# ETFs taxation issue



## daheff (17 Oct 2017)

Hi all

I've made some gains on ETFs in 2016, and some small gains (below exemption) in equities.

I've submitted CGT return for equities (back in 2016) and Form 11 (Section E) for ETFs. I also sent a cheque for the tax due on the ETFs (calculated at 41% -think now it should have been 40%).

Problem I'm having now is revenue seem to have different people looking at it and everybody has a different view. Some people are telling me ETF Form 11 @40% is correct, others are then telling me its CGT return (And late!) @ 33%.

Anybody else have similar issues? Or can guide me to somebody who can properly look at this in Revenue?

any help/guidance is much appreciated


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## bmount (17 Oct 2017)

For what its worth, I found out recently that Rabodirect funds (closed down since April 2017 were "ETFs" to be treated as "offshore funds" and therefore are Income Tax'ed at 40% on the Form 11 and are not CGT relevent and also therefore you can't rollover or offset losses annually as well as being subject to a higher tax rate.
So I declared my (very modest) Rabodirect fund gains on the Form 11 foreign income section I think.

I notice on the Form 11 online calculation that unlike rental property profits you are not subject to USC and PRSI (bringing the marginal tax rate to 52%) but "just" the 40%.


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## Sarenco (17 Oct 2017)

daheff said:


> I've made some gains on ETFs in 2016, and some small gains (below exemption) in equities.


Where are the ETFs domiciled?


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## daheff (17 Oct 2017)

Like bmount, mine were Rabodirect funds & are Irish domiciled ETFs.

I've just had response form somebody else in Revenue now telling me hes amended the CGT computation to NIL and wants a full Form 11 (rather than just Section E I've previously provided).

this is getting very very painful.


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## Sarenco (17 Oct 2017)

The funds distributed by Rabo were not ETFs.

In any event, your gains are taxable at 41% and should be reported on Form 11 (line 322(c)).


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## daheff (17 Oct 2017)

Sarenco said:


> The funds distributed by Rabo were not ETFs.
> 
> In any event, your gains are taxable at 41% and should be reported on Form 11 (line 322(c)).


Yeah which I have. But everybody I speak to in revenue has a different view on it! Its painful to deal with.

Why do you think Rabofunds are not ETFs? Or am I mixing this up with Irish domiciled funds??

I've also been told 40% rather than 41% (well was also told 33% & cgt with annual exemption, but i've told them thats wrong)!


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## Sarenco (17 Oct 2017)

daheff said:


> Why do you think Rabofunds are not ETFs?!


ETF is an abbreviation for "exchange traded fund" (i.e. the shares in the fund are traded on a regulated market).  The mutual funds distributed by Rabo were not exchange traded.

I'm afraid I can't explain why any Revenue officials insist on giving taxpayers bad advice - the correct position is very clear.


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## torblednam (17 Oct 2017)

Sarenco said:


> ETF is an abbreviation for "exchange traded fund" (i.e. the shares in the fund are traded on a regulated market).  The mutual funds distributed by Rabo were not exchange traded.
> 
> I'm afraid I can't explain why any Revenue officials insist on giving taxpayers bad advice - the correct position is very clear.



Maybe it's a case of Garbage In Garbage Out. They can only go on what info  they're given. And it's a self assessment system, Revenue aren't in the tax advice business, it's up to joe punter to establish what they've invested in and what the tax treatment is.


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## Gordon Gekko (17 Oct 2017)

Never ever go to Revenue for advice.

For every competent member of staff, there are four others who either haven’t a clue or believe nobody should have any money.


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## torblednam (17 Oct 2017)

Gordon Gekko said:


> Never ever go to Revenue for advice.
> 
> For every competent member of staff, there are four others who either haven’t a clue or believe nobody should have any money.



Agree with the first sentence.

Second one is, with respect, rubbish. The reality is that, unsurprisingly, the lowest paid frontline staff are the least expert. As it should be in any similar large organisation. They're in the unenviable position of being under pressure from their own management to escalate as few items of correspondence as possible and deal as quickly as possible with as many work items as possible, as well as having to deal with joe public who expects (and in general gets) a good service. A very thankless job.

I dare say Gordon, that you get paid better than a CO working customer service in Revenue, and are under less time pressure when you need to figure out something a bit unfamiliar or complicated, rather than being expected to do it on the hoof while your client is on the other end of the line.


