Key Post Understanding Deemed Disposal on Life Insurance products

Brendan Burgess

Brendan Burgess

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This has been discussed in many different threads with many diversions and confusions. I want to clarify the rules here.

It is about Life Insurance investment products. The calculations will be done for you but you need to know the calculations to understand the strategy around them.

This thread is not about ETFs. Feel free to start a new thread on ETFs.

This thread is not about the stupidity of the rules or what changes are expected. Again, feel free to discuss these in other threads.

My understanding is based on the Duke's clear explanation in the middle of this thread

Key Post - Strategy around the 8 year deemed disposal

I sold one of my ETFs in January 2023. This was the first disposal for many years. I am thinking of disposing of them all and just buying a selection of shares. But for S&P 500 or NASDAQ this is quite messy I have asked Revenue how I should account for this in my Form 11 return next year -...
www.askaboutmoney.com

The key to understanding it is that any Deemed Disposal tax paid after 8 years is paid on account and will be deducted from the final liability.

Can anyone link me to the Revenue's rules on this?
 
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Deemed disposal at a profit

Note: Updated in light of subsequent posts correcting my initial example

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Frequently Asked Questions

Q: I am unhappy with the Irish Life product I have as it's made a loss and the charges are too high. I want to switch to New Ireland. Can I set the loss on the Irish Life product against future gains in the New Ireland product?
A: No

Q: If I make a loss on a product, can I carry it forward against gains on other products?
A: No

Q: If I switch within a fund e.g. from equities to cash, is that a disposal?
A: No, assuming it stays within the same product which allows you to switch.

Q: Do I have to pay Exit Tax on my death?
A: Yes. The Life company will deduct it and pay the net amount to your estate.
 
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Brendan Burgess said:
Deemed disposal at a profit


View attachment 9684
Click to expand...
I don't think this is correct - it should be

Value at encashment
€ 30,000​
Original investment
€ 10,000​
Gain
€ 20,000​
Exit tax at 41%
€ 8,200​
Tax paid on deemed disposal
€ 4,100​
Tax due now
€ 4,100​

The tax paid at the deemed disposal was paid by reducing the amount in the fund, but presumably the value at encashment is the full value and takes this into account - the tax on deemed disposal isn't separate from the fund value - the fund value would have decreased when the units to pay the tax on the deemed disposal were encashed after 8 years
 
jpd said:
I don't think this is correct - it should be

Value at encashment
€ 30,000​
Original investment
€ 10,000​
Gain
€ 20,000​
Exit tax at 41%
€ 8,200​
Tax paid on deemed disposal
€ 4,100​
Tax due now
€ 4,100​

The tax paid at the deemed disposal was paid by reducing the amount in the fund, but presumably the value at encashment is the full value and takes this into account - the tax on deemed disposal isn't separate from the fund value - the fund value would have decreased when the units to pay the tax on the deemed disposal were encashed after 8 years
Click to expand...
The deemed exit tax should be added to the gain calculation, then subtracted from the exit tax.
 
Brendan Burgess said:
This has been discussed in many different threads with many diversions and confusions. I want to clarify the rules here.

It is about Life Insurance investment products. The calculations will be done for you but you need to know the calculations to understand the strategy around them.

This thread is not about ETFs. Feel free to start a new thread on ETFs.

This thread is not about the stupidity of the rules or what changes are expected. Again, feel free to discuss these in other threads.

My understanding is based on the Duke's clear explanation in the middle of this thread

Key Post - Strategy around the 8 year deemed disposal

I sold one of my ETFs in January 2023. This was the first disposal for many years. I am thinking of disposing of them all and just buying a selection of shares. But for S&P 500 or NASDAQ this is quite messy I have asked Revenue how I should account for this in my Form 11 return next year -...
www.askaboutmoney.com

The key to understanding it is that any Deemed Disposal tax paid after 8 years is paid on account and will be deducted from the final liability.

Can anyone link me to the Revenue's rules on this?
Click to expand...


Chapter 5 in the pdf

There used to be a great document with plenty of examples of exit tax, but they pulled it years ago. Since it was called something like "joe.pdf", I suspect it was never meant to be published.
 
And the interesting thing is that if Exit Tax is reduced to say 33% you get a refund of the 8% paid on DD.
 
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Slightly off topic but can anyone explain to me why these investment vehicles are called “Life Insurance” products? I have one with Zurich which is doing well, but it is an investment, not life insurance.

Thanks

g
 
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