ETF Investing in Ireland | Everything You Need To Know
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- Опубліковано 14 лип 2024
- In this video we run through everything you need to know about investing in ETFs in Ireland & Europe. If you're from Ireland or the EU, ETF investing is quite different than in the US. The costs are different, the ETF names are different, and the ETF taxes are different! This last point about taxes is probably the most important, and something you absolutely need to understand before investing in ETFs.
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💡 Key Learnings:
00:00 1️⃣ Intro
00:43 2️⃣ What is an ETF?
01:44 3️⃣ Pros & Cons of ETFs
03:36 4️⃣ ETF Costs
04:56 5️⃣ ETF Dividends - Accumulating vs Distributing
06:14 6️⃣ How to buy ETFs in Ireland/Europe?
07:54 7️⃣ ETF Domicile Rule
09:45 8️⃣ ETF Taxes Ireland
10:53 9️⃣ Deemed Disposal Rule
11:38 🔟 Pay & File ETF taxes
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A lot to take in here, so make sure to hit us up below if you have any questions 👍 In our opinion, ETFs are certainly valuable investment tools, but the tax on them (especially in Ireland) is significant and certainly has its downsides. What do you guys think about stocks vs ETFs considering the tax implications?
ETFs tracking passive market index funds (eg. FTSE All World, S&P500, etc.) are great investment vehicles. Not so sure about ‘de jour’ index funds (marijuana ETFs anyone!!). Being informed about the downside of ETF taxation here is important, for people to make informed decisions. Is the tax drag worth the immediate diversification, simplicity, low fees...? In some cases yes. Some no.
Well summarised, and indeed there truly is an ETF for everything! The VICE ETF is always one I find interesting 😂 It's a shame about the elevated tax, but agreed - instant diversification and simplicity is an easy pill to swallow.
Hi guys, if you invest regularly into an etf, say every month for example, how does the deemed disposal rule work then?
@@davidfagan9080 Hey Dave, pretty much the same. If you're adding to an ETF regularly, on the 8th year anniversary of when your first purchased it, you will owe 41% tax on any profits accumulated up to that point.
@@TheLearningsReport perfect. Thanks very much. Wasn't sure if you needed to do it on the anniversary of each time you invest.
We should really start a petition to get efts classified the same a shares , I don’t mind paying tax it’s a parts of life but paying taxes on profits you haven’t even taken out every 8 years is ludicrous
Hear! Hear!
Investing through a pension is one way to avoid taxes on gains but you are restricted with when you can withdraw.
- Cian
I've been thinking this for awhile 😂 somebody set it up because 41% is absolutely ridiculous.
@@TheLearningsReport can you avid the deemed disposable if through a pension?
@@josephboyle98 Hey Joe - that's our understanding yes, but I think it also depends on your specific pension plan (need to double check this one) so let me circle back with ya on it.
- Ste
Thanks thats great advice! And brilliant video thanks so much
'I cannot over emphasize the importance of being an experienced trader to make good returns off the market space, else you'd join the group that call it a gamble. Those that understand the market trends are always a step ahead and apply adequate measures to stay secure no matter the situation".
There are way too many information out there, its hard to know which to get into that will be suitable for you.
Would appreciate any assistance to get started, thank you.
@@raymondbarnes5264 'MARGARET ANN WARNKEN".
@@raymondbarnes5264She is my FA, she can help. Look with her name online for her webpage.
Trying to earn some extra income and this comment came in handy. Thanks 😊
Honestly, Revenue should put this video on their website! Great job guys!
It's sad to see that in a country with one of the lowest corporate taxes, it's the general population that suffers the most.
Appreciate it! The lack of clarity was the reason we did this video in the first place, so it’s great to hear that it helped you out. Agreed, the tax rates are v unfortunate! Cheers for the comment 👌🏼
Great video lads, the tax on ETFs is crippling in Ireland, it would really put you off investing in them for sure! I’d love to see the rules changed on this in Ireland, for smaller retail investors it’s a serious detractor to getting involved in the market outside of your pension fund. I think now with the influx of new retail investors the government will be seeing a lot more money coming from CGT. I feel like a single individual deciding to passively invest a few quid every month to better their financial future shouldn’t be burdened with such a significant tax hit. Sorry for the rant, it just bugs me 🤣
Haha literally nothing to add to this, you've nailed the synopsis. It just doesn't make sense that one of the safest and reliable forms of investing is less incentivised in Ireland (due to the way its taxed) than individual stock investing, which due to its nature is inherently 'riskier' for most investors.
Definitely second your hope that we see some changes due to the influx. That being said, I worry that covid will adversely effect the rates of tax across the board - and assumably CGT will be high on the list in terms of hikes, despite its already elevated status. 🤷♂️ Ste
@@TheLearningsReport Yeah I really hope that’s not the case, hard to see how much they can increase without just taking all our profits away 😅 I guess if you’re concerned about taxes then it means you are profitable which is a good thing at least 😆
@@irishwealth6346 Agreed. The issue, I feel, is that investing is still generally seen as for the 'wealthy' (and it is to an extent, of course) and thus it's easier to just say "ok lets increase the CGT tax and let the rich pay more". This of course becomes a problem as more 'everyday' investors get their start, and the tax burden on them is not equal relatively speaking. But yes at the end of the day, it's still far better than a return your savings account will give you!
@@TheLearningsReport 100% agree!
The tax con is an immediate no no for me. It's such a shame because I would absolutely love to invest in a high dividend yielding ETF, but as things stand right now, the tax is the deal breaker. Hopefully Ireland gets with the times. There is a severe lack of education on investing. It should be part of every secondary school education. I'm 43 now, and if I knew back then what I now know about investing my life would have panned out very differently. Had I a teacher in secondary school as talented and encouraging as my Science teacher was, we would have all left school with a solid foundational understanding of investing.
Well said. Agreed on all accounts (we're two decades behind you and can confirm we didn't learn any of this stuff in school either). We're hoping that our videos can at least help get some people started - but you're right, this should be way more integrated into regular school curriculum. And that goes for personal finance in general (as opposed to just 'accounting' etc.)
Thanks for your comment.
- Ste
Guys, keep up the good work.
I am amazed to find your channel. I had been reading the revenue website to understand that 41% tax and you just clarify it with additional information.
Thank you, new subscriber here...
Great stuff, Isac! Glad you found it helpful.
Yeah, the Revenue website can be confusing at times but we don't want that to be a reason to stop people from investing!
- Cian
Thanks a million lads! Very informative video💪
This is the video I have been hoping for!! Thank you very much lads 😊
Anytime!
Great video lads. You did a fantastic job. I bet this will benefit many people.
Cheers Nidge 👊 Glad you found it helpful!
Really good informative video in simple & plain English thank you.
Super useful guide for a beginner who wishes to invest from Ireland or Europe. I'm 23 yo and planning to start investing from now on. Thanks for a great video guys!
P.S still a bit confused about usd and eur options for one etf
Great video, thank you.
Investing in Ireland is a subject so tough to find useful and clear information.
Keep up rocking :D
Love it, Edson - we really appreciate that! Glad you're enjoying the channel and please do pass along the video to anyone else you think it might help. Great to have you on board 👌
These videos are incredible. Every Irish person should be paying attention. Please keep them up
Thanks a mill for watching and for the kind message, Chluain. Plenty more to come!
- Cian
Great video guys, keep it up 👍
Thanks, Rony!
Any ETFs on your radar?
- Cian
Excellent video 👏
Thanks, Pablo! See you in the next one.
- Cian
Thanks for the video, guys! Loads of important information.
I was considering investing on an ETF of European stocks to diversify from my mostly US-based investments, but the tax implications are just too unreasonable, especiall the deemed disposal rule. That one is just absurd!
Why is the Irish government so hostile towards investors?
Again, thanks for the comment António!
That's a great question, and one we ask regularly ourselves. On Reddit there is a group that I believe are lobbying to have this rule changed (as it certainly would have benefits). I remember reading that it was initially introduced due to dividend tax avoidance or something along those lines (don't quote us on that!) but yea, in a nutshell, the ETF tax is such a disincentive for new investors to get started. If anything, it pushes people to invest in individual stocks which is inherently riskier already. ETFs and index fund investing should be the most incentivised investing tool given its long term proven track record.
My guess would be for decades, investing was only accessible to the rich, so it was easier just to say "ok you pay more taxes". The issue now of course, is the rise of the retail investor, who has far less disposable income than the 'traditional' investor from a decade or two ago - yet we all pay the same tax.
Great video! Any chance you could do a video on the different ETFs available in Ireland?
Hey Brian, thanks for watching!
Do you mean a broad overview? In general, we don't look at specific stocks, cryptos, ETFs, etc., but maybe we could look at a comparison analysis at some point. 👍
You can check which ones are available by searching on your broker. And justetf.com is a good resource for finding out more about ETFs and strategies.
- Cian
41% is outrageous my god! Thanks for this video helps massively. So hard to find info on Irish investing and tax.