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## Sarenco (17 Oct 2017)

torblednam said:


> And it's a self assessment system, Revenue aren't in the tax advice business, it's up to joe punter to establish what they've invested in and what the tax treatment is.


Yes, i fully appreciate that.  

However, i am surprised that junior Revenue employees aren't instructed to decline to offer any advice beyond pointing taxpayers to their published guidelines on any particular matter.


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## torblednam (17 Oct 2017)

Sarenco said:


> Yes, i fully appreciate that.
> 
> However, i am surprised that junior Revenue employees aren't instructed to decline to offer any advice beyond pointing taxpayers to their published guidelines on any particular matter.



Well neither you nor I are privy to the detail of the conversation. If the customer says, I've made a gain on an Irish domiciled ETF, where do I put it, then they can read him the answer to the question. 

The answer is right based on the question asked, but results in a wrong return only because the information given was wrong.


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## Sarenco (17 Oct 2017)

@torblednam 

The correct tax treatment of a gain on an Irish-domiciled ETF or any other UCITS fund would be identical - neither of the treatments advised by the relevant Revenue employees (per the OP's report) would have been correct.  

If they don't know the answer to a question posed by a taxpayer why offer any opinion at all?  As you correctly point out, they are not in the advice business - so why are they offering (incorrect) advice?


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## torblednam (18 Oct 2017)

Sarenco said:


> @torblednam
> 
> The correct tax treatment of a gain on an Irish-domiciled ETF or any other UCITS fund would be identical - neither of the treatments advised by the relevant Revenue employees (per the OP's report) would have been correct.
> 
> If they don't know the answer to a question posed by a taxpayer why offer any opinion at all?  As you correctly point out, they are not in the advice business - so why are they offering (incorrect) advice?



I think you miss my point because I've used a poorly worded example - since neither you nor I know exactly what way the conversation went, we can't say that the taxpayer was given wrong advice.

I agree with you, if they don't know the answer they can't / shouldn't give one. But if they're asked a question that they can see the answer to in their manual then they absolutely should give it, and point the taxpayer to the relevant material.

I don't think it would be fair for Revenue to refuse to offer any assistance to their customers, but at the same time there has to be a reasonable limit to what constitutes an acceptable level of service. They do commit to providing services to help people to voluntarily comply with their obligations:
https://www.revenue.ie/en/corporate/documents/governance/sos-2015-2017.pdf


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## Sarenco (18 Oct 2017)

@torblednam

And I think you may be missing my point - the answers given would have been incorrect regardless!

An Irish or EU domiciled mutual fund or ETF would be subject to the same tax treatment - none of which correspond with the answers offered by the relevant Revenue officials!  They very clearly weren't reading from a manual - they were making it up off the top of their heads.


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## torblednam (18 Oct 2017)

Sarenco said:


> @torblednam
> 
> And I think you may be missing my point - the answers given would have been incorrect regardless!
> 
> An Irish or EU domiciled mutual fund or ETF would be subject to the same tax treatment - none of which correspond with the answers offered by the relevant Revenue officials!  They very clearly weren't reading from a manual - they were making it up off the top of their heads.



We're going around in a circle here. We DON'T KNOW exactly what question was put to them. They may have been genuinely wrong,  they may have made up an answer, or they may not have been given the correct information. We simply don't know.

I'm not saying nobody ever gets a wrong answer when they call Revenue, but I take issue with Gordon's assertion that 80% of their staff dealing with customers are incompetent. I'd be surprised if the quality of responses to queries fielded by Revenue differs materially from the answers people get from their own accountant in most cases.

Except for people are paying top dollar for their tax advice. Unfortunately, while people may have their views on how well paid our public servants are, they're not paid so well as to provide the same quality of service as a Big 4 firm, for free to the taxpayer.


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## freewheeler (18 Oct 2017)

Daheff  ,Instead of ETFs, My Rabo offshore fund was described as UCITS, or Luxembourg based SICAVS, for CGT on form  11. Hope this helps.


