How ETFs Are Taxed in Ireland - Full Explanation & Comparative Analysis Against Stocks

[@malone_financial]

If you've any questions just let me know in the comments! Let me know, what ETFs are you investing in?

[@Szefartur]

Hello I have a question ! I am a bit confused with my situation . I was born in Poland , I had been in Ireland for 20 years, I have Irish passport . Basically I have dual nationality. Now I have been living in Vietnam for 5 years now. I have shares and crypto on etoro and bit in binance . I have connected Irish bank to my accounts and the bank address is in Ireland which was my old house, I used to rent . My question is “should I pay taxes? If so, how do I do it and to which country ? Looking forward to your response. Thank you in advance.

[@andrewobrien919]

could u recommend a broker to use and an etf to go with? i was think eToro and VOO. thanks

[@malone_financial]

@@andrewobrien919 Hey Andrew, I use DEGIRO for all my investing activity (two review/tutorial videos on the channel). As for ETFs, check out one of my latest video ‘3 Best Index Funds’, that’ll give you guidance as to what I’m doing

[@andrewobrien919]

@@malone_financial thanks, great channel

[@davidev9107]

The tax is very hight 😳 41%

[@edsonrocks]

This video should be in the Revenue home page. Excellent content, thank you.

[@malone_financial]

Glad you found it useful!

[@robertmullan9130]

Great clarity in your presentation - showing the different scenarios was a great idea. Still, the law will have to change at some point, either lowering the interest rate or ending the dreaded DD.

[@remco2777]

Very comprehensive explanation - thank you!

[@malone_financial]

No problem

[@patmulligan7157]

Thanks for the video, I think I will stick too stocks, the whole 8 year effort with the ETF's and 41% is a bit too much.

[@DailyDividends]

Great stuff man I hadn't a breeze about it

[@malone_financial]

Cheers

[@billytremoloband7456]

New sub here, haven’t ever looked into investing until this year! Loving the videos

[@malone_financial]

Cheers Billy, if you’ve any questions on your journey just give me a shout, always happy to help out

[@billytremoloband7456]

Malone Financial Ah thanks a mill. I’d better get a few bobs together first to actually have something to invest 🤦‍♂️

[@frankdoyle3493]

Great video, how are monthly contributions calculated. From the first date of original purchase of an etf or 8 years after each contribution made? An excel example would explain a lot... thanks

[@BLUEMAN9284]

This is an excellent explanation of ETF in Irish context. Apart from complicated Tax the lack of CGT allowance is a huge disadvantage of ETF.

[@malone_financial]

Cheers!

[@stephenj7275]

Deemed disposal is such bs, if you cannot afford the exit tax on deemed disposal after 8/16/24 years and have to sell some of your holding to cover it, the affect is huge on your compounded figure come final sale. Revenue will make less money in this situation but just get it sooner

[@malone_financial]

Definitely a frustration for sure - something that can be solved with good cash management and planning however!

[@podge7356]

Great video man! Nice one :)

[@malone_financial]

Cheers Podge!

[@BorysKhodan]

Great video, thanks!

[@malone_financial]

No problem, thanks for watching 🙏

[@dt3493]

Can you please explain the 15% withholding tax sunk cost? Also, it would great to hear your thoughts / a video on investing in an accumuating ETF and pension in Ireland. Should you be topping up your pension to the full tax relief amount, not incurring the exit tax but also maybe not going to match the market and paying higher fund fees. Good insight for the Irish investor I think! 1% difference long term can be very material

[@malone_financial]

Sure. When a dividend is paid to the fund, the paying company withholds tax at a rate of 15%. This is a real expense to the fund and can’t be reclaimed, therefore it is a sunk cost. Where as if the dividend was paid directly to investors they could claim it as a credit against their final tax liability As for the second point, my perspective is that it’s always best to maximise your pension contributions within your allowable threshold where possible.

[@seamusmurphy9415]

Very good video thank you . People should be encouraged into saving for their future Ie College Funds pensions , hopefully Common sense would prevail and the government introduce some sort of an isa scheme Which is of course tax-free like the uk and the Roth ira in America 🇺🇸☘️❤️

[@seamusmurphy9415]

This is in relation to the deemd disposal 41% it’s crazy .