Hi guys great video, well explained. Could you make a video telling about after sell the ETF or Stock or receive an income when we should pay tax? All at the end of the year or the month. Thank you
Hey Danilo, thanks for that! Have you watched our video on capital gains tax? We explain it in that video so we suggest checking that out if you haven't already.
ua-cam.com/video/HZ1StqSfEaE/v-deo.html
- Ste
Could you make a video talking about 'non-domiciled' status in Ireland for people who live in Ireland but they are not Irish? Could you explain about taxes and what is the correct way to make investments in that case?
Thank you for this outstanding video (so clear and engaging) and for replying to everyone's questions in the comments. Could I ask (not looking for advice) your general thoughts on the Vanguard FTSE All-World, compared to the Vanguard S&P 500? Is it best to pick one, rather than both? Or does it generally not matter a whole lot?
Any general thoughts on this would be brilliant!
Hey Cape,
Glad you liked the video and found it helpful!
So, to pre-empt, in general we don't advise people on specific stocks/ETFs and it is up to you to do your due diligence on researching the stocks.
Having said that, there are certain differences between them in terms of what they are focused on. S&P is focused on American companies and there are 500. FTSE is international and has >3,000. Within the two there would be companies of different sizes/industries/business models. So, it would depend on how much you want to index your funds between the two. And then you would need to look at the financials, costs, analyst reports, etc. to compare the quantitative side of the ETFs. The more diversified you are, the less risk but potentially less reward.
Hope this helps and best of luck with it!
- Cian
@@TheLearningsReport Much appreciate the reply, cheers Cian. Subscribed, keep up the brilliant work!
@@Iambecome Love it, thank you!
Very informative for the beginner like me in investing
Hey Manipuri,
Thanks for watching and glad you found it interesting. We have more videos for beginners that you can check out here:
Investing Guides for Beginners 📈: ua-cam.com/play/PLvKfba1wmPk9Ix6n3mrRNEKxwSP-STPcx.html
- Cian
I have seen one of your video about ,the broker so I have no background knowledge about the investment just thinking which broker is best between Degiro and interactive broker ,can you please suggest
@@manipuriinireland2103 It comes down to preference - but IBKR might be better if fractional shares is something you'd find useful!
@@TheLearningsReport 😊
Thanks for the videos lads, great to have the info in the irish context. I have a question about deemed disposal.
If someone makes monthly contributions into an ETF over a number of years, do they need to pay deemed disposal every year after the initial 8 years as they will essentially be making a new investment every month? I'd say you'd need a full time accountant to sort that out if that's the case.
Howiya Niall - no worries and cheers for the question.
So yes, sadly, that is also our understanding too. Ms Money Hacker did a great blog piece breakdown of it (caveat: I don't think she's 100% certain on the situation either!) and I've linked below for your reference.
mrsmoneyhacker.com/how-to-file-taxes-for-etfs-in-ireland/#Deemed_Disposal
I haven't had to deal with the 8 year rule just yet - still living in blissful ignorance for now! Always worth pinging revenue a message to see what their take on it is.
- Ste
Investing in stocks / etf seems easy compare to understanding this tax rules in Ireland. Head rotatinggggg :D
Haha, they don't make it easy! 🤯
- Cian
Hi Chaps, great video! I understand there may have been a recent update with regard to Etfs and how they are taxed. I can't see anything online. Have you guys any knowledge on that?
Hi John,
Thanks a million for watching.
Very interesting, I (Cian) have not seen anything on this and just did a quick search for any update there but it doesn't look like there has been anything confirmed. Where did you originally see/hear of this update?
Please keep us updated as all of our ETF investing viewers are desperate for some reform! There may be a change in the upcoming budget although it seems unlikely given the amount of spending that has happened in the past 2 years.
I came across an interesting recent article in the Irish Times which runs through the current differences between Exit tax and CGT/DIRT which you might be interested in: www.irishtimes.com/business/personal-finance/why-do-some-investors-pay-more-tax-than-others-1.4684106
Thanks again for watching!
-Cian
Hello lads, this is a great video, I wish revenue were as efficient as you! Quick question:
If I were to sell my etfs to rebalance at the end of each year, let’s say because there was a market crash and I wanted to take some of my bond etf to buy more into my S&P 500 etf, would I have to pay capital gains on that for that specific year?
Also if I were to buy a portfolio of etfs, let’s say 10K divided into a percentage across a few different allocations, would I have to fill the RST01 form or is that just for individual stocks?
Thanks so much for the information!
Great video! I'd like to know what is the situation to "non-domiciled in Ireland but tax resident in Ireland" individuals. 1 - Are they still subject to the Deemed Disposals when acquiring a Irish domiciled ETFs? 2- What happens if they leave Ireland before the 8 years time? 3- Are US based ETFs available for them? Thanks so much!
재테크 ETF 장단점과 아일랜드 ETF 🎉🎉
High lads, I know you're not intending to give financial advice on what to spend money on but weighing up all the factors. In your own opinion for someone looking to just drop a set amount in per month and have it accumulate, is the VUAA the handiest one to do that? Great video btw
Hey Corey - thanks a million for watching!
Yeah, of course I have to preface this by saying that this is not financial advice or a recommendation but the Vanguard S&P 500 (i.e. VUAA) is one of the most popular ETFs globally. Over the course of it's existence, it has averaged 8-10% which is a pretty good ROI and much better than any savings account in Ireland. VUAA has the benefit of being an accumulating ETF.
I have heard of a lot of passive investors going down this route but definitely do your own due diligence on the ETF and understand the risks.
- Cian
Great video! How does the tax rules change if investing through a CFD of an ETF?
Cheers for the comment! As far as we can see in the revenue documentation, CFDs are treated the same across the board i.e. 33% CGT. Although this sounds a lot better than the 41% you pay through non-cfd ETFs, you do need to factor in the much higher risk that trading CFD products entails - just to flag!
- Ste
Thanks for the video lads, very helpful. First time investor here and currently looking into ETFs. Please forgive the silly question: In relation to when we buy, do we need to notify Revenue of this purchase? Or do we only need to worry about the tax side of things when we decide to sell?
Hey ChosenKoala,
Thanks for watching!
For purchasing, we don't think so. This pops up a bit but we haven't seen any regulation on it nor have Revenue confirmed to us yet.
For selling, yes, you'll need to pay and file when you sell or else when the 8 year deemed disposal comes around.
- Cian
@@TheLearningsReport section 4.1.1 seems to indicate that you should, but I've never heard of anyone doing so or revenue going after anyone www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-04-01.pdf
Thanks for the videos, lads. They really clarify investing in Ireland. Just one question after this video: do you pay 41% ETF tax over the full value of your ETF or over the increase in value (profit)?
It would be great if you can do a video comparing both forms of investing in Ireland and which one would be most profiable over a certain period of time.
Thanks again, Ed
Only taxed on profit
@@DAc2723 thanks a lot.
Great video lads, subscribed now.
Few questions please,
1) Do you have to declare annually how much you have invested in ETFs? There doesn't seem to be a place on form 12 for that, so im assuming you just have to declare and pay taxes on gains and dividends?
2) If selling ETFs and your gains were over 5k, does that push you from needing to use a form 12 to a form 11 for that year?
Thanks
Hey II nam,
Thanks for watching and excited to have you on the journey.
1) I'm presuming you are a non-chargeable individual (
@@TheLearningsReport Hi Cian, thanks for the detailed response!
Yea I am a non chargeable individual.
1) I will be investing in accumulating ETFs, so no dividends. And im going to sell before year 8 (and reinvest) to avoid going through that crappy DD rule, so i think the only time i will have to bother with these revenue forms is when i sell my shares and have to pay tax on any gains, is that right?
2) Thanks for that, so gains from selling ETFs aren't classed as non-PAYE income. So then its a form 12 or CG1 for the tax on the gains... revenue certainly aren't making this easy for us!
Thanks for following up! Il try them myself aswell
@@ilnam550 no worries at all.
1) so you won't have to pay then until you sell but to clarify we're trying to figure out from Revenue if and how you declare ETF purchases. Apparently you have to declare the purchases but it is not clear where or how (of course!). We'll keep you posted.
2) So, to also clarify the tax treatment here it will depend on where your ETF I domiciled. If Ireland and EU, it is exit tax and yes we believe it is Form 12 and CG1 for that. If US, EEA and other OECD, it is CGT and Income tax which is Form 12 and CG1 form. This should cover the majority of them but if it's an offshore ETF it is just income tax, PRSI and USC which would just be Form 12. So, yes, Revenue makes it incredibly tricky to navigate 😂
Article here to explain further: www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331
Hope that clears it up, we'll keep you informed on what Revenue says about filing purchases.
- Cian
@@TheLearningsReport Thanks a million Cian, yes keep me posted if you hear back from revenue on that, cheers!
Hi guys, great video! Thanks!
Just a quick question on VUAA. I note that it is listed on three exchanges (LSE [US$], XEF[€] and MIL[€]) and I was wondering if you had any advice in terms of the pros/cons of each exchange or if it really matters?
Thanks
Greg
Hey Greg - sorry for the late reply.
In short, it shouldn't really - but if your account is in Euro, you may want to purchase on the euro denominated exchanges just to save on the conversion fees! Some brokers (depending on where they are located) also might charge a smaller or bigger fee depending on the market you are trading, so worth checking that too.
