ETF’s. Can I do this?

Steady Investor

Registered User
Messages
10
Hi, I have found the contributions on this site very helpful and appreciate everyone’s efforts.

I am Keen to invest in ETF’s from Ireland. I have a basic understanding of the tax process in regards the the deemed disposal.

My question however is as follows.

1. If I plan to ‘trickle’ money into an ETF each month, does this create a big headache when it comes to calculating my tax? It appears to me that ETF’s in Ireland are only a product that would suit investors with large lump sums?
2. Do I just pay tax on any dividends as I would my individual share holdings?

Any advice is appreciated.
 
On dividends I’d suggest you try to only purchase accumulating ETFs, that way you’ll have no dividends to deal with!

Regarding trickling money in and the deemed disposal rule, I think this is very easily managed in a spreadsheet, I really wouldn’t let it put you off. Worst comes to worst you could pay an accountant to do the first return for you in 8 years time so you can see how it works and go from there.
 
Hi @Zenith63 & @Sarenco. I hope you don’t mind, but I have a quick follow up question for you on ETF’s that you might be happy to help with.

I am going to take the plunge and start investing in two accumulating ETF’s this week. My question is that if it’s just a case of paying 41% exit tax before or on the 8 year threshold, am I right in saying I just need to know the profit I am exiting with and then pay 41% of this to revenue?

It might be a very basic question, but if the answer is yes this is positive for me as I can invest small amounts whenever I wish and don’t really need to record it in any detail. I believe I just need to know the amount I have hopefully made?

Thanks
 
You need to know the amount you've made just on the tranche that has reached the 8 year point, not your entire holding. If you started buying a tranche of ETFs every month from now onward, 8 years from today only the very first tranche would have reached the 8 year threshold, all the rest would be at 7Y11M, 7Y10M etc.

In reality you won't make a return in exactly 8 years though, you would group an entire year of deemed disposals into a single tax return (you'd be doing a return for all of 2019 before October this year for instance) so you'll need to calculate the profit on 12 tranches of each ETF, or 24 in total. That sounds messy, but is trivially easy to do in a spreadsheet if you just make sure to add each purchase you make to it with the date, price and any costs associated.
 
That’s great, thanks you for your input. I was thinking of selecting maybe between 2-4 ETF’s and ‘launching’ them on the same day to possibly help make things even more simple 8 years down the line.

Losing 41% of my profits I don’t like, but at least it seems straight forward. With no dividends to worry about and a flat rate of tax to pay, at least I can drop uneven amounts in as I go and this does not complicate things.

Again, thank you for the interaction. I’m looking forward to getting started.
 
and ‘launching’ them on the same day to possibly help make things even more simple 8 years down the line.
No real advantge to that to be honest, if anything it might lead you astray, keeping in-mind the granuality required is just "Which tranches did I buy in the year XXXX". Better off just having a row in your spreadsheet for every transaction with the date/quantity/price/costs and use some formulas to do the calculations and highlight any rows where a return is due.
 
That sounds like good advice. Probably need to go on a bit of a journey with this and let it grow.

Will definitely start a spreadsheet from the start though as I can imagine it would get messy quite quickly Without one!

Thanks
 
Back
Top