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## Gordon Gekko (18 Oct 2017)

torblednam said:


> Agree with the first sentence.
> 
> Second one is, with respect, rubbish. The reality is that, unsurprisingly, the lowest paid frontline staff are the least expert. As it should be in any similar large organisation. They're in the unenviable position of being under pressure from their own management to escalate as few items of correspondence as possible and deal as quickly as possible with as many work items as possible, as well as having to deal with joe public who expects (and in general gets) a good service. A very thankless job.
> 
> I dare say Gordon, that you get paid better than a CO working customer service in Revenue, and are under less time pressure when you need to figure out something a bit unfamiliar or complicated, rather than being expected to do it on the hoof while your client is on the other end of the line.



QED

Anyone who dishes out answers to complex queries on the hoof in such a manner is, quite frankly, an idiot.

I also wouldn’t dismiss the idea of bias; Revenue’s agenda is to collect as much tax as possible on behalf of the State. It is not an independent font of knowledge, and contains many zealots with peculiar views on wealth and how it should be taxed.


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## Sarenco (18 Oct 2017)

freewheeler said:


> Daheff  ,Instead of ETFs, My Rabo offshore fund was described as UCITS, or Luxembourg based SICAVS, for CGT on form  11. Hope this helps.



Again, UCITS, whether mutual funds or ETFs and whether domiciled in Ireland, Luxembourg or anywhere else in the EU are not subject to CGT.  They are subject to exit tax at a rate of 41%.


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## torblednam (18 Oct 2017)

Gordon Gekko said:


> QED
> 
> Anyone who dishes out answers to complex queries on the hoof in such a manner is, quite frankly, an idiot.
> 
> I also wouldn’t dismiss the idea of bias; Revenue’s agenda is to collect as much tax as possible on behalf of the State. It is not an independent font of knowledge, and contains many zealots with peculiar views on wealth and how it should be taxed.



So you stand over your assertion that 80% of Revenue staff are incompetent?


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## daheff (18 Oct 2017)

freewheeler said:


> Daheff  ,Instead of ETFs, My Rabo offshore fund was described as UCITS, or Luxembourg based SICAVS, for CGT on form  11. Hope this helps.


what section of form 11 have you put this in under?


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## daheff (18 Oct 2017)

Ok. Let me try and clarify what i've said/ seen /submitted on this as i'm conscious i'm getting some terminology mixed up which might be confusing people on this thread....me included.

So in 2016, based off some information from another thread on askaboutmoney.com and a revenue guidance note from 2015, I emailed a spreadsheet of transactions for which there was a gain to the named individual at revenue. I provided ISINs for the transactions (Rabo funds -*not etfs*, UCITs/IE domiciled funds). I received the following response


_The taxation regime for unit holders in Irish domiciled funds (including ETFs) is provided for in sections 739B- 739H of the Taxes Consolidation Act (TCA) 1997.  There is no annual tax on income and gains arising to an investment undertaking.  The unit holder funds  roll up tax free within the investment undertaking and the investment undertaking must deduct exit tax from payments made to certain unit holders on the happening of a chargeable event – e.g. annual payment from, or disposal of units in, the investment undertaking.  The exit tax deducted by the investment undertaking is a final liability to Irish tax for individual unit holders – i.e. payment from the investment undertaking do not form part of a unit holder’s income for the purposes of the Income Tax Acts nor do not give rise to a chargeable gain for the purposes of the Capital Gains Tax Acts.  However, as ETFs cannot deduct exit tax at source, the unit holder must declare same under self-assessment and file a Form 11. 


You should completed *Panel E of Form 11* in relation to the disposals in your spreadsheet.  As per the ETF guidance note, such gains do not attract PRSI or USC. 


I hope the above helps clarify the issue._

So I did. Rightly or wrongly, I put in the gain under line 317 (a) "Income from all other Foreign Non-Deposit Interest, Royalties, Annuities, dividends, etc. on which no foreign tax deducted". Again I also attached the spreadsheet detailing transactions & ISINs.

That was the place that I thought best suited the return (as no specifics were given by Revenue). I didnt use 321/322/323 as this was named "Foreign Life Policies/Offshore Funds/Other Offshore Products" and I didn't feel it was the right place to put it. 