- Ste
if you have DeGiro, some of the exchanges might be commissions free etf (initial charges fee, not ongoing), and that might drive the choice - check the free commission etf list
Hi guys! I have watched about seven of your videos so far (more to come), and it's so great to have the information in an Irish context - the classic texts like Graham and Malkiel have been super-useful except when it comes to the practical aspects of becoming a newbie passive investor! I have two probably very stupid questions that despite my research I'm having difficulty finding a (passive) answer to, so if you could answer them that would be great. The first is: I do want to put my investment money into index funds, but are there Irish citizen options for this that aren't ETFs? I'm guessing that for the S&P no (?), but are there equally robust ones that do the same job? And the second question is if you can set up a direct debit or regular annual transfer (eg the 3k CGT gift exemption) into these funds so it goes out before I can see it to spend it ...? Thanks a million for putting this all out there. Cheers, Rachel 😊
Hey Rachel - Great to hear you're starting your investor journey, and delighted you're finding out videos helpful :)
Q1) The short answer is 'not really' but I do believe investment trusts can do something similar - although I don't own or invest in any myself. Informed Decisions (run by another Irish guy) have a great post on investment trusts that might be worth a read
informeddecisions.ie/investment-trusts-in-ireland-blog-159/#:~:text=Pros%20of%20Investment%20Trusts%20in,opposed%20to%2041%25%20Exit%20Tax.
Q2) Many brokers will offer a direct debit to your bank account (or similar) so that you can set up a reoccurring payment directly, removing your temptation to spend it - although you will likely still need to actually click the 'buy' button, so its not completely automatic. That being said, some brokers may offer this functionality, I just might not be aware of them! Alternatively, you could set up a vault on Revolut (or similar internet bank), schedule a payment to go into that vault every month, and just get into the habit of taking that vault and sending the funds directly to your brokerage account before spending it.
Hope this helps somewhat!
- Ste
Can you make a video on how to file tax for dividends and etf please ?
Hi lads great video, I am currently looking to invest my self administered pension in an ETF, preferably one to track the S&P 500, do you know are any taxes involved going down this route as I am not aware if any CGT or disposal taxes apply? Keep up the good work!
Hey mate - Sorry for the late response - big summer off!
This is a tricky one, and one we've never full clarified. Usually via the pension route, you don't have to worry about the deemed disposal or CGT but I would certainly get a second opinion to back us up, especially as I'm not sure when it comes to the self-administered option.
Sorry I can't be of more help. If you found out the answer in the meantime, please do share!
wow nice
Hi guys! Awesome content! Learned a ton from this. Quick question. Is the 41% tax applicable to non-irish citizens who are invested in irish-domiciled ETF’s?
Hi Jay - thanks for the comment and sorry for the delay in getting back to you on this. So in short, I'm not 100% certain - but my guess would be: unlikely. The 41% tax is Irish specific, and from what I can see from my research, non-residents sometimes choose to invest in Irish domiciled etfs to to avail of the lower dividend withholding tax rate on dividends (15%) due to our DTA with the United States, but I can't see any mention of non-residents needing to pay the 41%.
Hope this helps, and if you hear anything to the contrary, please let us know!
Cheers for watching
- Ste
@@TheLearningsReport Alright! thanks for responding!
No worries 👍 Great content on your end btw - keep up the good work!
Great video, thank you! Can you please let me know if a resident non-domiciled in Ireland still has to comply with the 8 years deemed disposal rules? Does the answer change if one buys an Irish or US/EU ETF? Thanks for sharing your thoughts!
Great video and very informative.
If I made a profit on an EU domiciled ETF, I need to file a form 12 as stated. In the Non PAYE income section what would you file this under? Other foreign income including rents? Would this be where the 8 year deemed disposal is disclosed aswell?
Slightly different question then. If you make a gain from an investment in an EU offshore investment fund, would this be filed in the same place as an ETF profits?
Hi Gary,
Thanks a mill for watching.
Great question. This is one that is also so unclear so I have raised an enquiry with Revenue and will circle back when I get a response.
I would be hesitant to include it in other foreign income as Revenue will automatically calculate the tax on it and if you are in the higher bracket this could be up to 52%.
But, we have previously checked with them on the Form 11 side which has a CG1/Capital Gains section. My sense, and let me confirm, is that you could file the profit using a CG1 form via my enquiries. For dividends, let me also check as these could be charged more than you should pay in the Other Foreign Income section.
Sharing Revenue's response below to the Form 11 question:
"Dear Cian,
Please see the following Tax Duty Manual 27-02-01 to guide you with the declaration of your ETF :
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-02-01.pdf
You enter any gains as well as deemed disposals of ETFs at the rate of 40% under the heading 'Offshore Funds' in the Foreign Income panel. Payment from or a disposal of an interest has to be included in the Form 11 for tax purposes."
Also sharing a guide from the Irish Times explaining the different taxes that apply to different domiciles:
www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331
I'll let you know what Revenue says.
- Cian
great vid guys would you say investing into ETF's as a form of 3rd string passive income even though the tax rate is so absurd on them?
Hey Kay - sorry for the late reply on this!
Yes if your holdings are large enough and the ETFs you hold pay out a dividend, then absolutely they can be a great form of passive income. The same could be said for stocks in general though - as although it might not be 'consistent' passive income, the appreciation of the shares you hold over time can accumulate passively.
(They can also depreciate passively also - as the markets have recently been showing us 😅)
- Ste
Thanks for the great video! How did this work for people who are living in Ireland temporarily and may move in the future - if they buy an EU etf whole in Ireland and subsequently move to another eu country or somewhere like the UK, would you still be liable for the Irish deemed disposal and 41% tax rate? In which case, would or perhaps make more sense to invest at a later point of you plan to become tax resident somewhere else that may have more favorable tax rules?
Hey Nina thanks for the question. In short, as deemed disposal and exit tax is specific to Ireland in this situation our understanding is that once you leave (for longer than the required time from a tax standpoint), you shouldn't be eligible to pay - at least not in Ireland, but you'll probably then owe tax wherever your new residence is, if applicable. (But we're not tax professionals etc etc. so definitely do your own checks on this! This is from our own research)
Irish Tax Residence - you live in Ireland for more than 183 days from Jan to Dec or 280 days in the last two years, having spent at least 31 days in Ireland in each of the two tax years.
Ordinarily Resident for tax purposes - you have been a tax resident in Ireland for 3 consecutive years.
To the second part of your question, personally I wouldn't let that stop you from investing now. Although the tax implications are significant when living in Ireland, *time IN the market* nearly always trumps this, so I would advocate to just getting started and putting your money to work.
Hope this somewhat helps with your question!
@@TheLearningsReport Thanks a mill for the reply, that's really helpful!
You're very welcome!
Thanks lads for a n informative clear video. So the bottom line is that it's not worth investing in ETFs in Ireland because of the tax?
You're very welcome, glad it helped! The bottom line is...it depends 👀 The alternative is investing in individual stocks, which carries more risk and less diversification. ETFs as an investing instrument carry a lot of value for a retail investor due to their simplicity and instant diversification, but yes, the tax in Ireland is certainly prohibitive.
You'd need to weigh up your returns. If you can consistently outperform the indexes over the long term, then yes, individual stocks might be better. But for many investors (including ourselves) that might not end up being the case, and even with the hefty tax, you might still come out better off if you just get the average market returns and let it compound for the next 20 years by investing in ETFs (granted, with deemed disposal - compounding is interrupted every 8 years. Lets hope this changes at some point.)
There's also the option of investing in ETFs through your pension, and reducing your tax liability that way - so could be worth looking into that too.
Hope that helps!
- Ste
@@TheLearningsReport Thank you so much for your reply. I really appreciate it.
No problem at all!
Hi guys, thanks for the vid. One quick question - if you buy and hold accumulating ETFs, at what point do you inform revenue in order to pay the deemed disposal tax? When you purchase the ETFs? or only in the 8th year when the deemed disposal is due? Thanks
Hey Nick - no bother. On the 8th anniversary of whenever you made your first purchase! Technically you also need to notify revenue of when you purchase the ETF (no idea why) but I honestly don't know how much they care about this (not financial advice, etc etc. but yea, my opinion).
You could probably sent message in my enquiries to notify if you wanted to.
- Ste
@@TheLearningsReport thanks a mil!
Hi, am a new investor on etoro and have nearly 20 different stock and bond etfs(not big amounts) and am dollar cost averaging them until I
work out which ones I really like once I've seen how taxes work etc. Am I mad? Will
completing tax returns be a nightmare and could revenue charge a bigger accountancy fee? Brilliant videos thanks
Hey William,
Welcome along the journey and thanks for watching!
First mistake most investors make when starting is doing nothing so well done on diving straight in.
Taxes are definitely a pain in Ireland. Most brokers keep records of transactions and gains per holding which takes a lot of pain out of the calculations. When reporting, you would just enter a total capital gain or dividend amount for the asset type e.g. all crypto/ stocks or all ETFs. We have loads of videos on how you can pay and file taxes in Ireland which you can check out here: Taxes in Ireland 💸: ua-cam.com/play/PLvKfba1wmPk_zQLVB9tHyqhwbY2b7d1jv.html
And also, to confirm that both capital gains and dividends are self-assessed. You don't pay an accountancy fee to Revenue.
