ETF in December 2023 and I haven't sold anything do I still need to fill a Form 11 this year?

By the way, all the ETFs I am talking about are Irish domiciled and are accumulating.

I believe the reason why @Persius filled his/her Form 11 was because a sell was made so the exit tax kicks in.

I would appreciate if you could shed more light into this issue please.

 

[ronaldo]

“Mortgage etc” is not “subjective”.

If it was, carving a baseball bat from a piece of wood and bludgeoning oneself to death would also be “subjective”.

Someone is taking the ramblings of a few financial self-help shysters and applying them with all the subtlety of a baseball bat to the Irish system.

This is one of those posts where much advice has been given but will never be taken onboard.

When it comes to Ireland, the wisdom of the crowd at Askaboutmoney vastly exceeds that of any commentator with a vested interest from advertising or a desire to get YouTube hits.

Where someone downright refuses to realise that the advice of someone that considers ones home a liability should be taken with a pinch of salt and, instead, believes they should rent based upon said advice, perhaps they are beyond help.

It seems, based upon this thread, that regarding a house as a liability shouldn't even be questioned.

Ignoring all of the above, the advice that investing via ETFs may not be the ideal option is also ignored. Does Robert Kiyosaki also mention ETF investing? It's years since I read it but I truly hope someone didn't read one US-centric self-help book and consider it the be-all-and-end-all to worldwide investment advice.

 

[Racrus]

Assuming you did sell after 10 years, this is what your spreadsheet will look like for the first year of monthly purchases. If you didn't sell you would have a column at Year 16, 24, etc.

In your annual tax return you will sum up the tax in the 12 rows. You will have one of these sheets for each calendar year of purchases.

	A	B	C	D = A * (C - B)	E = D * 41%	F	G = A * (F - B)	H = G * 41%	I = H - E
Purchase date	Nb of shares	Price @ Year 0	Price @ Year 8	Gain	Tax, where >0	Price @ Year 10	Gain	Tax, where >0	Net tax to pay
01/01/2024​
01/02/2024​
01/03/2024​
01/04/2024​
01/05/2024​
01/06/2024​
01/07/2024​
01/08/2024​
01/09/2024​
01/10/2024​
01/11/2024​
01/12/2024​

That's absolutely great, fair play to you for taking the time to make and share your DD spreadsheet. Helpful posts like this are a credit to this forum. That will come in very handy for me in the future and I'm sure for many others here.

I printed it and filled in random figures here now for the craic just to see how it works practically, I added some total figures just to double check my workings.

 

[Innisfree]

“Mortgage etc” is not “subjective”.

If it was, carving a baseball bat from a piece of wood and bludgeoning oneself to death would also be “subjective”.

Someone is taking the ramblings of a few financial self-help shysters and applying them with all the subtlety of a baseball bat to the Irish system.

Just to be clear, the comment around mortgage etc. being subjective was referring to the overpaying vs investing question mentioned as being on reddit. I think that is subjective, and depends on your attitude to risk. Investing has the potential to deliver greater returns, but overpaying your mortgage gives a risk-free, tax-free return. And probably greater peace of mind.

Buying vs long-term renting, that is a lot more clear cut.

 

[franc82]

That's absolutely great, fair play to you for taking the time to make and share your DD spreadsheet. Helpful posts like this are a credit to this forum. That will come in very handy for me in the future and I'm sure for many others here.

I printed it and filled in random figures here now for the craic just to see how it works practically, I added some total figures just to double check my workings.

Thanks a lot for providing those actual numbers which are also very helpful.

Just to add that I found another ETF tax calculator on YouTube specifically aimed at Irish investors provided by Walter Dunphy, ACCA qualified Accountant (2019) ; Degree in Economics and Finance (UL 2008-2012). Just go to YouTube and type Free Template for ETFs: How to Track Your Portfolio and Calculate Taxes in Ireland and you will find it.

He also provides a Google sheet to work out the exit and deemed disposal tax. It is a little intricate to customize it to your need but it is a good starting point.

 

[DublinHead54]

If I am non-domiciled in Ireland, if I opened an broker account in the UK and invested in ETFs and sold after 10 years. What tax would be due in Ireland?

 

[Corola]

That's absolutely great, fair play to you for taking the time to make and share your DD spreadsheet. Helpful posts like this are a credit to this forum. That will come in very handy for me in the future and I'm sure for many others here.

