Taxation of precious metals ETCs

Five years ago, I decided to get exposure to gold and silver by buying some Exchange-Traded Commodity funds in an execution-only degiro account.

Two of the funds are "domiciled in Ireland", one in Switzerland. As the funds just hold precious metals, there are no dividends. I expected to pay CGT on disposal, as for shares.

Then I heard about a 41% rate and an 8-year deemed-disposal rule for ETFs (it seems this includes ETCs?), but I can't make sense of the TDM Part 27-01A-01 or Part 27-01A-02, which even refer to an "element of subjectivity" in determining what rules apply.

If a tax regime other than CGT applies to those three funds then I have been caught out, but either way I would be relieved just to get some clarity.

Can anyone who might have been through the same pain point me to the decisive text I should be looking at?

Thanks,
Mike

Anything of use here?

Thanks, Clubman.
I had trawled through a lot of the ETF threads here, but now I see a "Revenue Guidance Note on Exchange Traded Funds" from 2015 indicating that such ETCs are subject to the normal CGT and income tax regime on the basis that they are structured as debt instruments. That is contrary to the impression I got somewhere else, but it made no sense to me that a non-income producing ETC should be subject to anything other than CGT, as the underlying commodity would be, so I will assume it remains valid.

Although that note doesn't appear on a "guidance note ETF" search at revenue.ie

You can still find it here, from 2023.

While an investment in an Exchange Traded Fund (ETF) would generally represent a material interest in an offshore fund, investments in Exchange Traded Commodities (ETC) can vary and may be a debt security. If an ETC is a debt security, then it will be taxed in accordance with general taxation principles.

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ETNs, like shares in iShares Physical Metals plc, are debt instruments and taxed accordingly (basically CGT on capital gains).

I’m afraid I’ve no idea how the Swiss entity is taxed.

Thank you for your help, Corola and Sarenco.

Yes, I've confirmed that the two Irish ones are officially debt instruments. So if I understand correctly, they are be subject to 33% CGT, and in the CG1 form go under the heading "Shares/Securities - Quoted".

Going by the 2015 note, it looks like Revenue would be willing to allow any ETC to be treated in the same way given that they are generally structured like that, but based on the sentence after the one quoted by Corola in the other one, they expect you to find out: "A review of the exchange traded product is important to ascertain what tax treatment applies."

The prospectus for the Swiss one doesn't mention "debt", however. FWIW, the relevant prospectus text is:

"1.16 Legal form of the investment fund
ZKB Gold ETF is a contractual investment fund under Swiss law in the "Other funds for traditional investment" category and is established under the Swiss Collective Investment Schemes Act (CISA) of 23 June 2006.
The investment fund is based upon a collective investment contract (fund contract), under which the fund management company undertake to provide the investor with a stake in the investment fund in proportion to the fund units acquired by said investor, and to manage the fund at its own discretion and for its own account in accordance with the provisions of the law and the fund contract." ...
"All unit classes embody an entitlement to a share in the undivided assets of the fund, which are not segmented."

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I could guess at the implications of that but it would be a guess, so it appears Revenue require me to pay for professional advice. I hope not too much - my investments are small thousands, not millions.

So - anyone considering investing in ETFs: beware the landmines laid by the Revenue Commissioners for the unwary. I can't imagine any justification for sucking up hours of people's time with unreasonably complicated distinctions.

The prospectus sounds like it would fall under the equivalent offshore funds regime, i.e. 41% and deemed disposal.

Corola said:

The prospectus sounds like it would fall under the equivalent offshore funds regime, i.e. 41% and deemed disposal.

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I don’t necessarily disagree but UCITS can’t invest in physical metals so I think you could argue that it’s not an equivalent regime.

But who knows whether Revenue would accept that argument.

I'd be happy to be able to be in the league of those capable of arguing with the Revenue Commissioners! This reminds me of the "element of subjectivity" in "Part 27-04-01".

If it is 41% then I make an income tax return for the year of disposal, get a statement and pay the amount due before the following October (correct?)

If it's 33%, i.e., CGT, then I have to make the payment before the end of the year of disposal (or January, if sold in December).

For peace of mind, I'd be willing to do either one (the extra 8% could be less than the cost of tax advice) - but if I get it wrong, I'm in trouble either for an 8% underpayment or for late payment of CGT.

Edit:
I've just seen another thread in which you experts have commented: "Officials recommend scrapping deemed disposal and lowering tax on investment funds"
Since I'm not hitting the 8 years yet, maybe I should just hang on with this holding for the time being in hope of a change. Thank you for your insights.