- Cian
Hey lads, late to the party here. Great video.. I'm seeing info describing the difference between ETFs and Index funds. To me they're the same thing and you don't seem to mention in the video.. Is this right?
Hi there. I’ve read that you can invest in US domiciled ETFs as long as you can access them via a US broker, or fund manager. I’ve also read that you can access an ETF like VOO via Tastyworks, and not be subject to deemed disposal every 8 years. Is this true? Equally, upon disposal, it is subject to CGT at the lower rate. This would have a massive implications for compounding potential. Would love to know your thoughts on this? Thanks, really like your content
Howiya Ian - cheers for the comment.
Q1 - US domiciled ETFS: in short, everything I've read indicates that either we 'can't' invest in US etfs but there may be ways around it that I'm not aware of. Most US based brokers don't accept Irish clients (unless you have a US bank account, address, SSN, us phone number, etc.) so not sure how you'd go about that either (I used to live in the US and had an account with Robinhood).
Never heard of Tastyworks until now, and no idea how it would allow you (legally) to avoid deemed disposal. So can't offer insights there!
Your reference to 'lower rate of CGT' is also a bit misleading. I'm guessing thats a reference to the US based Capital Gains Tax rate (short term and long term rates) whereas in Ireland there is no lower rate of CGT (at time of writing). It's a blanket 33%.
Thanks for the questions and glad you're enjoying the videos! I'll be looking into Tastyworks, cheers 👍
- Ste
Thanks for bringing up that topic. At 10:22 do you mean we still pay taxes on dividends from accumulated ETFs?
Hi Laurent,
For ACC ETFs, you don't need to pay taxes annually on the dividends. You would only pay when you sell the ETF or on the deemed disposal date.
- Cian
@@TheLearningsReport Excellent! That's one thing these blood suckers won't get. A tip about ETF's in different currencies:
I've heard of some people having the same ETF, same amount invested, in 2 different currencies. For instance VUSA in € and VUSA in $.
If you plan to life off the profit of the growth in 10 years, you would sell a portion of the ETF
that has better currency conversion (for instance it depends if the $ has devalued or not at the time of the withdrawal). It could be a good hedging strategy.
@@_el.guapo_ Interesting, have you come across a VUSA offering in USD? Don't think I have but perhaps it's not offered by my broker. Will have to do some more digging on this! Cheers for flagging.
- Ste
Thanks for the video. I'm planning on starting investing but I'm also moving to the UK in a few weeks. Should i set up my account on Degiro in the Uk to avoid these taxes or are they still applicable if I'm withdrawing to an Irish bank account? Thanks
Hey Jack cheers for watching. It'll likely come down to your tax residency/domicile as opposed to bank accounts. Couple of links below that should set you on the right track. In short though, you might be better holding off until you reach the UK. Best of luck with the move!
www2.deloitte.com/content/dam/Deloitte/ie/Documents/Tax/ie-tax-ges-moving-abroad-guide.pdf
www.revenue.ie/en/jobs-and-pensions/tax-residence/how-to-know-if-you-are-ordinarily-resident-for-tax-purposes.aspx
You pay the tax in the location you're ordinarily resident. So, if you live in the UK, you will pay tax to the HMRC. If you live in Ireland, its the Revenue commissioner. UK tax is soooo much better for this sorta stuff. Open an investment ISA and you don't need to pay *any* tax on your gains. The only catch with the ISA is that you can only invest up to £20,000 pa. But every new year you can invest another £20,000 and leave last years investments to appreciate for as long as you want tax free :)
Hey guys... amazing video content! Thanks so much!
So I'm a US citizen, but I'm living & working in Ireland (tax resident & paying tax in Ireland every year). I have a significant amount of USD (located in a US bank acct) that I'm looking at investing in VOO (Vanguard's US-based ETF - with all of its advantages) as a long-term investment (not planning on pulling it out for 20+ years).
Q1) But since I'm currently tax resident in Ireland, it sounds like I'd still be hit with the forced 41% on gains after the 8yrs, 16yrs, etc., yeah? Even though I'm not selling / repatriating any of that USD into EUR / Ireland?
Q2) What if I had purchased VOO like 7 years ago, moved to Ireland, and lived here for 1 year? Would I still be on the hook for the 41% deemed-disposal tax at the 8yr anniversary of ownership?
Q3) As I'm sure you know, the USA and Ireland have a double-taxation treaty... so (just out of curiosity) if I sold the VOO after let's say 9 years of ownership (still tax resident in Ireland), US CGT is let's say 20% for the amount of gains I'd have, but I've paid 41% on the gains in Ireland just last year. Would I have a 21% tax credit in the US because I paid the 41% in Ireland just last year?
Q4) So what if I moved back to the US in the 7th year of owning the VOO (assuming the deemed-disposal law is still around then)? Upon the 8th year, I would no longer be tax resident in Ireland... thus no need to file Irish taxes, and no 41% on the gains?
Sorry if these questions are super complex. Hope you're well.
Okay... quick update based on some more research (This video ua-cam.com/video/3elg3k30-tc/v-deo.html starting at 8:00 lays out the context).
Q5) All of my above questions might be irrelevant because it sounds like US domiciled ETFs are treated like stocks for Irish tax purposes (aka - you only realize CGT when you sell... the deemed-disposal rule doesn't apply)... is that correct?
Q6) And any distributed dividends from the US domiciled ETF will still be taxed at the marginal rates... yeah?
Sorry for how convoluted this post got. Just trying to think through all this. :)
Cheers! And thanks in advance. :)
Hey Matt,
Nice one - thanks a million for watching!
So, to start I would just caveat that we aren't tax advisers and your situation is quite unique so I would recommend chatting to your tax adviser to get clarity on these questions for your situation.
But, here are some helpful resources and general rules that might help:
1) Are you domiciled in Ireland? There are different implications depending on your domicile. Leaving a link below to Revenue's rules
If domiciled and resident (www.revenue.ie/en/jobs-and-pensions/tax-residence/index.aspx):
"If you are resident and domiciled in Ireland for tax purposes, you are chargeable to tax in Ireland on your worldwide income."
If not domiciled (www.revenue.ie/en/jobs-and-pensions/tax-residence/what-is-domicile-and-the-domicile-levy.aspx):
"You may be Irish tax resident, but non-ordinarily resident and not domiciled in Ireland for a tax year. In this case you will pay Irish tax only on your:
-Irish source income
-foreign income to the extent that it is remitted into Ireland."
2-4) I think this might be quite nuanced to your situation so I think your best bet is to raise these enquiries on Revenue or with your tax adviser.
5-6) Sharing a really good Fiona Redden article explaining how ETFs are taxed based on domicile at the bottom but correct for US-domiciled ETFs you pay the following:
"Tax on gains: Capital gains tax at 33 per cent
Tax on income: Income tax + PRSI + USC"
- www.irishtimes.com/business/personal-finance/don-t-invest-in-an-etf-until-you-understand-the-tax-1.3421331
Hope this helps, Matt. If you do reach out to Revenue about questions 2 - 4, let us know what they say. we'd be curious to understand more!
-Cian
hi Guys. Great videos. very helpful. 2 questions if your don't mind. (1.) does stamp duty apply to EFT's? in particular the ETF you mention VUAA - is there stamp duty to this. (2.) you mentioned in another of your videos that if you sell stocks that you have to wait 30 days before purchasing them again. does this 30 day rule also apply to EFT's? thank you
Hey Sean, thanks for the question.
1) Stamp Duty is applied at 1% on Irish Share purchases (Irish Listed Companies) but not ETFs (to the best of our knowledge).
2) So the 30 day rule isn't relevant to ETFs, as the video which I assume you're referring to (Bed & Breakfast Sales) is a method to reduce your CGT liability by making sure you use your €1270 CGT exemption. But in Ireland, ETFs are not subject to CGT tax, they're subject to Exit Tax, so you couldn't use your €1270 to offset your ETF gains anyway - so 30 day rule doesn't really apply.
- Ste
@@TheLearningsReport hi Ste. thanks for your reply. the reason i asked about the 30 day rule is because i am hoping to start investing into ETF's. the same amount of money each month for a number of years (basically to have money for my kids college: fees + accommodation/rent). am i correct in saying that after year eight i would have to file and pay deemed disposal of 41% EACH year (41% on year 1 purchases in year 9, 41% on year 2 purchases in year 10 etc). will this then get very messy if I get past year 16??
so i was wondering if at the end of year 8 i sold all my eft's and then paid the 41% exit tax on all 8 year purchases. then purchased them back. wouldn't this save me having to pay tax again for another 8 years? albeit i would be paying a high tax bill (8yrs in one go) to save the hassle of having to do it yearly
or would this be a stupid idea as i would need to use some of my gains to pay the 41% and would i then lose out on compound interest for the next 8yrs
@@seanmurphy9587 that the gains would make
@@seanmurphy9587 Hey Sean - so this is where we're not 100% on how its viewed by revenue. One way to look at it, is as you've described i.e. from year 8 onwards, you're basically paying deemed disposal every year assuming you're investing consistently over that first 8 yer period.
