Officials recommend scrapping deemed disposal and lowering tax on investment funds

Brendan Burgess

Brendan Burgess

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Tax rate on investments in funds should be lowered, Department of Finance officials recommend

Officials recommend that taxation on investments in funds be aligned with the lower 33 per cent capital gains tax rate
www.irishtimes.com www.irishtimes.com

Department of Finance officials have recommended that the taxation on investments in funds be aligned with the lower, 33 per cent capital gains tax rate that applies to direct investments from stocks to property.

Under current rules, domestic investors in funds must pay a 41 per cent tax on the sale of a fund, irrespective of what income tax bracket they are in, or after eight years – which ever comes first.

The officials have recommenced, as part of a review of the Irish funds sector, that the eight-year rule – known as the deemed disposal rule – be removed and that rate be aligned with the capital tax rate.
 
Definitely a step in the right direction but they're pretty much advocating setting up another "working group" that will take a few years to examine the options. If you invest now then hopefully before the first deemed disposal it should be sorted but I wouldn't count on it!
 
It's always been the case that you get a credit for deemed disposals already paid when you make your final disposal. Presumably that won't change so even deemed disposals made at 41% in the past would be converted to 33% if it is removed.
 
Minister ‘backs’ the change, disappointing it hasn’t gone further along the lines of ISA or Roth IRA.

x.com

x.com x.com

Although the quotes are it will be left to next government

“
The decision would require a change in legislation which would be left to the next government.

Minister Chambers said there were "real opportunities" that changes could allow for a "reset" for involvement of the public to invest in funds.

He specified cutting the 41% rate of tax to the same rate as Capital Gains Tax which is charged at 33%.

"I think a future finance minister in the next government should positively embrace some of the wider recommendations."

He added: "I think the tax policy changes merit consideration next year."
 
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Officials recommend scrapping deemed disposal and lowering tax on investment funds

https://www.irishtimes.com/business/2024/10/22/tax-rate-on-investments-in-funds-should-be-lowered-department-of-finance-officials-recommend/ Department of Finance officials have recommended that the taxation on investments in funds be aligned with the lower, 33 per cent capital gains tax rate...
www.askaboutmoney.com

Officials recommend scrapping deemed disposal and lowering tax on investment funds

https://www.irishtimes.com/business/2024/10/22/tax-rate-on-investments-in-funds-should-be-lowered-department-of-finance-officials-recommend/ Department of Finance officials have recommended that the taxation on investments in funds be aligned with the lower, 33 per cent capital gains tax rate...
www.askaboutmoney.com
 
Extract from report(page 12), also mentions a limited form of loss relief, but I don't see anything more detailed

The following reforms to the taxation of Irish-domiciled funds, with similar amendments made to the equivalent products in EU, EEA and OECD territories, to bring the regime into closer alignment with the taxation on othersavings and investment products:
-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
Click to expand...
 
ashambles said:
Judging by the date in the document description this document was published internally on 21/12/2023, which matches the partial title "Progress Update: Responses to the Public Consultation December 2023"

(it could look to some cynics like they sat on the report until after the budget)

https://www.gov.ie/en/press-release/4be16-minister-chambers-publishes-funds-review-report/
Click to expand...

Some people are very cynical...

(please vote FF if you would like us to do something about this...)
 
ashambles said:
Judging by the date in the document description this document was published internally on 21/12/2023, which matches the partial title "Progress Update: Responses to the Public Consultation December 2023"

(it could look to some cynics like they sat on the report until after the budget)

https://www.gov.ie/en/press-release/4be16-minister-chambers-publishes-funds-review-report/
Click to expand...
Where are you seeing this? When I check document properties of the published report and also the subsection reports it says date created is 18 October 2023
 
gort_gráinneog said:
Where are you seeing this? When I check document properties of the published report and also the subsection reports it says date created is 18 October 2023
Click to expand...
Think you're right (assume you mean Oct 2024) - when I went earlier to the gov.ie link I got a December 2023 document, now I see a 2024 version with pictures of Jack Chambers included - and I assume some sections changed (I'll have a look in more detail at differences later).

Funds Sector 2030 A Framework for Open, Resilient and Developing Markets Final Report

www.gov.ie www.gov.ie

So that initial document I downloaded was not the final one. Not sure if they changed it or they've both versions there.
 
On Life Assurance Exit Tax :

  • Removing the levy should reduce AMCs
  • The link (DoF and Irish Brokers) to DIRT will be gone
  • Greater certainty on the rate of taxation - unlikely to jump 18% in one 8 year cycle like it did from 2006.
  • Some sort of loss/gain offset across different products, perhaps
  • Possibility of being able to move from a high AMC product to a low one without triggering a DD event. Can only be good for competition.
If they implement those then they'll have listened to some of us.

It's going to take a lot of time to unravel the current regime though.

Gerard

www.saveandinvest.ie
 
It's possible they were worried if they do it now the opposition will scream about it being tax cuts for the wealthy and they didn't want to be seen to be doing that this close to an election.
 
Connard said:
It's possible they were worried if they do it now the opposition will scream about it being tax cuts for the wealthy and they didn't want to be seen to be doing that this close to an election.
Click to expand...
By the sounds of it though, it’s probably more a case of the changes being infeasible before the end of this government, so why start something you can’t finish and risk making a half-assed mess of it when you can make an election manifesto item out of it instead.
 
Connard said:
It's possible they were worried if they do it now the opposition will scream about it being tax cuts for the wealthy and they didn't want to be seen to be doing that this close to an election.
Click to expand...
Investing is so mainstream now that it is no longer the reserve of the wealthy where you need a stockbroker to place a trade.

By saying it will be for the next minister to implement, it is certainly saying to the voters the Jack Chambers will implement it if FF is returned to power. Will Pearse Doherty? Unlikely.

If it does happen and happens quickly, it is brilliant news for investors all round. Investing in Ireland has been so difficult with 41% tax on gains taking all the joy out of it. 33% is a lot more equitable.
 
Yea great news that they saw the light , the most important point they made was they wanted deemed disposal removed. Obviously all the submissions and even all the discussion forums down through the years has the desired effect.

If they do abolish deemed disposal what about the people that sold all their us domiciled etfs in 2021 because of the removal of the revenue clarification regarding us domiciled etfs being taxed like normal shares. They won't be happy as they were effectively forced to sell their etfs and crystallise their gains and pay the cgt
 
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