[@mnopyzstrife188]

Hi there! Gem of a channel, thanks a lot for the info! Hopefully a future Irish investor here. There's something I don't quite understand about the 1270 euro CGT tax allowance. 1- How would it would play out in the context of having a US-domiciled ETF? Would you take it and reinvest it? 2- Wouldn't the gross roll-up regime already be reinvesting anyways free of tax? Why would not having this allowance in an Irish domiciled ETF be a disadvantage? Would greatly appreciate the clarification! :)

[@malone_financial]

Hey! Glad to hear you’re enjoying the videos, thanks a mill for the support. To answer your question, the CGT allowance doesn’t apply to ETFs, they are on two different tax rules. You can effectively ignore the CGT annual allowance for ETF purposes

[@mnopyzstrife188]

@@malone_financial ​ @Malone Financial Thank you! I see, is this even for US domiciled - since those count as stocks according to what you mentioned in the vid? (about 8:00) Also, how can I check whether a US domiciled fund has a KIID?

[@malone_financial]

@@mnopyzstrife188 It would apply to US domiciled funds yes, but for all intents and purposes this can be ignored (given that you’re going to be investing into a non-US domiciled fund) because of PRIIPS. Most US domiciled funds won’t have a KID, you’re better off saving yourself time and investing in a non-US fund.

[@mnopyzstrife188]

@@malone_financial Ah I see, thank you! The reason why I'm thinking of US domiciled, is because I'm trying to find an ETF which is in compliance with Islamic finance (basically non-prohibited and ethical investing); US has quite a few options, but I can't really find much in the EU unfortunately

[@Lily-ph4wm]

Thanks for the video, very informative. I'm currently living in Ireland but If I move to abroad in few years time, should I still pay for deemed disposal ETF tax until the point I lived in Ireland?

[@AlexMarzoMontoro]

I have this exact same question. What happens if my tax residency changes before the deemed disposal comes into effect?

[@malone_financial]

Hey Lily! This is what I found in Revenue guidance: "Exit tax is not required to be deducted in respect of the following non-resident unit holders provided that the fund is in possession of an appropriate non-resident declaration prior to the chargeable event (sale, deemed disposal etc.) - i) non-resident investors who invest for the first time in an IFSC fund which was in existence as at 31 March 2000, and ii) non-resident investors who invest in a fund set up on or after 1 April 2000." I believe there is a declaration you can fill in to avoid the charge to exit tax arising upon non-residency however you would need to double check this with an advisor. Refer to Appendix II (xiv) of Part 27-01A-02 (Investment Undertakings) for this declaration.

[@ilnam550]

Excellent video! Thanks for creating. 2 questions please, 1) When paying the 41% tax after 8 years, do you pay the 41% on the entire fund value or is it that you just pay the 41% on the value from 8 years ago e.g year 8 you pay 41% on year 1 total, year 9 you pay 41% on year 2 total etc? 2) on an irish or eu domiciled fund aswell as having to do tax returns on dividends recieved and gains, do you also have to declare each year with revenue the amount of money you have invested? I'm assuming not, in which case if the funds were kept in for e.g. 10 years then i would only have to bother with revenue at the 8 year mark, is that correct?

[@malone_financial]

1. You pay 41% deemed disposal on the gain which has accrued from Year 1 up to the point of deemed disposal. You then receive a tax credit for this deemed disposal tax at the point of ultimate sale 2. I believe for EU domiciled ETFs you need to make Revenue aware of the fact that you've purchased one. I don't believe you need to update for the exact monetary value each year

[@valdisandersons129]

Thanks for the video, much appreciated. The Deemed Disposal rule is what's keeping me away from ETFs at the moment. In the ETF scenario, did you cover the DD tax from selling part of the fund (would eat into compounding) or did you assume separate funds available for that? I.e. investing 400eur a month over 8 years with 8-9% returns will be close to 12k 'profit' of what 5k is payable in tax. If I sell part of the fund (~52k) to finance that then the compounding gets reduced next to nothing as the sale is taxable at 41% (9k of fund needed to sell to cover the 5k tax). To avoid that one would have to finance it from somewhere else or in the next 8 year period one would 'lose' about 17k from the final return (130k vs 147k). The tax credit doesn't offset that compounding loss. Btw. What index fund yields 4% dividends? The S&P 500 is like 1.3% now. Also, how is tax on the 8 year cycle treated if that year falls into a market crash year (i.e. no gains) and on year 9 has regained everything, do I get a tax free year then?

