Revenue E-Brief on ETFs

[jpd]

Are you prepared to pay for "bespoke taxation advice"?

I am sure that they will be delighted to help, for a fee

 

[nest egg]

Just wondering what other investors in these us domiciled etfs are doing now. My position is that I do not have enough information on where they fall. There is no advantage for me to sell them now as I don't have any loss relief to avail of anyway. If there is a big sell off in stocks next year I might use that as an opportunity to exit them and buy investment trusts or normal stocks instead.
There is such an information vacuum with regard to these etfs that I think it would be silly to take drastic action in the next month . Surely some accounting firm could provide bespoke taxation advice with regard to these investments over the next few years anyways

I sold my ETFs, they were bought as a hassle free investment and when Revenue withdrew their guidance, they no longer were that.

 

[joe sod]

I sold my ETFs, they were bought as a hassle free investment and when Revenue withdrew their guidance, they no longer were that.

Do you have much cgt to pay or do you have some loss relief to use to reduce down the capital gains?

 

[nest egg]

Do you have much cgt to pay or do you have some loss relief to use to reduce down the capital gains?

I sold other shares afterwards at a loss to offset some of the gains, I had been thinking of cutting my losses on those shares for a while, the CGT reduction helped soften the blow.

 

[Finance]

Has anyone got any clear updated guidance from Revenue on the tax situation with regards to non EU ETFs in Ireland? I've read this thread and I would like to know if anyone has any new information? The establishment frequent (or are controlling) a lot of the online sites now so it's no wonder that this move has come into play.

 

[Marc]

At the risk of opening up old wounds, I thought it might be helpful to post the following on here.

A client of mine was selected by Revenue for a level 2 compliance intervention/ audit earlier this year.

The period for review was the tax years 2019, 2020, 2021, 2022. The scope of the review was for income tax and capital gains tax.

So one of these years was in scope for the “new regime” for non EU ETFs which came into effect in January 2022.

Direct quote from the Revenue ebrief setting out this “new regime”*

““Prior guidance confirmed that investments in ETFs domiciled in the USA, the EEA or in an OECD member state (other than the USA) with which Ireland has a double taxation treaty, follows precisely the treatment that would apply to share investments generally. That confirmation does not apply to such investments with effect from 1 January 2022.”

Their portfolio which is c€5M consisted almost exclusively of US ETFs which had been filed by their tax adviser under general tax principles.

Revenue had no questions and no fines or penalties were imposed in fact the client actually received a refund.

*regime - noun, a system or ordered way of doing things

 

[jpd]

Without details of the etfs in question and of the status of the investor, it is difficult to say say anything useful about this.

It's possible that the people doing the audit were not fully trained on the intricasies of Etfs

 

[fistophobia]

Interesting.
I would not want to be on the receiving end of this "intervention"

 

[Marc]

Without details of the etfs in question and of the status of the investor, it is difficult to say say anything useful about this.

It's possible that the people doing the audit were not fully trained on the intricasies of Etfs

Yes a client with a 5m investment portfolio would most likely be assigned the most junior revenue official available

 

[Gordon Gekko]

Yes a client with a 5m investment portfolio would most likely be assigned the most junior revenue official available

I note that the €5m element of the story was edited into your original post subsequently.

“I’ll take ‘things that never happened’ for $500 please, Alex.”

 

[jpd]

An investor with a portfolio of € 5m, which was an addition to the post after I replied, is most probably a qualified investor and exempt from the PRIIP regulations

 

[Marc]

An investor with a portfolio of € 5m, which was an addition to the post after I replied, is most probably a qualified investor and exempt from the PRIIP regulations

No a retail investor and not a professional investor, but even so,, what has that to do with the tax treatment?

It has no relevance and you were simply picking a fight

 

[torblednam]

It’s highly likely that the Revenue auditor... didn’t understand the taxation of investment funds, which is a very complex area...

I'm only coming late to this thread, have only read the current page of posts so I don't know who's been fighting with whom, so I have no dog in this fight...

But I would echo the selected bits of Gordon's post - there's been HUGE turnover in Revenue's compliance staff in the last 5 - 10 years, and this is simply not an area that many people would have been au fait with before then.

 

[joe sod]

@Marc thanks for the update, it confirms what you have been saying all along, nothing really changed when they removed the clarification in January 2022 regarding US ETFs. If they don't have a clear simple definition themselves how can argue with a client during an audit? Its finally put some meat on the bones

 

[Fortune]

Revenue had no questions and no fines or penalties were imposed

I wouldn't expect any fines or penalties based on the details provided. Were there any ETF disposal in the period? Or an 8 year deemed event (I note the audit covered a 4 year period). If so, what taxes had the client paid? Exit tax or CGT, or income tax for dividends received?

 

[Steven Barrett]

At the risk of opening up old wounds, I thought it might be helpful to post the following on here.

A client of mine was selected by Revenue for a level 2 compliance intervention/ audit earlier this year.

The period for review was the tax years 2019, 2020, 2021, 2022. The scope of the review was for income tax and capital gains tax.

So one of these years was in scope for the “new regime” for non EU ETFs which came into effect in January 2022.

Direct quote from the Revenue ebrief setting out this “new regime”*

““Prior guidance confirmed that investments in ETFs domiciled in the USA, the EEA or in an OECD member state (other than the USA) with which Ireland has a double taxation treaty, follows precisely the treatment that would apply to share investments generally. That confirmation does not apply to such investments with effect from 1 January 2022.”

Their portfolio which is c€5M consisted almost exclusively of US ETFs which had been filed by their tax adviser under general tax principles.

Revenue had no questions and no fines or penalties were imposed in fact the client actually received a refund.

*regime - noun, a system or ordered way of doing things

Thanks for the update.

It would be interesting to have an example of US domiciled ETFs that the Revenue believe that the confirmation does not apply to.

As has been mentioned after this post, it is a complex area and the Revenue seem to be struggling with the taxation of ETFs and funds outside that of the life company wrapper. It doesn't help that they haven't amended the tax forms to make it clear to investors where to put their returns or to include it on a Form 12. As investing on platforms has become so mainstream, amending tax return forms is the easiest thing to do for the administration of declaring returns.

All can be done while we await the results of the review on the taxation of ETFs and funds in Ireland...

 

[Brendan Burgess]

Folks

Stay on topic and avoid personal attacks with people you disagree with.