The alternative way it could be viewed , is that, lets say you only buy shares of VUAA - and consistently add to that over the 8 years. In year 8 you'd pay deemed disposal on all gains up until that point. Then in year 16, you'd again pay on all profits generated between year 8 and 16 (adjusted for the taxes already paid), and so on.
I've linked an article below that I believe supports the second scenario, but when it comes to details like this, we always suggest getting an answer in writing from revenue so that you have some fall back!
www.bluewaterfp.ie/investments/calculating-deemed-disposal-on-a-long-term-investment/
- Ste
Great Video. Im trying to understand the exit tax better. Im not an Ireland citizen. However, would like to invest in CSPX ETF as the dividend withholding tax is 15% compared to the US ETF equivalent. The country that I reside in does not have capital gain tax. Hence, in this case, would I be subjected to the 41% Exit Tax?
Hi Prem, thanks for watching!
Good question, I gather that you are not resident in Ireland - are you domiciled in Ireland, however? If you are not resident or domiciled here, you may not owe tax in Ireland and it would be dependent on the country that you are domiciled in. From looking at a few blog posts, CSPX seems to be a popular ETF for Singaporean residents.
It may be worth talking to a tax adviser to clarify given the international nature - sorry that we can't be more help here.
- Cian
@@TheLearningsReport Thanks for your assistance. Yes, this ETF is very popular here and our financial advisor has not heard of the Exit Tax. So, thank you for the clarification. We will only be subjected to the 15% dividend withholding tax.
Great Video. just a question on deemed disposal. lets say for example your investment strategy was dollar cost averaging and you invest a set amount of money every month for the 8 years upto your first deemed disposal is due. in year 9 (year tax is due) are you paying tax on just those first 12 purchases as its only those purchases that are 8 years old and then the following year you pay deemed disposal on the next 12 purchases. from this wouldn't it mean your paying deemed disposal every year after year 9.
Hey Des,
Yeah, I think you've hit the nail on the head there. That is my understanding albeit there is very little clarification on Revenue's website. It would get even messier when you get into year 17, 25, etc. when there will be multiple deemed disposals.
It's so messy, would love clarification or a simpler process from, Revenue. Or, at the very least, move ETFs to CGT!
- Cian
Ms Money Hacker has a great explainer piece on her blog that might offer some more transparency! Linked below (and a shoutout to her - her blog posts are a great read if you're an Irish investor)
mrsmoneyhacker.com/how-to-file-taxes-for-etfs-in-ireland/#Deemed_Disposal
Hey guys, great as usual! one thing i am not clear on the deemed disposal. For the same etf, i don't understand if the deemed disposal is due only once after 8 years or every 8 years. Say, i buy an ETF in 2020 and keep it for 30 years, shall i pay deemed disposal on 2028, 2036, 2044 ? Could u point me to revenue documentation on this? i can't find it
Hey Giovanni - cheers for the comment! Yes, the tax is unfortunately due every 8 year period.
Revenue documentation: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-04-01.pdf
Alternative blog post: www.bluewaterfp.ie/investments/calculating-deemed-disposal-on-a-long-term-investment/
Thanks guys for the great video, very informative. Regarding deemed disposable tax every 8 years, will it incur on whole profit amounts every 8 years? i. e. If I make 10k profit in 8 years time, I'll have to pay 41% of 10k, then if I make 30k profit on the same ETF in 16 years, will I have to pay 41% of 30k profit OR 41% of 20k (considering that 10k was deemed to be disposed and paid 8 years ago)? Hope my question make sense!
Thanks Lily! Great question. No, you won't be taxed on the disposals you've already made. To save me the typing, I'm going to borrow Steven Barrett's (Bluewater Financial Planning) excellent example as it explains your exact question thoroughly 👍
www.bluewaterfp.ie/investments/calculating-deemed-disposal-on-a-long-term-investment/
Hope this helps!
- Ste
@@TheLearningsReport thanks a lot Ste, very helpful!
@@TheLearningsReport one more question...! I'm trying to learn the tax implication difference between ETF and index funds. Would investments in index funds also apply to deemed disposal tax?
@@Lily-ph4wm So in Ireland, investing in an 'index fund' generally entails buying an ETF that tracks an index e.g. VUSA or VUAA which track the S&P 500.
In the States they have more of a distinction between the two, but here (as far as I'm aware but happy to be proven wrong!) they're basically the same thing, and thus, are subject to deemed disposal 👍
- Ste
Great informative video, I thought tax would only be 15% on the likes of VUSA/VUAA because of the agreement between Ireland and the US?
Hey Kris, cheers for watching. So I think you're referring to the double taxation treaty that we have with the US when it comes to *dividends* . So 15% is withheld at source (usually by your broker if they have a W8-BEN form on file for you, which they probably do from when you signed up) and then you're required to pay the balance on your annual tax return (5% if you're usually taxed at 20% marginal income tax and 25% if you're at the higher 40%).
In terms of the actual gains on your ETF investments, these are sadly still taxed at 41%.
- Ste
@@TheLearningsReport thanks for the clarification, makes sense now.
No worries, Kris
For a beginner, would you suggest investing in an ETF or just investing in the company themselves? especially because of the tax regardless of if youre selling your ETF. Thanks in advance!
The age old question! If we remove the tax liability from the equation, then ETFs are great. Not just for beginners, but for everyone. Simply put, most people are better off investing in an ETF that tracks an index (e.g. S&P 500) and just dollar cost averaging into that for the next 20 years. Takes no thought, or work, or research. You can also do it through a pension and get tax benefits that way also.
But of course, if you can beat the market (even by a % or two) over the long term, it can really add a significant amount to your long term wealth - hence why people also pick individual stocks.
A standard recommendation would be to try both for a few years. Do some ETF investing, pick some individual stocks you're really passionate about or believe in. See how you perform over say 5 years. On average, how did your performance measure up with the index? If you beat it, good for you, maybe picking stocks is for you. If not, maybe you start weighting more of your investments to just index funds.
But then there's Ireland. and Irish taxes. Deemed disposal and 41% exit tax is rough. For me, it's too bitter a pill to swallow so I focus on individual stocks. But if the rules changed (or I turn out to be really bad stock picker!) then I absolutely would either pivot or re-balance to include ETFs also!
Hope this gives some guidance :)
- Ste
Great video, so considering the Irish tax implications would it be an idea to put together your own 'etf' of value / aristocratic stocks? I know that this goes against conventional financial advice.
Hey John,
Thanks for watching!
I imagine setting up a financially regulated ETF would be fairly tough! 🤣
But, you can just buy the stocks of an ETF individually at the same weighting of the ETF and there are definite tax benefits here. You ultimately would be paying CGT at 33%, and you would get the annual exemption, be able to carry forward losses, etc.
The main drawback is the time and effort it would take to manage the portfolio as ETFs are managed.
Trading 212 actually have a function that allows you to do this easily called the pie function. We touch upon it in our T212 video which you can check out below if you're interested:
ua-cam.com/video/JCAYd_-TVjQ/v-deo.html
- Cian
@@TheLearningsReport oh no not another trading app! Thanks for the advice.
Haha fair. But yes, in short, your suggested method is feasible - but you’d just have a bit more work to do in terms of rebalancing etc. and likely wouldn’t offer the same level of diversification as a regular etf. You’d also need to manually reinvest dividends and pay the income tax on those upon receipt!
- Ste
@@TheLearningsReport yup I'd lose diversification and increases risk and I do get that downside, but you make a good point again is there an option to automatically reinvest dividends so I wouldn't have to pay tax? Unrealised gains isn't it?
Thx again
@@johnrodgers2018 Your broker may offer a DRIP option (Dividend Reinvestment Plan) which will automatically reinvest dividends, but the important clarification here is that even with DRIP, you still actually need to pay the tax when you 'receive' the dividend i.e. when it's paid out (regardless if you reinvest automatically or not). This is where ETFs that re invest automatically have an advantage - you don't need to pay the tax when the dividend is paid, you just pay it when you sell the ETF (or when you cross the deemed disposal 8 year threshold). You don't 'skip' the payment, you just postpone it - which just makes things easier from a tax return standpoint. And again, for clarity, dividends are taxed at income tax rates (20 or 40%) plus USC & PRSI
Hope this answers your question
- Ste
Great vid, thanks. I was looking at investing in ETFs but thinking twice now. The taxes in Ireland make no sense. In theory could someone who wanted to invest in an S&P 500 ETF decide to buy each stock individually to avoid those taxes and stay on the regular CGT rate?
Hey Ronan, cheers & appreciate the comment. Agreed, it's really quite frustrating how it's structured.
Theoretically, yes, but there are a few caveats. You'd need to take into account the 'weighting' and 'rebalancing' of each holding in the index. Trying to do that yourself on an ongoing basis, for 500 companies, would be tricky. Vanguard can do it, but they have a few more resources!
There may also be trading fees to consider, and many of those stocks in the S&P pay dividends, which would mean you'd have some work to do for tax season. (whereas with an ETF, you'd just have 'one' holding to do taxes on, instead of 500).