[@malone_financial]

Hey Valdis, cheers for the comment and thanks for checking out the video. 1. The examples assume separate cash available to cover DD tax over the life of the investment 2. The yield figures used were for illustrative purposes and didn't represent any fund in particular. You certainly can invest in high yield ETFs however that's not the point of the examples. The results will of course vary depending on how much of the investment returns come from income and gains respectively. 3. The best way to think of DD cycles is on a rolling basis from Year 8 onwards. Example, all investments you make in Year 2 will be DD taxable in Year 9 (as in the 9th year from when you first started investing). So in your scenario, there would be no DD tax in Year 8 on the investments you made in Year 1 (assuming the market crashes and there's no gains), but then in Year 9 the gains on the investments made in Year 2 would be subject to DD tax (assuming the market has recovered enough for there to be gains).

[@tomaszjaworski3859]

Thanks for info.

[@malone_financial]

No problem Tomasz

[@adriant900]

Great video. Keep up the good work. One question, your assumption on the ETF that the tax is paid from cash and not part disposal of the asset. It maybe more realistic to assume that there is a part disposal to pay the tax because if paid from cash there is the opportunity cost that is the same as if it was paid from part disposal. I would imagine its impact on compounding would have a large impact on the final result. What do you think?

[@malone_financial]

Cheers Adrian. It’s tricky to cover every possible scenario regarding part disposals and alternative tax payment methods. I just assumed cash payment for the sake of simplicity. However I think it’s a fair assumption as most people won’t invest 100% of their cash without having reserves. I do take your point though for later years where the deemed disposal tax might be quite large depending on the invested amount. Any amount taken from the investment to cover tax will impart compounding.

[@giovannimessina7124]

Fantastic video, really clear, and provide lots of context and information. I ve watched and studied ETF tax for a while, and so far this is the video that has given me more value. The last point to clarify for me would be: could you make a practical example of what tax amount needs to be paid? Say, buy an etf at year 0 and sell it at year 8/10/17. Before the first deemed disposal event, it seems straightforward, but after is not that clear

[@richardjudge3329]

Hi, really useful video, thanks a lot! I do have a question about a particular ETF and how to file the income tax due on dividends received. The ETF is: Vanguard FTSE All-World UCITS ETF - This is an Irish Domiciled, Distributing ETF. I'm wondering would dividends be filed under the 'Dividends from Irish Resident Companies' or the 'Untaxed Income Arising in the State' section of the revenue.ie website? My understanding is that ETFs are treated differently than normal stocks but I don't see a section specifically for ETFs. Also, I'm wondering if the amount received is what needs to be declared here or if there is some witholding tax which needs to be declared too. Many thanks for the great content!

[@sharadpatel8387]

Great vid again pal! What if at the end of the year, I decided to rebalance my portfolio, let's say my bond etf was doing well and I wanted to sell part of that etf to rebalance my s&p500 etf due to a crash, I'm assuming I would have to pay tax on any gains I made on the bond etf right? Where does the deemed disposal sit in terms of rebalancing each year?

[@malone_financial]

If you sell at a gain you pay tax at 41%

[@funpeopleful]

Hi Dan! Have a quick query, so let's say I have accumulating ETFs, I decide to keep for long term but at the 8 year, revenue will charge me the 41% anyway? How that's work exactly, I understand tax are charged when money is paid out to your bank account

[@pereira025]

Thanks for this, very comprehensive! Is the deemed disposal rule applicable to non-domiciled residents in Ireland? Also, have things changed since you posted the video wrt Irish investors being able to acquire US ETFs?

[@viviane99]

Great videos 👏🏼👏🏼👏🏼

[@yasseryounes8970]

Thanks Malone, do I need to report my ETFs while I am not selling them in my annual tax report ? If yes under which category please ?

[@redhead13001]

Hi Dan, 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

[@maestro19965uy]

Hi Paul, did you ever get clarification on this?

