You need to go back and look at the discussions between Revenue and the tax institute.
In December 2021 a brief circulated as follows
“The Institute has been engaging with Revenue regarding the potential issues for taxpayers arising from the withdrawal of the guidance which had been in place for ETFs. Revenue confirmed at a meeting of the TALC Direct and Capital Taxes Sub-Committee this week that where the 8-year deemed disposal rule now applies to an ETF purchased prior to 1 January 2022, the clock does not begin to run for the purposes of the 8-year deemed disposal rule until 1 January 2022. The Institute will update members via TaxFax on any further clarifications received on the guidance”
Specifically
“Revenue noted that e-Brief 164/21, issued on 1 September 2021, provided notification of the key updates to the relevant TDMs.
Practitioners queried how the updated guidance, which stated that previous Revenue confirmations in respect of the treatment of ETFs would no longer apply from 1 January 2022, would impact someone acquiring an interest in an ETF in 2020 or 2021. Revenue noted that the updated guidance will only apply as of 1 January 2022.
Practitioners further queried whether there had been any updates to the guidance to assist advisors in determining which treatment would apply to investment products. Revenue confirmed that the recently published TDMs had been updated to provide general guidance on ETFs and ETCs in as far as possible, but that there was very little assistance that Revenue could provide to simplify such a complex area of legislation, and that each product is unique and needs to be considered on its own merits.
Practitioners referred to the submission made in July, and Revenue noted that the suggestions therein didn’t have general applicability and that absent a complete overhaul of the offshore funds regime, there was no way of simplifying the tax treatment for investors or advisors. Revenue further noted that the manual is intended to be a general guide, and that the submissions in respect of the remittance basis and how it could apply to offshore funds would not be addressed in this TDM.
It was agreed that this item would remain on the agenda and Revenue encouraged submissions relating to areas where TDMs could be updated to provide additional general guidance.”
This latest update simply clarifies some considerations that practitioners should take into account when “each product is considered on its own merits.”
So, again, nothing has “changed” we are back in the regime that applied prior to the issue of the “original” revenue Ebrief that came out in the foot of my Sunday Business Post article “a fair exchange”
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While the rest of the world is ploughing money into the ETFs and enjoying the benefits, Irish investment managers are currently struggling to get a straight answer from the Revenue Commissioners on just how the proceeds will be taxed.
Specifically, there is no clarity over whether gains from ETFs outside the European Union – of which there are hundreds – will be eligible for the 41 per cent exit tax usually levelled on funds, or whether the lower 33 per cent capital gains tax will apply, as is the case with normal gains from share disposals.
Marc Westlake, who relocated from Britain to Ireland several years ago, was gobsmacked when he saw how arcane the tax authorities here are when it comes to dealing with investments.
“I was staggered at how inconsistent and complicated Ireland is from an investment point of view, once you step outside pensions. In the Irish situation, something as simple as an ETF becomes probably the most complicated thing I’ve ever dealt with in 23 years,” he said.
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Sources in the investment community said that efforts by some of the larger fund managers based in Ireland to convince the Revenue Commissioners to provide clarity on the issue had proved fruitless so far.
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“We looked for clarity on this from the Revenue. The most concrete thing we got back from them was: ‘You could look at it that way if you wanted to’. You couldn’t get less committal if you tried.”
A Revenue spokesperson said ETFs were a “complex and specialist area”.
“The Revenue has no wish to be opaque in any respect in setting out the specifics of the law in this matter and we regret that any potential investor in ETFs may have had an unsatisfactory experience in seeking to clarify the relevant tax treatment,” she said.”
That regime requires a forensic analysis of the prospects of a particular investment fund and arguments need to be put forward why a particular fund is not “materially the same as an Irish fund”
The key point I believe is this “there was very little assistance that Revenue could provide to simplify such a complex area of legislation,”
Revenue are admitting that they themselves cannot provide guidance because this is so complicated and
“absent a complete overhaul of the offshore funds regime, there was no way of simplifying the tax treatment for investors or advisors”
Arguably that’s the real answer here. Fix the legislation and make it so that it is easier to administer and file.
Unless that happens it’s my belief that a lay person is unable to confidently file their taxes because they will not have conducted the necessary analysis of the prospectus.
You simply cannot rely on an anonymous post on askaboutmoney as the basis of your argument for why you have elected a certain tax treatment for a particular investment.
If a sufficiently large number of tax payers were to submit their tax returns with an expression of doubt it might force a positive change.
The purpose of an Expression of Doubt is to indicate to Revenue a genuine doubt about the application of law or, the treatment for tax purposes of any matter contained in the return. Arguably by revenue’s own admission that is the case here.
You should not do this lightly however as you are literally asking Revenue to take a closer look at your tax return. But in doing so they will have to address this. They themselves have admitted that this is very complex and clearly don’t want thousands of tax returns to deal with.
Financial Advisors Dublin offering wealth management advice, cross border planning, inheritance strategies, and investment advisory.
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