Also gave them a cheque for the tax amount. This was cashed and initially put against the CGT amount due...and i was told 0 outstanding. Later this cheque was then applied vs Income tax and I was told a CGT amount was outstanding


so at this point I rang revenue, got somebody who advised things were applied wrong in their system and said submit a mail via myRevenue to advise that Revenue should apply the cheque again vs CGT. At this point it got messy and the response from the myRevenue mail was that it was to be treated like equity gains and at 33%. When I queried that and provided above email response re Irish domiciled funds that i was then requested to complete a full Form 11.

Now I think re-reading the ETF guidance note & 



Sarenco said:


> The funds distributed by Rabo were not ETFs.
> 
> In any event, your gains are taxable at 41% and should be reported on Form 11 (line 322(c)).



I should have advised using this line and not 317.


I've attached the guidance notes for other people.


But i do think that most of the people I've dealt with in revenue did not have a clue on this and while trying to help, probably should not have made any comment or should know where to direct the query.


So long story short -partly my fault for not knowing exactly what to submit (but I couldn't find clear guidance on how to report the income -and their contact only said use schedule E) and partly revenue for not really knowing what to advise/incorrectly advising.


So I'm going to resubmit a Form 11 schedule E using line 322(c) and hope to God this is all resolved.


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## Gordon Gekko (18 Oct 2017)

torblednam said:


> So you stand over your assertion that 80% of Revenue staff are incompetent?



That would be my experience based on 20 years of experience.


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## torblednam (18 Oct 2017)

Gordon Gekko said:


> That would be my experience based on 20 years of experience.



You should write to Niall Cody and tell him that, or pass it on to the Sunday papers, you must have stuff that could be as big as the Garda scandals?


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## torblednam (18 Oct 2017)

Gordon Gekko said:


> That would be my experience based on 20 years of experience.



While we're at it, since a majority of Revenue audits (80% of which are conducted incompetently if your assertion is correct) result in additional liabilities due from taxpayers, what do you think that says about competence across the accounting/tax profession?


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## Gordon Gekko (18 Oct 2017)

torblednam said:


> While we're at it, since a majority of Revenue audits (80% of which are conducted incompetently if your assertion is correct) result in additional liabilities due from taxpayers, what do you think that says about competence across the accounting/tax profession?



We’ll leave it there, thanks, on the basis that:

- You think that a statistic relating to all Revenue staff would also apply to Revenue auditors.

- You think that the majority of additional liabilities uncovered during Revenue audits are the fault of tax advisors/accountants.

(Both ludicrous views)


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## torblednam (18 Oct 2017)

Gordon Gekko said:


> We’ll leave it there, thanks, on the basis that:
> 
> - You think that a statistic relating to all Revenue staff would also apply to Revenue auditors.
> 
> ...



If they're ludicrous views maybe I've oversimplified your opinion, which I'm sure is very well thought out and has a sound rationale behind it that you can share with us.

So the concentration of incompetence varies across Revenue?

I'm only asking you to stand over your assertion that 80% of their staff are incompetent.

Would you like to break it down across the various areas then, the main customer/agent focused ones being customer service, audit/compliance and CG's.

What proportion of each of those would you say is incompetent, in your experience?

And how do you extrapolate from there to Revenue as a whole, given that the areas you interact with constitute only a proportion of the organisation as a whole?


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## Gordon Gekko (18 Oct 2017)

No I would not. I have no interest in playing whatever game you want to play. In my experience, a minority of Revenue staff are competent or highly competent. I’ll leave it at that. You are free to disagree.

As a sorbet to cleanse your palate, I will leave you with a statistic. Revenue employ just under 6,000 people. Last year, 12 of them completed the Chartered Tax Adviser qualification.


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## Sarenco (19 Oct 2017)

Anyhoo...

I hope it's uncontroversial to say that the administration of our investment fund tax regime is not exactly user-friendly and that the OP's experience with Revenue thus far has been far from ideal (to put it mildly).

I think that's a shame.


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## daheff (19 Oct 2017)

Sarenco said:


> Anyhoo...
> 
> I hope it's uncontroversial to say that the administration of our investment fund tax regime is not exactly user-friendly and that the OP's experience with Revenue thus far has been far from ideal (to put it mildly).
> 
> I think that's a shame.


 Agreed on the non user friendly regime. Can't really give out about Revenue as I may have contributed to the confusion with original return....but i do think they should have a little better idea of what to do. The ETF/UCITS guidance doc should really state where each type of fund is to be advised (eg which form/line).