[@carlosf.2927]

I hope you can help me. What's about non-dom irish resident? what type of ETF is better? what are the steps to follow to avoid paying taxes as non-dom? I think one of the most important point is not buy irish domiciled ETFs.

[@johnoshea2789]

Hi dan, i'm liking your videos so I subscribed, I've a few questions if you don't mind. 1 do yo have to tell revenue that you have stocks if they are unrealised? 2 can you just leave them there for years (10+) and then pay the tax on realising the gains? 3 is there anyway of not paying tax on them??

[@malone_financial]

Hi John, for company stocks you’ve no obligation to declare unrealised gains to revenue. You’ll only need to pay capital gains tax (CGT) when the stocks are sold and the gains are realised. The best way to not pay tax is to not sell for as long as possible but you can utilise loss relief if you’ve losses on other investments to reduce the taxable gain. Outside of that, utilising your pension is the best way to avoid tax on investment gains

[@BrianBullmanInvesting]

Well said man!! :)

[@malone_financial]

Cheers Brian!

[@digbar]

Hi Dan. Thanks for this video. Great source of information. I assume the tax credit from the deemed disposal rule can be used across the board on the following FY tax return? Is that correct to say? Also, a good suggestion of video would be a hands-on how to manage ETFs with the deemed disposal rule? How can I manage the 8 years for each one purchased, taken someone buys those every month? Create an excel? Is there a tool to help with that? Do any of the trading platforms already facilitate that? Etc.

[@malone_financial]

Hi Diego, your deemed disposal credit for tax paid can only be used against any tax arising from the subsequent sale of the ETF. It is solely used for the purposes of working out your net tax position (i.e. refund or balancing payment)

[@PaulColclough47]

@@malone_financial Hi Dan. I'm having a little trouble parsing this. Is the following correct? Let's say after your 8 year period you had a profit of €10k. You get charged €4,100 in tax. Then 5 years later it's been a decent couple of years and you've made another €10k profit. You're liable for €4,100 tax again but that gets cancelled out by the tax credit you gained 5 years earlier. Is that correct? It seems too good to be true given how much I've heard people complain about deemed disposal. Thanks.

[@oo7sam]

bro One suggestion, make videos like graphical representation with real-life examples please other that that all good

[@malone_financial]

Appreciate the feedback!

[@paulmurphy8678]

Thanks for the video. If you adjusted the 6 and 4% (capital appreciation, dividends) to something like 8 and 2, would this have had a different outcome in your 3 case scenario. I would assume dividends paid out would be a lot less than 4% annually. I stand to be corrected though.

[@malone_financial]

An 8%/2% split would produce the following results - Scenario 1 RoI = 317%, Scenario 2 RoI = 323%, Scenario 3 RoI 372%. So the stock investment would outperform in each case (albeit by small margins for the higher rate tax payer). But again, this is assuming your stock picks produce a rate of return equal to the market over 20 years. The primary reason for the differences in RoI is because of a higher % of capital appreciation which is untaxed until year 20 for Scenario 2 and 3

[@brendanodonohue1278]

Great video, Dan, new to your channel and appreciated eh great advice! Question: If i change tax domicile over the first 8 years (from IE to another EU country let's say), will i still be liable for the exit tax on year 8?

[@malone_financial]

Hey Brendan! Changing your domicile isn't as easy as just moving country. You need to prove that you have zero intentions of moving back to Ireland in your lifetime at the point of departure (a hard feat to accomplish in a court of law seemingly). What you're talking about is likely your tax residence. If you become non-ordinarily tax resident (3 consecutive years of non-residence) then you may avoid the DD charge. I'm not 100% sure in practise, but it would be a lot of work in any case.

[@brendanodonohue1278]

@@malone_financial great stuff, thanks Dan!

[@Amy-uc1gd]

Hi Malone, thanks for the great info! I’m in Ireland myself and wanting to start investing in an ETF. However I keep putting it off because of the fear of having to figure out what tax I owe after 8 years. Do you have any tips on how to work this out, or what info should be recorded for the benefit of an accountant I might hire in the future to work it out for me? Thanks so much!