It's a shame, because most investors SHOULD be invested in ETFs (as it makes the most sense), but then we're actively discouraged from doing it due to the tax incentives.
- Ste
@@TheLearningsReport Thanks a mil for the reply Ste. I think it's safe to say even with the higher tax rate it still makes far more sense, the workload in rebalancing etc...would be ridiculous. Keep up the good work 👍
@@ronanodriscoll1343 Agreed!
I'm wondering with regards to the deemed disposal rule - what happens if you've paid and keep your shares invested after the 8 years? Do you still have the 41% exit tax on further gains when you do sell? If so, what is the gains reference point, the original investment or anything after the 8 year deemed disposal? Thanks!
You’re not taxed twice on same profit. For the second calculation you treat is as if you bought the ETF at the 8 year point
Is it possible to get in contact with you guys discuss etfs and how to invest the little bit more so I can try and understand better and start investing ASAP I really do appreciate the content it's very informative
Sorry for the late response - big summer off!
Unfortunately we don't really offer 1:1 discussions, we just focus on the video content. Happy to try answer any questions you have here in the comments though :)
Hey lads, do ye have information on 60/40 investments? I searched for a video but could not find any. Plenty of other videos from different UA-camrs but I would be interested to know what ye think of the 60/40 approach! Thanks.
As in the 60% stocks 40% bonds approach?
I personally would err far more on the stock side of things, especially as a younger investor with ( what I hope is) a fruitful and long investing life ahead of me.
However, could still certainly look at doing a vid on it - so thanks for the suggestion. Haver you gone down the 60/40 route yourself?
@@TheLearningsReport Yes correct. 60% stocks and 40% bonds. Eoin McGee (Prosperous) recommends this type of approach. I am early 40s and researching how to invest for the future. But yes I would be thinking long term (minimum 10 years) and very diverse so I am thinking bonds may not be needed.
Great video, I read that when you purchase ETFs you need to inform Revenue about every purchase. Is this correct?
Hey Karol - appreciate the comment and question! So yes, technically you do. I'll be completely honest and say I haven't done that 100% of the time, and not sure if there are any repercussions either way - but again, apparently you do.
Cheers for watching!
@@TheLearningsReport Hi guys :) love the videos wow! Just following up on the question there above - I'm assuming that if the purchase of an ETF (let's say accumulating) occured in 2021 that you would declare the purchase during your self assessment in 2022 using the Form 12 (if that's the correct one for the individual) - would that be the correct approach? Thank you for casting light on a (suspiciously) confusing process!
@@charlotteweever4936 glad you like the videos!
So, this one is a bit peculiar. If you are filing a form 12 online or paper version, there is no option to declare assets being acquired. If you do sell, it would be declared on a CG1 form the year after disposal. Given that you haven't disposed and it is ACC, then you don't need to pay in the year or file the dividends.
For contrast, if you are filing a form 11 as a Chargeable Individual, ETFs are classified as offshore funds for CGT purposes. To declare the purchase, you would enter it as "Other" in the Chargeable Assets section.
I can double check with Revenue but currently my revenue.ie account is down so might be a while before I can ask!
- Cian
@@TheLearningsReport they certainly like to make things complicated - thanks Cian it's super useful to get these insights - not to worry if you can't ask at the moment. If you do remember next time you're on to them I'd love to hear more - cheers and again great videos - I've spread the word :)
@@charlotteweever4936 brilliant, will do. Should be able to get answer to you before 2022, anyway. 😂
Any other questions, just shout!
- Cian
Holding non leveraged cfds is a way of being taxed at 33% but is holding cfds long term a good thing ? Would be really interested in your thoughts
Hi thanks very much great information, I have a question are you supposed to inform revenue first before you buy ETF Funds and also individual stocks or is it ok just to buy them and inform revenue every 8 years for ETFs, or when you sell individual stocks for taxes?
Hey Darren,
Thanks for watching the video!
Are you a chargeable individual (>€5k in non-PAYE income) or a non-chargeable individual (
Thanks very much Cian for your reply 👍👍👍.
@@darrenmcinerney2212 Just to clarify, you only need to notify revenue for ETF purchases, not for individual stock purchases 👍And to be honest, I haven't heard of anyone having issues with not declaring ETF purchases - the bigger issue would be of course if you just ignored the tax liability, then I'm sure they'd say something!
@@TheLearningsReport Hey - I believe I came cross something somewhere (can't remember where) in the last few days when I search information for ETF, it said YOU DO NOT need to notify your purchase if the ETFS is domiciled in Ireland ? Xu
@@user-bi2pe4xn9c Hmm would be great to see the source. Please send on if you find it! In short, I haven't heard that myself (but that's not to say it isn't true). If in doubt, I'd just check with revenue via a myenquiries message. To be honest, the whole setup of declaring ETF purchases is a bit of a mess. I've heard of many people literally just sending a message to revenue on MyEnquiries declaring it 🤷♂
That taxation is insane.. 41% every 8 years... golleeee!
Question. If i pay 41% on my earnings after 8 years.. the following 8 years am I taxed on the remaining 59% from the first 8 years plus the earnings for the following 8 years or just the earnings of the following 8 years?
If not the latter then would it be better to take out the earnings just before the 8 years and reinvest assuming that all the investments are in an index fund?
Great video.. Shit tax!
Hi Isaac - thanks for watching! Completely agree, the taxes are awful.
So, to clarify, you pay 41% every 8 years on your gains. If I take a simple example, you buy €100 of an ETF and after 8 years it is valued at €200, meaning you have made a gain of €100. In this case with deemed disposal, you would have to pay €41 in tax but the €159 remaining is now your new principle/cost basis. If the value of that €159 goes up, you will pay tax again on the amount above the €159 but not on the €159 itself. So, to your question, it is just the earnings/gains of the following 8 years. Unfortunately, if you sell before the 8 years, you will still have to pay the 41% exit tax.
Let's hope the lawmakers consider some changes to the high tax rates!
- Cian
Just started my research on investing and stumbled across your channel. Great work guys and it’s brilliant to see content that’s relevant to the Irish market. Quick question on etfs. I can afford to invest €200 a month into an etf. Is it better to invest that amount into something like the Vanguard S&P 500(€70 per share) or invest it in a smaller etf that tracks the same index but is about €15 to €20 per share?
Hey Brian,
Welcome along on the investing journey and thanks a million for watching!
Good question - with fractional shares, this is not an issue as you can buy whatever amount you want. However, for some brokers, e.g. Degiro, you aren't able to.
In this case and in theory, the lower priced one would make more sense as you can ensure you buy a much as you can with the €200 every month.
HOWEVER, remember that these prices will change and fluctuate so they are not guaranteed to and most likely won't stay at these levels. And with dollar cost averaging, whatever money is left over from the previous month can be used the next one.
In the long-run, there are other factors that would be more important to consider between the two such as base currency, fees and country domicile for tax purposes so I would start there and trust the dollar cost average process for whichever one you choose.
- Cian
Looking for to buy DHHF ETF, and accumulating if possible. Would you recommend a certain stock broker?
Is the exit tax due from a sale of ETF shares filed and paid alongside CGT from the sale of singular shares or separately? And if seperately, are they filed under a different form than a CG1 for regular capital gains?
Hey Conor,
Thanks for watching.
I'm presuming you are a non-chargeable individual (
Great video! What happens if you are a foreign investor (non-irish citizen)? Assuming you decide to invest in an accumulating ETF while in Ireland, but then decide to move to a different country... do you still have to pay 41% to Ireland on the 8th year? Or do you have to declare your accumulated gains before leaving the country?
Hey Sara, thanks for that. This is a great question, and in short, I'm not 100% sure how its handled. It'll likely come down to tax residency, where you're domiciled, and how long you're out of Ireland when the deemed disposal anniversary occurs. Revenue's website states that you can still be taxed for up to 3 years after you leave Ireland in certain scenarios (link below for your reference) so that may apply to you depending on when you plan to leave Ireland again?
www.revenue.ie/en/jobs-and-pensions/tax-residence/how-to-know-if-you-are-ordinarily-resident-for-tax-purposes.aspx
This could be one thats worth sending revenue an enquiry about. They may also end up saying to consult a tax advisor though - but do let us know if you can get a clearer answer! Sorry we can't be of more help.
- Ste
@@TheLearningsReport thanks for your answer I’ll check out the link! Great job these videos are so helpful and well done!
@@saramonacchi6447 glad you like them and thanks for watching.
- Cian
@saramonacchi6447 Hi, did you find the answer to this?
@@ErikaMichielon as long as you change immediately your residence to the country you are living in then you have to follow the rules of the country you live in. If you don’t change your residency immediately, you are bonded to Irish laws for the two years after you leave (not 100% sure of the amount of time) so in short, make sure you keep your residency updated with the country you are living in so you can follow their rules.
what about VOO(CFD) that is now available to us? i know its a contract for difference so i guess we don't pay deemed disposal tax, Right?
Hi guys, very informative. I am just wondering if invested in an etf, eg VUAA, do I need to do anything tax wise annually if I plan on holding long term or is it just a matter of paying the deemed disposal tax every 8 years?