I printed it and filled in random figures here now for the craic just to see how it works practically, I added some total figures just to double check my workings.

That all looks good, there's a small arithmetic error but the understanding is correct.

	A	B	C	D = A * (C - B)	E = D * 41%	F	G = A * (F - B)	H = G * 41%	I = H - E
Purchase date	Nb of shares	Price @ Year 0	Price @ Year 8	Gain	Tax, where >0	Price @ Year 10	Gain	Tax, where >0	Net tax to pay
01/01/2024	10​	90​	140​	500​	205​	160​	700​	287​	82​
01/02/2024	10​	95​	130​	350​	143.5​	160​	650​	266.5​	123​
01/03/2024	10​	105​	140​	350​	143.5​	165​	600​	246​	102.5​
01/04/2024	10​	97​	120​	230​	94.3​	160​	630​	258.3​	164​
01/05/2024	10​	100​	135​	350​	143.5​	165​	650​	266.5​	123​
01/06/2024	10​	95​	135​	400​	164​	160​	650​	266.5​	102.5​
01/07/2024	10​	90​	140​	500​	205​	160​	700​	287​	82​
01/08/2024	10​	90​	145​	550​	225.5​	175​	850​	348.5​	123​
01/09/2024	10​	95​	150​	550​	225.5​	180​	850​	348.5​	123​
01/10/2024	10​	100​	150​	500​	205​	190​	900​	369​	164​
01/11/2024	10​	105​	145​	400​	164​	185​	800​	328​	164​
01/12/2024	10​	110​	150​	400​	164​	190​	800​	328​	164​
Total	120​	​	​	5080​	2082.8​	​	8780​	3599.8​	1517​

Tax to pay at Year 8 deemed disposal = €2,082.80
Tax to pay at Year 10 sale = €1,517.00

In practice for the actual sale, I would also deduct the broker fees incurred buying and selling those units from the final gain which reduces the tax.

 

[franc82]

That all looks good, there's a small arithmetic error but the understanding is correct.

	A	B	C	D = A * (C - B)	E = D * 41%	F	G = A * (F - B)	H = G * 41%	I = H - E
Purchase date	Nb of shares	Price @ Year 0	Price @ Year 8	Gain	Tax, where >0	Price @ Year 10	Gain	Tax, where >0	Net tax to pay
01/01/2024	10​	90​	140​	500​	205​	160​	700​	287​	82​
01/02/2024	10​	95​	130​	350​	143.5​	160​	650​	266.5​	123​
01/03/2024	10​	105​	140​	350​	143.5​	165​	600​	246​	102.5​
01/04/2024	10​	97​	120​	230​	94.3​	160​	630​	258.3​	164​
01/05/2024	10​	100​	135​	350​	143.5​	165​	650​	266.5​	123​
01/06/2024	10​	95​	135​	400​	164​	160​	650​	266.5​	102.5​
01/07/2024	10​	90​	140​	500​	205​	160​	700​	287​	82​
01/08/2024	10​	90​	145​	550​	225.5​	175​	850​	348.5​	123​
01/09/2024	10​	95​	150​	550​	225.5​	180​	850​	348.5​	123​
01/10/2024	10​	100​	150​	500​	205​	190​	900​	369​	164​
01/11/2024	10​	105​	145​	400​	164​	185​	800​	328​	164​
01/12/2024	10​	110​	150​	400​	164​	190​	800​	328​	164​
Total	120​	​	​	5080​	2082.8​	​	8780​	3599.8​	1517​

Tax to pay at Year 8 deemed disposal = €2082.80
Tax to pay at Year 10 sale = €1517.00

In practice for the actual sale, I would also be deducting the broker fees incurred buying and selling those units from the final gain which reduces the tax.

Thanks a million for your providing this. Out of curiosity bonds that pay their interests when they mature are subject to which tax please?

So for instance, if I buy a 5% rate bond for 3 years for 100 euros. The interests are only pay when it will mature so I will get at the end 115 euros. The 15 euros gain are subject to the exit tax or the USC and PSRI?

Finally, on the table itself, I would like to add that the values in columns B can be easily obtained on Trade Republic. There is a Saving Plan feature which I will encourage people to use. Each transaction is recorded and the receipt is also supplied, that makes it easy to keep track of the values. Plus the saving plans are free to execute too. A quick disclaimer here: I don't get paid by Trade Republic for giving these tips so you are absolute free to dodge them.