[@malone_financial]

Hey Amy! Thanks for the question. The beauty of online brokerages these days is that they provide you with very concise annual reports which shows your buying activity and positions held. Any tax specialist would be able to work out your liability through these reports. I know it seems daunting but its no reason to put off investing!

[@Amy-uc1gd]

@@malone_financial amazing, thanks so much for your reply :)

[@oliverquinlan1819]

I bought back in 1984 lived in it for 3 years left the country and still own it today. If I sell do I pay capital gain tax?

[@Bianca-eb4fe]

Hi Malone, I've already invested in SXR8. What do you think about it? Is CSPX a better option? And why? Thank you!

[@ajvaack]

Hey Malone, So if you start and continue to purchase ETFS on a monthly basis, and once it reaches the 8yr time frame,will that mean that every month thereafter you'll be subject to deemed disposal unless you sell ? Great videos!

[@malone_financial]

Correct, a deemed disposal liability will arise every year after the first 8 year anniversary. Be sure to check out the latest ETF video on the channel which is going up today (Feb 15th)

[@pabloa8961]

Excellent content!

[@malone_financial]

Cheers Pablo 🙏

[@bluegtturbo]

The tax on Irish etf is a bloody joke 40 percent tax on etfs after 8 years even if you don't sell it! And you can't offset any losses against other investments. I just sold my tracker etf for this reason.

[@Zigzag-k]

why not create a pie in trading 212 where we can mirror ETF and enjoy capital gain tax 31% ? and no deemed disposal ?

[@malone_financial]

One reason would be the FX fee every single time you rebalance your portfolio. Another reason would be the fact that you'd pay marginal rate taxes on dividends whereas an ETF is exempt from taxes on investment income

[@oliverquinlan1819]

I bought a property back in 1984

[@Edward_Joseph_]

I don't understand how the stock underperformed the ETF when they both had the same returns and the ETF was subject to exit tax at 41% and gross roll up, while the stock was only subject to CGT at 33%? For the higher earner taxpayer

[@malone_financial]

You’re forgetting that the dividends from the stock investment are taxed at 52% each time they’re paid. Whereas the dividends from the ETF accumulate within the fund tax free for 8 years.

[@Edward_Joseph_]

@@malone_financial Thanks Malone, I get it now

[@Edward_Joseph_]

@@malone_financial PS, unrelatedly, would love to see a video on private pensions in Ireland

[@madzyadzy07]

What a video! Have you thought about comparing holding US ETFs vs UCITS ETFs? While they’re hard to get your hands on, it’s not impossible. Maybe a comparison of accumulating ETF with DD taxes modelled in vs a US ETF with tax on dividends factored in with equal growth of both.

[@malone_financial]

Cheers Adam. The model in this video replicates the scenario you've proposed - because remember, US domiciled ETFs are subject to CGT/Income Tax at marginal rates (therefore being the same treatment as regular stock investments for Irish investors). Unless I'm misinterpreting what you're proposing (feel free to clarify).

[@madzyadzy07]

@@malone_financial you’re right! My bad. How did you model this btw? I’ve been wanting to something similar using sheets

[@malone_financial]

@@madzyadzy07 There's a good bit behind the model itself (too much to explain in a comment) - to make an accurate model you need to account for things like i) how tax will be paid ii) withholding tax at the fund level (everybody misses this one) iii) the tax credits owed to the investor - once you understand those concepts, then its just about making assumptions on investment return and accurately calculating the net result!

[@madzyadzy07]

@@malone_financial one thing I was thinking of was the CGT allowance €1270 per year. If (in theory) you could sell and rebuy (after bed & breakfast period) with less than a 1% deviation in price then would single stock or US domicile ETF outperform a UCITS ETF for higher rate tax payers I wonder ?🧐 for the sake of simplicity it might even be worth assuming no price difference.

[@chluain1]

can you invest in the vanguard s&p500 through a pension fund?

[@malone_financial]

Have a look into small self-administered pension schemes (SSAPS). It can be achieved via these schemes. Alternatively some providers offer non-standard PRSAs which can allow for it

[@zano8738]

Great video. My pension with Irish life gives me the option to invest in a Indexed World Equity fund. Is this similar to the S & P500 but with International stocks as well? Would this be a better option to avoid the tax issues?