So just for everybody reading this or having similar issues, I got a response from the original person in revenue. This person apologized for omitting information on the original email which may have caused me some confusion. I was told categorically that I should submit the return completing Panels A,D & E and submit my gain under 322 (c). (Plus any other relevant panels for my circumstances outside this issue).


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## torblednam (21 Oct 2017)

Gordon Gekko said:


> As a sorbet to cleanse your palate, I will leave you with a statistic. Revenue employ just under 6,000 people. Last year, 12 of them completed the Chartered Tax Adviser qualification.



Bit of an irrelevant statistic in isolation. Revenue currently recruit in the hundreds of new staff across various grades each year, to replace the large numbers retiring. The majority of whom (with the possible exception of the clerical officer grade where the pay starts at about 20k) have either a tax or accounting qualification.

Revenue also run their own academically accredited technical training for their staff, up to Honours degree level. All of which I suspect you know, if you sourced your statistic where I think you did... (
https://www.revenue.ie/en/corporate/information-about-revenue/governance/annual-report.aspx)
 but you cherry pick if you feel you must 

As I think about it, I'd say at this stage Revenue must employ more qualified accountants and CTA's than any other employer in the country, private or public sector, certainly not far off it.


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## jeanneau39 (8 Nov 2017)

Hi,

Sorry to add always the same question here but I would like to see if everybody is filing the form in the same way.

The gain from an Irish ETF should be posted in the form 11 (2017) under the part E 322 (offshore funds) or under F 409 (Investment undertakings)?

And, Do you know if we should also pay the preliminary tax for the 2017?

thank you!!


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## Sarenco (8 Nov 2017)

You can use panel E322 for gains arising on the (actual) disposal of an interest in an Irish domiciled ETF and F409 for gains arising on a deemed disposal (under the 8 year rule).

Apparently Revenue considers any exit tax paid to be relevant for preliminary tax purposes.


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## Gordon Gekko (8 Nov 2017)

Sarenco said:


> You can use panel E322 for gains arising on the (actual) disposal of an interest in an Irish domiciled ETF and F409 for gains arising on a deemed disposal (under the 8 year rule).



Why would one do that?!

Onshore funds have no place in the offshore funds section of the tax return.


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## Sarenco (8 Nov 2017)

Gordon Gekko said:


> Why would one do that?!



Because gains arising on the disposal of shares in an Irish domiciled ETF are obviously not deducted at source.

My understanding is that Revenue has previously advised that E322 was the appropriate place to make that return on Form 11, as though the Irish domiciled ETF was an offshore fund.  

Are you suggesting that is no longer the case?


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## Gordon Gekko (8 Nov 2017)

Interesting; I was advised to include it in 409 as a deemed disposal.

Neither is optimal...more nonsense in relation to fund investments. All of which is a barrier to people investing and providing for themselves.


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## Sarenco (8 Nov 2017)

Gordon Gekko said:


> Interesting; I was advised to include it in 409 as a deemed disposal.



I definitely wouldn't do that - it suggests you still hold the shares.


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## jpd (8 Nov 2017)

What a mess!


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## jeanneau39 (8 Nov 2017)

So. I think we can say that is better using the 322 E fir irish and eu etf. This is what Davy group is suggesting.

Thanks to all the posts on this... the etf tax treatment is really a mess...


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## jeanneau39 (9 Nov 2017)

Last question. Hope will be more clear than the previous.

I check with revenues regarding the preliminary tax (deadline with Ros 16 Nov.) And they told me that I have to pay

90% of the final liability of the tax year (And they confirm me 3 times is the year 2016)

100% for the 2015

105% for the 2014 if this is not nil.

Are the years correct?  I thought the 90% was on the tax for this year (2017!)

Thanks


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## jpd (9 Nov 2017)

If that's what they said (in writing?) then go with it - I have to say that I thought that preliminary would be 90% of tax due on 2017 income - but you live and learn


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## jeanneau39 (13 Nov 2017)

Hi, 

No unfortunately by phone. 

I found a guide that is saying that for this year (2017) it should be 90% of the 2017, 100% of 2016 etc.

I contacted again the revenues and the answer has been:

We are all in the same ship. If you don't know what will be the tax for the 2017 pay what you have until now and then amend it asap.

At this point let's see.


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