Index tracker products with CGT

M

Minnow2

Registered User
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Hi,
My preference is to invest in stock market index trackers, which I have done through ETFs to date.
Given the tax downside of ETFs (deemed disposal, income tax rate), I was wondering if there are any investment products other than ETFs which are structured to track the markets but are subject to CGT? I read somewhere that some Vanguard trackers are treated as shares rather than ETFs, but cannot find reference

Would appreciate any advice.
 
Non-EU domiciled index funds (including ETFs) are subject to the normal income tax/CGT regime.

Accessing those funds is another matter ...
 
There is a huge amount of posts on here about people trying to avoid deemed disposal and exit tax.

The tax regime in Ireland is gross roll up on ETFs/ funds and 41% exit tax, paid every 8 years or sooner if you actually cash it in.

If you want to avoid that, you can:

  1. Invest in unit trusts. These are actively managed though so you will have to test your "can't beat the market" philosophy in the bid to pay less tax.
  2. Buy individual shares.
  3. Build up a big enough pot of money so you can use a discretionary fund manager who can buy them.

We'd all love to pay less tax but don't let the tail wag the dog on this one. I've been investing in funds for years and have made significant gains from them.


Steven
www.bluewaterfp.ie
 
SBarrett said:
  1. Invest in unit trusts. These are actively managed though so you will have to test your "can't beat the market" philosophy in the bid to pay less tax.
Steven
www.bluewaterfp.ie
Click to expand...
Steven, do you mean investment trusts? Unit trusts are usually UCITS and subject to the exit tax regime.
Observation; when the exit tax regime was introduced in 2001 there was no deemed disposal and the exit tax was set at 23% (3% above DIRT because of gross roll up). There is now deemed disposal and the rate is at a penal 41%, 8% above DIRT with limited benefit from gross roll up. Oh, I almost forgot the 1% insurance levy - does anybody actually invest in life company savings products these days?
 
Life company products are good for people who are investing small amounts, who require simplicity, who don’t have access to good investment advice, and who don’t want to have to submit a tax return.
 
Duke of Marmalade said:
Steven, do you mean investment trusts? Unit trusts are usually UCITS and subject to the exit tax regime.
Observation; when the exit tax regime was introduced in 2001 there was no deemed disposal and the exit tax was set at 23% (3% above DIRT because of gross roll up). There is now deemed disposal and the rate is at a penal 41%, 8% above DIRT with limited benefit from gross roll up. Oh, I almost forgot the 1% insurance levy - does anybody actually invest in life company savings products these days?
Click to expand...

Sorry, yes investment trusts.

I can understand the Revenue's argument on the reason for deemed disposal, they weren't getting any income from gross roll up. But they should therefore allow people to pay CGT on dividends as per shares.

With the move to the left and the gap between those who have and those who haven't getting bigger, there doesn't seem to be an appetite to reduce the exit tax of 41%.

Steven
www.bluewaterfp.ie
 
Looking for investment options for my post tax income. I have already maximized my pension contributions and overpaying mortgage.

This article shows the performance of EU ETFs that are accumulating vs distributing (I understand US ETFs are unavailable to retail investors).


Does anyone have anything similar that would compare Investment Trusts to accumulating/distributing ETFs?
 
Investment trusts are taxed in the same way as direct shares or US-domiciled ETFs (income tax on dividends, CGT on capital gains).

I take the view that our tax code is such that it rarely makes sense to invest after-tax income while carrying a mortgage. Just overpay the mortgage until it's paid off in full.
 
Jeez, the tax treatment of ETFs in Ireland is a complete mess imho. Differentiating between US domiciled (with a KIDD) and European domiciled is clearly just plain stupid!!

Revenue are being very unkind and inconsistent with the after tax investor.

p.s. they must think that everybody has the gold plated public sector pension they do or something!?
 
Daithi7 said:
p.s. they must think that everybody has the gold plated public sector pension they do or something!?
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Revenue don’t determine tax policy; that’s the Government, via the department of finance. In any event, I very much doubt that is the reason for policy being as it is.
 
Differentiating between US domiciled (with a KIDD) and European domiciled is clearly just plain stupid!!
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The requirement for the ETF to have a PRIIP (Packaged retail investment and insurance products ) document has nothing to do with the Revenue. It is an EU requirement to protect retail investors in the EU from themselves (and unscrupulous investment brokers, if any such exist)

US ETF can't be bothered producing a PRIIPS as the market for their funds in the EU would be too small for the cost of producing and keeping it up to date.
 
jpd said:
The requirement for the ETF to have a PRIIP (Packaged retail investment and insurance products ) document has nothing to do with the Revenue. It is an EU requirement to protect retail investors in the EU from themselves (and unscrupulous investment brokers, if any such exist)

US ETF can't be bothered producing a PRIIPS as the market for their funds in the EU would be too small for the cost of producing and keeping it up to date.
Click to expand...

Do European ETFs also have to produce PRIIPs?

(& if so, why is it worthwhile for them to do so & not US ETFs I wonder?....)
 
torblednam said:
Revenue don’t determine tax policy; that’s the Government, via the department of finance. In any event, I very much doubt that is the reason for policy being as it is.
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Re Revenue/ Dept of Finance point, that's semantics tbh. Fact is Revenue implement ETF tax policy & issue guidelines on it, so I attribute responsibility for this cack handed scheme in my post to them (as a proxy for all government depts involved).

Genuinely curious: What do you consider is the reason for the bewildering differentiation in tax treatment of different etf options??
 
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Daithi7 said:
Re Revenue/ Dept of Finance point, that's semantics tbh. Fact is Revenue implement ETF tax policy & issue guidelines on it, so I attribute responsibility for this cack handed scheme in my post to them (as a proxy for all government depts involved).

Genuinely curious: What do you consider is the reason for the bewildering differentiation in tax treatment of different etf options??
Click to expand...
That's a ridiculous statement - Revenue, as all other Civil & Public Servants, implement policy as laid down by them government of the day. It is true that the Revenue and the Department of Finance can propose policy changes but it is the prerogative of the government of the day to accept or reject those changes

Are you implying that the government of the day is not responsible for decisions made by them?
 
Daithi7 said:
Do European ETFs also have to produce PRIIPs?

(& if so, why is it worthwhile for them to do so & not US ETFs I wonder?....)
Click to expand...

because demand for US domiciled etfs in Europe would only be marginal, its easier just to buy the european version. The only real demand is from the small number of irish investors disadvantaged by the irish specific tax code. The US ETFs are not going to jump through hoops for this very small market.

Paradoxically ireland is the domicile country for many of these european etfs . Its a wonder an irish financial institution cant construct a few ETFs themselves produce the PRIIP themselves and domicile them in the US for irish investors. Afterall I thought the IFSC in Dublin was managing huge sums of money for everyone else yet they cant construct a few investment products for irish investors !
 
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