[@malone_financial]

Thanks Nicole! A world equity fund is just that, it consists of the largest companies in the world weighted by market capitalisation. You’ll find a lot of the top weighted companies will be S&P 500 member companies

[@dt3493]

Nice video. So with the ETF i am getting an IRR of around 7% but does this assume you pay the tax due initially from not selling and using other funds to let it compound? If this is the case and the amounts due on tax were getting to become a decent size, is that reasonable to assume? Also if its a 7% IRR would it not nearly make more sense holding portfolio of stocks as we dont need to "beat the market" with this IRR due to how we are being taxed in Ireland on these ETFs?

[@malone_financial]

Thanks for watching and cheers for the comment, love the thought process! 1. Yes the model assumes that the tax due is paid from external funds to preserve the value of the investment. Your ability to meet deemed disposal tax payments of course depends on how much cash flow you have coming in. For the purposes of this video I assumed the investor had sufficient cash flow which I think is reasonable for the average investor 2. Yes there would be a case for holding stocks. However this would assume that you’re successful in picking stocks that achieve such a return. 82% of ‘professionals’ underperform the market. Plus ETFs have the additional benefit of tax free growth on both capital gains and income within the fund.

[@abelbermudez6518]

As a non domicilied tax resident in Ireland, I guess US ETFs perform as stock to me and I don't have to pay taxes on them, are EU ETFs tax exempt?

[@malone_financial]

If you're Irish tax resident then you're liable to ETF taxes

[@carlosf.2927]

@@malone_financial despite the fact that he is "non-dom"?

[@gerfitz101]

Good analysis. Can you provide an update or comment on the recent notification by Revenue bringing US, Canadian, and all OECD domiciled ETFs into the roll up regime effective Jan 1, 2022. Thanks.

[@malone_financial]

I’ll have a look into this Ger and if it’s warrants an updated video I’ll do so! I’d imagine this will make little difference as it’s difficult for us Irish folk to invest in said products due to the lack of compliance with PRIIPS

[@gerfitz101]

Yea, I agree. However, it might impact those who already had the investments from before and may conclude the previous tax treatment is unchanged. See what you think anyway.

[@oo7sam]

Can you please make video on EIIS and it's fund performance

[@malone_financial]

Sure, will add it to the list for the future

[@Szefartur]

Hello I have a question ! I am a bit confused with my situation . I was born in Poland , I had been in Ireland for 20 years, I have Irish passport . Basically I have dual nationality. Now I have been living in Vietnam for 5 years now. I have shares and crypto on etoro and bit in binance . I have connected Irish bank to my accounts and the bank address is in Ireland which was my old house, I used to rent . My question is “should I pay taxes? If so, how do I do it and to which country ? Looking forward to your response. Thank you in advance.

[@scrim505]

hey, so if im using VUSA Dist, even if the dividends are on my brokerage account i still have to pay 41% is there no €1200 allowance?

[@PereiraShane]

Hi Dan, that's a brilliant video on ETF's, I am thinking of investing in ETF's but just confused about the number of ticker symbols for the S&P500 etfs, I will be using trading212 platform for investing. VOO cannot be used on Trading212 and VUSA UK Vanguard portfolio I can invest in that one but the FX fees will take out any investments opportunities when dealing with EUR to Sterling rate. Is there a Euro accumulating ETF for S&P500 for investing ? Which one do you use for ETF's

[@paullhenriquee]

Hello, I just finished my emergency found this month and now ill start to invest. I've found out the world of ETFs, but its a bit confusing how is the taxation here in Ireland (completely high btw). I'm trying to figure out which one is better in my occasion. I'm a Brazilian living in Ireland and i would like to know if its better I hold an non eu domiciled that I'll pay like stocks 33% (But I don't know if ill have to pay some taxes in the original country) or if its better that I hold an eu domiciled and pay 41% and also have the deemed disposal. As you can see, im really lost right now, hope you can understand my doubt, and hope to hear from you soon. Thank you very much!!