Hey Dave, cheers for watching. Yes as you say, VUAA accumulates dividends so you’ll only need to worry about deemed disposal (or cgt if you sell of course).
A solid move!
- Ste
@@TheLearningsReport Thanks Ste. Learned a lot from the channel already. Noted you speaking about using a trading 212 to replicate the s&p 500. Which in your opinion would be best for long term? I'm torn between the benefits of each
** trading 212 pie
Glad to hear it! Thats a tricky one - its really up to you. I personally prefer picking individual stocks (at least for now) so my opinion is somewhat redundant. But:
Main pro of etf: completely passive investing, and deep diversification (but higher taxes)
Main pro of pie: no 41% tax (but less diversification as you wont be able to add 500 stocks and you’ll need to constantly monitor, etc.)
You could do both if you wanted 🤷♂️ Put some money into a full S&P500 ETF and then make your own mini ETF with your favourite companies from the S&P 500. One will be more concentrated than the other, but would be interesting to see how each performs. Just an idea - as I said, the decision is personal so it’s up to you!
- Ste
Does remittance basis apply to investments in ETFs? Answer for both EU and non EU etfs please.
Hi, thanks for the video.
I if I open and account with Interactive brokers which is an US Brokerage and invest in US domiciled ETFs, then I wouldn't be required to comply with the deemed disposal, correct ? Am I allowed to do that from Ireland?
Thank you.
Tks
What is the ireland-domicile etf equivalent to schd pls ?
I cannot believe the Irish government collect tax on ETF's held for over 8 years. How is that supposed to encourage investors, retail, HNWI or otherwise, to invest and save for the long term? And 41% on top of that?
Hey Killian - Yep, it's a big problem and I know there are ongoing discussions that I've heard about with people lobbying for a change in the rules. Couldn't agree with you more, it's ridiculous that the incentive is to pick individual stocks instead of index fund investing (which for most, is the way to go).
- Ste
may i ask , which form would i have to fill out if i am unemployed, and would it affect my emplyment status? and also would the 41% tax be of the amount i have earned on that ETF or the total amount of the ETF? for example if i put in €1000 on an ETF would i have to pay €410 in tax? sorry im new to this and very cautious.
Hey - Form 12 most likely! No, it wouldn't affect your employment status. The 41% is only liable on the PROFIT you make, not the principal (i.e. the amount you invested).
So if you invest €1000, and your investment grows to €1500, your taxable gain would be €500 so you would pay 41% of €500 which is €205.
- Ste
How can one invest into US stock (NVDA) on IBKR from Europe? The system asked to change the currency to USD from EUR. How does this work?
I’m confused. Some videos said the withholding tax is 15% on Irish domiciled ETFs and some said exit tax is 41%. What’s the difference?
Hi guys! Great stuff here at this channel. I recently came across this - jp morgan american investment trust (JAM) which tracks 173 companies similar to the S&P500. Is this also an ETF and how is it treated for tax purposes. Thanks a mil in advance
Hey Abishek,
Thanks for watching.
Interesting! Had a quick look at this and JAM looks like it's a closed ended investment company/ fund (www.hl.co.uk/shares/shares-search-results/j/jpm-american-investment-trust-ordinary-5p).
They are quite similar to ETFs, however, there are a few differences. For example, closed funds can't issue more shares and are actively managed. Found a good explainer here: www.fidelity.com/learning-center/investment-products/closed-end-funds/cefs-mutual-funds-etfs#:~:text=Closed%2Dend%20funds%20vs.&text=A%20common%20misunderstanding%20is%20that,%2Dtraded%20funds%20(ETFs).
To the best of my knowledge, these would be considered offshore funds and therefore taxed in the same way as ETFs. I would raise an enquiry on MyEnquiries to double check this. More detail here: www.revenue.ie/en/companies-and-charities/financial-services/collective-investment-vehicles/funds.aspx
If it tracks similar companies to the S&P 500 ETF, your main considerations would probably be fees, currency, broker availability, etc.
- Cian
Hey lads, what’s the difference with VUAA on the XEA exchange and the MIL exchange? Would you recommend one over the other?
Heya Karl. Not familiar with XEA - what country is that based out of? MIL is Milan anyway, but in short to answer your question, it shouldn't really matter. If EUR is your home currency, that's generally what you want to aim for with the exchange you choose. If they're both in EUR, it likely doesn't matter. Some exchanges have 'lower liquidity' but if you're buying an S&P 500 ETF such as VUAA, this will almost certainly be irrelevant as its one of the most liquid ETFs across all markets.
- Ste
@@TheLearningsReport Cheers Ste. Apparently XET is the Xetra exchange based in Frankfurt. Both look to be in euro and both are accumulating so I can’t see any major differences between the two.
@@karlcarthy4428 Nice one - yes in that case, I wouldn't see any major difference between the two!
VUG,is it accumulative or distributive
So with the taxes around ETF's would it even be profitable to invest lets say €100 a month towards the S&P 500? Would that actually see a reasonable return after taxes in let's say 3 years?
Thanks for watching!
So, the average return of the S&P 500 is roughly around 10% since it's inception, however, this is not guaranteed on a year-by-year basis. Based on your example, it would depend on what your initial investment would be but a good tool to play around with is the investment calculator (link is here: www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator) which should give you a good sense of where you would land.
- Cian
Hi guys,
I hope you'll help me out with this. I am so confused right now. Please bear in mind that I'm a complete beginner. I've already invested in SXR8 and I'm not sure if that was a good option. What are your thought on this one? Also is CSPX the same as SXR8? Thank you!🤗
Hey Bianca - no worries, thanks for the Q.
'Good' option is subjective of course, but as far as ETFs go - that looks as good as any! It's tracking the S&P 500, its accumulating dividends (or at least as far as I can tell, it is) - and this makes taxes easier for you. If your goal was to buy an ETF that tracked S&P 500, then yes you're all good!
In terms of the difference, I think CSPX and SXR8 are just different listings of the same ETF (IE00B5BMR087), i.e. the same product but traded on different exchanges: www.justetf.com/en/etf-profile.html?isin=IE00B5BMR087#listing
In short, I wouldn't be too concerned about choosing either!
@@TheLearningsReport Thank you so much for the reply!🤗 I'm so happy I found your UA-cam channel!
@@Bianca-eb4fe Great to have you following along :) Glad it helped!
Hi Guys, just found your site...love it, I have a question you may be able to help me with. Im an Irish citizen who has lived in Australia, as a permanent resident, for the last 15 years. If I buy ETF's that are all domiciled in Australia:
1. As Ireland taxes Irish citizens on all income earned Worldwide, I assume that I will be taxed in Australia, under Australian tax rules, based on the tax treaty Australia has with Ireland so no Double taxation , Correct? Therefore the Irish 8 year Chargeable event does not apply...... correct?
2. So what happens if I move back to Ireland to live in say 10 years....I bought the ETF's when I lived in Australia and they are all domiciled in Australia .... does the 8 Year chargeable event apply when I move back? and if so from when? i.e. from when I bought them originally or from when I moved back to Ireland?
3. Are Investments Trusts. Managed Funds or Listed Investment companies (LIC's) as they are known as in Australia ( achieves the same things as ETF'S but has a closed ended structure instead of the open ended structure that ETF;s have, in other words the LIC has a finite number of shares available at any one time) treated the same way in relation to tax?
Thanks
Dave
Heya Dave - hope all is well over in Oz.
1. You shouldn't be liable for Irish taxes if you've been in Australia for 15 years (this may have been a typo in your message as the second part of your question seems to indicate you're aware that Ireland does NOT tax worldwide income once you've been gone for longer than 3 years).
For these three years you must pay Irish tax on your worldwide income EXCEPT for:
- income from a trade or profession, no part of which is performed in Ireland
- income from an office or employment, where all the duties are performed outside Ireland
- other foreign income, for example, investment income, if it is €3,810 or less. If it is more than €3,810, the full amount is taxable.
As you can see from the above, most who leave Ireland and then work elsewhere, won't be taxed at all in Ireland.
2. For the ETFs you bought in Australia, the short answer is, I'm not 100% sure. I would guess/speculate that you may avoid deemed disposal given they're domiciled and purchased when you were in Australia (and thus you may be liable to pay the tax in Australia instead) but frankly, I don't know the answer to that one. Might be worth running it by a few accountants over in Australia to see what the craic would be on their side!
3. For investment trusts, I understand those to be taxed under CGT and not 41% exit tax like ETFs. Paddy over at Informed Decisions (he has a podcast also) did a great piece on them which I've linked below.
informeddecisions.ie/investment-trusts-in-ireland-blog-159/#:~:text=Pros%20of%20Investment%20Trusts%20in,opposed%20to%2041%25%20Exit%20Tax.
Very quick question and probably unrelated but you lads know your stuff. When you harvest a staked coin for the purpose of reinvesting back into the same staked coins, are we taxed on the harvest or just the realised profit (minus tax free allowance) when the coin is actually sold?
Heya, cheers as always for the comment. When you say harvest, we're just talking about you receiving the staking rewards, right?
