Is the 41% Exit Tax Soon to be Scrapped? Michael McGrath to Review

PQs reply 5 Nov 24
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Tax Code

Tax Code Dáil Éireann Debate, Tuesday - 5 November 2024
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My Department is developing a work programme to progress the recommendations of the report.
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PQ reply 5 Feb 2025 - shocking reply, they knew exactly what he meant but ignored it
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Tax Code

Tax Code Dáil Éireann Debate, Wednesday - 5 February 2025
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While the funds review report included a number of regulatory recommendations in respect of ETF’s, it did not include a specific recommendation regarding their tax treatment.
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PQ reply 5 Feb 2025
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Departmental Data

Departmental Data Dáil Éireann Debate, Wednesday - 5 February 2025
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Finally, the recently published Programme for Government includes a commitment to progress and publish an implementation plan taking into consideration the Funds Review recommendations to unlock retail investment and opportunities to grow the funds sector in Ireland.
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PQ reply 13 Feb 2025
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Tax Code

Tax Code Dáil Éireann Debate, Thursday - 13 February 2025
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The Programme for Government includes a commitment to progress and publish an implementation plan taking into consideration the Funds Review recommendations to unlock retail investment and opportunities to grow this sector in Ireland, and I, working with my officials, will consider the next steps in this regard over the coming months.

As with all areas of tax policy, the taxation of Irish-domiciled and offshore funds will be kept under review throughout the annual budgetary and Finance Bill processes.
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Donohue talks alot of rubbish and deliberately talks around it, rabbiting on about the definition of an ETF etc and other rubbish without actually answering the question. I notice that when asked a question on other topics he repeats the question again wasting time so their is less time left to address the question asked. He never gets reprimanded for this either in the media. For the life of me I don't understand how he is held in such high regards. Jack chambers is way better and upfront and McGrath was good aswell
 
While the funds review report included a number of regulatory recommendations in respect of ETF’s, it did not include a specific recommendation regarding their tax treatment.
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The report made very specific recommendations regarding the tax treatment of Irish-domiciled funds which includes Irish-domiciled ETFs.

22. The following reforms to the taxation of Irish-domiciled funds:
• Remove the eight-year deemed disposal requirement
• Align the IUT and LAET rate of tax with the CGT rate (currently 33%)
• Allow for a limited form of loss relief
 
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What is IUT?

LAET refers to the 41% exit tax on managed funds, applied at source by the life assurers, and the same tax applies to some or all individually held ETFs - isn't that correct?
 
IUT (Investment Undertaking Tax) is the correct name for what most people call exit tax on Irish-domiciled investment funds (incl. ETFs). It's the same rate with a different name than the LAET (Life Assurance Exit Tax) on managed fund policies from life insurers.

While Irish-domiciled ETFs fall within the IUT regime – subject to 41% tax, eight-year deemed disposal and no access to loss-relief – unlike other investment funds, tax on ETFs must be reported and paid via self-assessment which further adds to the compliance burden for investors.
 
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If there's no change by/in Budget 2026 then it's on Donohue because I honestly think that MGrath would have made a small change last year, if he had still been in the post, and that Chambers just didn't have the appetite for it when he took over.
 
GSheehy said:
If there's no change by/in Budget 2026 then it's on Donohue
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I'm (slightly) more optimistic given the information you provided about his initial involvement. That being said, how many reports gather dust on the shelves of government buildings? Time will tell.
 
Paschal Donohue is chair of the Eurgroup who are furthering the plans for a capital market union. Hard to see how that will work with a patch work of approaches to taxation;

"Member States are invited to assess ways to make their respective personal income tax systems more supportive of investments in capital markets. Notably, Member States should review the tax treatment of long-term retail investment products and of capital gains and losses."

https://www.consilium.europa.eu/en/...ormat-on-the-future-of-capital-markets-union/
 
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Some more here from yesterday..
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Fiscal Policy

Fiscal Policy Dáil Éireann Debate, Tuesday - 18 February 2025
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'Funds Sector 2030: A Framework for Open, Resilient & Developing Markets’ has been a wide-ranging review of the funds and asset management sector. The report was published on 22 October 2024.

The report made forty-two recommendations in total, including eight recommendations on the topic of retail investment. These include recommendations to better align the tax on investment funds and life assurance products with that of direct equities by removing deemed disposal and aligning the rate of tax to 33%.

The Programme for Government has committed to progress and publish an implementation plan for consideration in Budget 2026 taking into consideration the Funds Review recommendations to unlock retail investment and opportunities to grow this sector in Ireland. Work on delivering on this commitment has already begun.
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A lot of the PQs cited above are written answers. In a prior life I had involvement in this process. These written responses are pro formas and prepared by civil servants. I would wait to see what Donoghue says in his first oral questions in the Dail in the coming weeks to discern his attitude on this point.
 
I think that's the first time I've seen the Govt say they are hoping to begin changes from Budget 2026
 
m.independent.ie

Move under way to cut punishing 41pc exit tax on exchange-traded funds

Work is under way to ease the punitive tax treatment of exchange-traded funds (ETFs) and life-wrapped funds, an investment product sold by life assurance companies, in time for the Government’s first Budget, Finance Minister Paschal Donohoe has promised.
m.independent.ie m.independent.ie

So they are just going to cut the exit tax but not abolish deemed disposal, Donohue a very slow learner he still stuck in the 20th century
 
joe sod said:
So they are just going to cut the exit tax but not abolish deemed disposal
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It doesn't say that. It says the same as the PQs above. All the recommendations are being considered, none of them have been ruled out.
 
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DIRT has been reduced in phases, from a peak of 41% to 33% now.

Exit tax should also be cut.

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That would be helpful - you would then be due a refund or rather a tax credit for the overtaxed Exit tax

It's not like DIRT which is levied year by year on annual interest

Exit Tax is calculated when you finally dispose of the funds, which could on death, and it is calculated using the EXIT Tax rate at the date of disposal. All tax previously paid on deemed disposals is then a credit against the tax calculated

So Revenue would lose the benefit of the taxes paid at 41% - I can't see that going down well with them
 
jpd said:
Revenue would lose the benefit of the taxes paid at 41% - I can't see that going down well with them
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That's always a possibility with deemed exit tax. A reduction in the growth in a policy when it's surrendered could trigger a credit.
 
True but even without a loss, if the 41% is reduced than all the deemed disposals taxed at 41% have been overtaxed and a refund is due or rather a bigger credit when the actual disposal takes place
 
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