[@malone_financial]

Hi Paulo, cheers for the comment! I can’t advise you which route is best as it’s a personal decision and I’m unsure of Brazilian tax legislation. I suppose it will come down to how long you see yourself living in Ireland and what your investment goals are

[@cuiyuli5693]

Hi Malone, I've been learning how to invest in ETFs in Ireland as a Chinese. I‘m not sure if I need to pay taxes for my ETFs in here after 8 years, cause I will not be living in Ireland by that time. If I go back to China in the future, do I still need to pay tax for my dividends and gains in Ireland?

[@malone_financial]

Hey! You will lose your tax residency in Ireland when you move back to China after a certain period of time. So far as I'm aware this will remove the requirement to pay deemed disposal tax after 8 years!

[@prabagaran.s1285]

Non-ordinarily resident and domiciled in Ireland You might be non-resident, non-ordinarily resident and domiciled in Ireland for a tax year. In this case you will pay Irish tax on: your Irish income and income from a trade, profession or employment performed in Ireland any gains you make in Ireland. www.revenue.ie/en/jobs-and-pensions/tax-residence/tax-and-tax-credits-for-non-residents.aspx

[@cuiyuli5693]

@@malone_financial Hi, thanks for your reply. Good to know I probably could avoid this high tax system. But also, do I need to pay tax to Ireland when I sell them out either within or over 8 years after I move back to China?

[@cuiyuli5693]

@@prabagaran.s1285 which means I only need to pay ETF taxes during the years I'm living in Ireland？ And once I move back to China I'll become not domiciled, hence I don't need to pay taxes here, even if I'm still holding them by that time？

[@malone_financial]

​@@cuiyuli5693 The revenue guidance only discusses ETFs held by Irish resident investors. I can't speak for how the ETFs will be taxed from a Chinese perspective. Revenue have updated guidance on ETFs coming soon so hopefully that will answer your question!

[@mxdduc1]

Hi! Can you confirm if Ireland does not withhold or levy any taxes on capital gains from, or dividends paid by, Ireland domiciled UCITS ETFs for non-residents of Ireland? I understand the exit tax you are talking about is only for Irish resident but not for foreigners?

[@jerrywarren9304]

Hi Dan. How do we find US domiciled ETF’s.

[@malone_financial]

You won't need to, you can't invest in them anyway!

[@roc8193]

I'm still trying to get my head round deemed disposal. So if at the start I invest 100,000 and after 8 yrs Its worth 110,000. If the taxman takes 41% I'm left with 105,900. My question is... At the start of my second 8 yrs am I only taxed on gains over 105,900 or do they go back to the original 100,000?

[@malone_financial]

The ‘deemed disposal’ gain is always taxed as the total original gains on investment (not from year 8 onwards as you elude to). BUT you get a tax credit for any deemed disposal tax you’ve previously paid which ensures that you’re not getting taxed on the same gains twice

[@stephenj7275]

If a distributing etf was purchased in 2021, and a dividend paid this year also, am I correct in saying that the purchase of the etf and the dividend don't have to be declared until form 11 in October 2022?

[@malone_financial]

I would agree with that interpretation of the legislation yes. I would also be of the opinion that the ETF only has to be declared if it’s non-Irish domiciled in accordance with Revenue guidance but again that’s open to interpretation.

[@stephenj7275]

@@malone_financial Ah okay wasn't aware non Irish Dom ETFs may not have to be declared, had not done enough reading yet obviously, many thanks for your help!

[@nialld2638]

Hi Hope all is well. Is it better to max out your pension and matched contributions from your employer before investing more in etfs? I can get another 2% per month from my employer if I go 2% more myself bringing me to 17% monthly and I am 31 so still under the 20% threshold for tax relief. I suppose it’s about getting as much as you can in tax free before going any further with etfs etc. also with deemed disposal is it done on a fifo basis ?

[@malone_financial]

Hi Niall, thanks for the question. In my opinion yes, you should be maxing out your 20% threshold as a priority. After that point, if you still have money left over to invest, then allocate to whatever you see fit. Deemed disposal is done on FIFO yes

[@nialld2638]

@@malone_financial Thanks much appreciated 😀

[@malone_financial]

@@nialld2638 no problem

[@rkvid3692]

I received dividend from US based companies Lowes and Exxonmobil. There was automatic dividend tax paid on them. Do I pay any tax in Ireland again? I also received dividend from UCITS EQQQ etf, but no tax was deducted. Do I pay 41% tax on this?