So lets say you're staking BNB on Binance. By staking, you receive say 7% return on your staked holdings. The 7% you receive is taxed (to the best of our knowledge) as income, and calculated based on the value of the tokens when you receive them.
So to your question, the 'staking rewards' you receive are taxed at your marginal rate of income tax when you receive them, and then if you re-stake them and sell down the road, then you will be liable for CGT when you sell.
Hope that helps!
- Ste
@@TheLearningsReport Thanks for getting back. That's really interesting. So essentially you are double taxed. It doesn't matter so much when the harvested coins are worth 9 cent or so, but if the price goes over $20, then harvested coins are going to really add up where income tax is concerned. The CGT on top of that if one chooses to stake is a but of a double whammy. They should count the income tax charged at point of harvest as an expense, thus increasing tax free allowance before realisation. The current set up will deter investors from reinvesting their coins once the market price of the coin reaches a certain level.
@@TheLearningsReport Just another question.
Say I harvest 1 coin worth €100. I pay income tax on this. I then restake that coin back into the same investment. That coin gains by €50: I am only paying Capital Gains Tax on €50 and not €150.
@@VelcroKittie it effectively is a lot of tax on the same process although Revenue would argue that they are separate events. We would hope that there are some changes coming but Revenue are usually slow with these things.
So, in your example, you would pay income tax on the income received from the $100 (let's say this is 10% so $10). That's the first event. Then you can either 1. Sell the coin, which you would pay CGT on the $50 gain (not the $10 income, though) or 2. stake the coin again, on which you so would pay income on the staking rewards again. I say "either" because you can't stake coins you've sold but you can obviously sell some and stake some.
- Cian
@@VelcroKittie have you seen our video on staking, btw?
ua-cam.com/video/ah8fG2b05SY/v-deo.html
- Cian
Would it be a crime to invest in US domiciled ETFs? This was the idea, to invest in MSCI World ETFs.
I don't know if it'd be classified as a 'crime' from a legal sense, but I would imagine there would be penalties 'if' you were caught. To be honest, the issue would be getting access to US domiciled ETFs via your broker (as an Irish customer, all the brokers I use don't let me purchase US domiciled ETFs)
So does the deemed disposal rule every 8 years just kill any possibility for long term compound interest?
It has a huge detrimental effect. Theoretically, you could pay the deemed disposal out of pocket every 8 years and leave the ETF to grow but it's not going to be an easy sum to find every 8 years. Hopefully Revenue makes some changes soon!
- Cian
@ThelearningsReport: Domiciled in Ireland, investing in ETFs in India. ETF gain would be taxed in India. Now if I bring that money back to Ireland, does it again get taxed at 41%?
Hi, Please can you help clarify:
Every 8 years, “deemed disposal exit tax” is charged on the appreciation of your investment in an ETF in the previous 8 years.
This is like a “prepayment” of tax.
When you dispose of the investment, you pay exit tax on the appreciation of the investment since purchase less prepaid tax in the form of the sum of all the “deemed disposal exit tax” paid until disposal.
Final exit tax is triggered by either:
1.). Sale of the investment
Or
2.) Death of the share holder.
If the ETF shares are held jointly and one of the joint share holders dies, does this trigger a Final Exit Tax event, even if the surviving joint share holder wants to continue to hold the ETF’s?
Hey Louisa - our understanding is that if the shares are held 'jointly' then no, a death of one shareholder would NOT trigger the 'final exit tax'.
This taxes only applies if you are from the EU or ireland right? They will not apply to those outside?
Let's say I have 2 units of etf now .
Bought of 5 more unit after 5 yrs on same etf
Bought another 5 units on different etf .
Now how DD rule works ? After 8 yrs only 2 units dd rule will apply . Or whole 7 units gain single ETFs and another 5 units of another etf ?
To save writing a lengthly post, Ms Money Hacker has a fantastic blog post explanation of this, and I've linked it below for your reference!
mrsmoneyhacker.com/how-to-file-taxes-for-etfs-in-ireland/
Hi Steve & Cian, thanks for such a well elaborated video. I have some questions to you regarding taxes and hope you can clarify. Firstly i am a Malaysian (hence non Ireland Resident) and planning to buy the ireland US S&P 500 etfs (example the VUAA). Since Malaysia & Ireland have the double taxation agreement treaty signed, are we subjected to Ireland tax policies that you have mentioned here for the dividend tax and the deemed disposal tax? Just wondering if you can clarify or comment further? Thanks & take care, cheers
Hi Khoo - thanks for watching and for the comment!
I am not too familiar with the tax structure in Malaysia and not sure of your circumstances so it is difficult to say where you would pay the tax. In general, we recommend chatting to a tax advisor for cross-country clarifications (as we are not tax advisors) just to be on the safe side.
However, sharing a section from the Revenue website here which may be of use:
"Non-residents
If you are neither tax resident nor domiciled in Ireland for tax purposes, you are chargeable to tax in Ireland on:
Irish-source income, including income from an Irish public office
foreign employment income where the duties of the employment are carried out in Ireland.
You might be non-resident in Ireland for tax purposes, but ordinarily resident and domiciled. This will affect what income is chargeable to Irish tax."
There is more info in this link (www.revenue.ie/en/jobs-and-pensions/tax-residence/index.aspx) to help understand how it might affect your situation.
Hope this helps!
- Cian
hey guys. Just a quick question in relation to the deemed disposable rule. If someone invests 2000/ year into VUSA, does that mean at the end of the first 8 year term, they will be liable to 6560 euro in taxes?
After 8 years your ‘deemed disposal’ tax is 41% of the amount that the first set of 2000 has increased in value. A year later, your second set of 2000 has become 8 years old so is taxed as a deemed disposal. A year later, your third set of 2000 has deemed disposal etc
WANT TO understand , how many stock exchanges are accessible from Ireland via brokerages
i want to invest in s&p 500 and nassadaq 100 index funds for ten years, I am not sure which is the best way ,
Via revoult we have access to NYSE. But only few individual stocks listed.
No etf available.
Using etro, digero,tarding212,ibkr are allowed to invest directly to NYSE ? So I can invest on nassadaq 100 etf and s&p 500 etf ?
irsh domiciled etf are listed in NYSE , London stock exchange, euro next stock exchange Dublin ?
Which is the best way to buy it , irsh domiciled etf listed in euro next stock exchange in Dublin?
What is the use of euro next sock exchange Dublin ? Any usa etf listed over here for us ?
Hey there. Thanks for the questions! Little confused what you're asking, but lets give it a shot.
For tracking the indexes, invest in an ETF. That's the simplest way, although, you need to be aware of the higher tax rates as discussed in this video.
Revolut does not currently offer ETFs, you're correct. They may in the future.
Yes, you can buy etfs on eToro, Degiro, IBKR, etc.
We would suggest looking at Degiro for purchasing Irish/EU domiciled ETFs.
Irish investors can't trade US domiciled ETFs, but there are plenty of Irish/EU etfs that track the same markets as their US equivalents, For example, VUAA and VUSA are the EU/IRE version of VOO (which tracks the S&P 500)
Most of these questions we address in the video!
I have a question about ETFs in Ireland its in regards to deemed disposable tax, will it incur on the whole profit amounts every 8 years? i. e. If I make 10k profit in 8 years time, will I have to pay 41% of 10k? If I dont sell any of the position and another 8 years passes and I make 30k profit on the ETF. How much tax will I have to pay?
Hi Nidge - So you need to look at it as if you sell every 8 years (regardless if you do or not). On the 8th anniversary of your initial purchase, you'll owe 41% tax on the profits up to this point (10k in your example). Then in future years, if you continue to hold the ETF, you'll get taxed again in year 16, year 24, etc (but you won't be liable to pay tax on amounts you were taxed on previously. Bluewater Financial have a great example breakdown that I've borrowed below - that should help clear things up!
www.bluewaterfp.ie/investments/calculating-deemed-disposal-on-a-long-term-investment/
- Ste
If an Accumlating EFT adds increased value (dividends) to the EFT and it's exempt from tax. Does this mean that there's no CGT to be paid? Sorry new to this
Hi Ross,
Thanks for the question. Short answer: you will still get taxed regardless of whether it is ACC or DIST.
To clarify, accumulating ETFs aren't exempt from tax, the dividends are just not taxed annually but they will get taxed when you sell. The benefit is that the ETF dividends can grow tax free until the sale or deemed disposal.
And to clarify, it is Exit Tax that is charged on the majority of ETFs (depending on domicilie), not CGT. It is 41% exit tax vs. 33% CGT.
- Cian
@@TheLearningsReport Thank you for the advice. That makes more sense.
Hi guys, not sure you're still active on this but I have a question.
Been investing for a few years and I'm still struggling to understand the deemed disposal rule.
For example, if I buy a share of an ETF every month, do I pay the 41% tax on the month of the 7th year of that stock being purchased (I.e. January 2020 stock tax on January 2027, February 2020 profits in February 2027)? This would have me paying tax on several shares every month after the 7 year mark. Or do I pay 41% tax on all profits every 7 years. I.e. I pay the tax on all gains from January 2020 to January 2027 in one payment?
I've been looking for an answer for years and even serval accountants could not clarify this for me.
Kind regards,
Paul