[@malone_financial]

Hey! Thanks for the question. Here’s my thoughts based on the information you provided 1. US Dividends - the dividend tax you noted is what’s known as ‘dividend withholding tax’ and for US dividends should amount to 15%. US companies deduct this from the dividend paid to you in accordance with their requirements under US tax law. This is NOT the tax you owe under Irish tax law. Instead, you’ll be required to pay income tax, USC and PRSI on the gross value of the US dividend (the dividend BEFORE withholding tax). You will then receive a tax credit for the US withholding tax suffered against your Irish tax liability 2. No tax was deducted on the dividend paid to you by the fund because the fund is exempt from income tax and capital gains tax. You are required to pay 41% tax on the dividend.

[@rkvid3692]

@@malone_financial Thank you for the reply. I ended up closing the EQQQ position. So I will pay both 41% dividend tax and 41% exit tax on profit right?

[@malone_financial]

@@rkvid3692 Correct

[@rutaemilija8653]

So the loophole seems to be that non EU / Irish ETF that allows to be traded by EU folks. SURELY one has to exist for something like s&p500

[@malone_financial]

There's an Irish/EU domiciled ETF for nearly every major equivalent US ETF. It's only when you start looking at very specific US domiciled funds that you'll struggle to find equivalents here in Ireland/EU

[@MarieB553]

Do some brokerages deduct the tax from dividends for you? I currently use Degiro and dont know if they tax my dividend for me.

[@MarieB553]

Fantastic video btw. Great to have someone lay it out there in plain English. I had no idea ETFs were taxed differently to shares. Its so hard to get information on Irish investing and taxes, i've spent over a year trying to learn about investing and I never came across this until someone told me last week.

[@malone_financial]

Hey Marie! You'll need to account for the tax on the dividends yourself as part of your income tax return. DEGIRO will not deduct this on your behalf

[@malone_financial]

@@MarieB553 Thanks for the kind words, glad to hear you found it valuable!

[@oisinbowles]

One thing Im trying to understand is that if your investment is taxed every 8 years Let's say I invest 5K a year every year, (lets just say its acc. and I am holding it for 20 years) in 8 years time I guess I have to pay 41% on any gains on the first 5K and then after that Im paying 41% tax every year on each of the 5Ks I invested for each subsequent year? If I wanted to invest a bit every month would they just add up everything you invested in in the year and add all that together and then pay 41% on any gains there? also if your investment goes down after you really sell it, how do you claim that tax back?

[@malone_financial]

Hey Oisin! Q: "in 8 years time I guess I have to pay 41% on any gains on the first 5K and then after that Im paying 41% tax every year on each of the 5Ks I invested for each subsequent year?" A: Spot on - the deemed disposal is levied on the 8th anniversary of EACH investment into an ETF. As you correctly pointed out, if you have multiple deemed disposal liabilities arising in one tax year on different ETF investments, you could account for them at once in your tax return Q: "also if your investment goes down after you really sell it, how do you claim that tax back?" A: This would be claimed back as part of your tax returns

[@luislanga]

Is this only for irish tax residents or everyone?

[@carrie20074]

I have an ISA with a Vanguard Global fund invest in the UK. If I return to Ireland to live as an irish citizen after working in the UK abroad for years how will this be taxed in Ireland.

[@malone_financial]

Provided you become Irish tax resident, it will be taxable under the 41% taxation regime (41% on gains and income as well as the deemed disposal charge)

[@carrie20074]

@@malone_financial thanks 🙂 so if your ISA is worth 30k you will be taxed 41% of that leaving you with 17700? is that correct

[@malone_financial]

@@carrie20074 No, why would you be taxed on the full amount (that would be crazy!). You're only taxed on the gain (10k) i.e. €4,100 tax, leaving you with €25,900 Edit: You've left two separate comments regarding the same matter on two videos. So I took the gain of 10k from the other comment. In future, one comment is sufficient for a question!

[@carrie20074]

@@malone_financial You never know with Ireland (Crazy country when it comes to taxes:-) Great news this is not bad then if your only taxed on the gain. Its still worth my while investing in an ISA Sorry the page kept jumping from video to video when i was trying to comment and I didn't realise there were 2 comments. Thanks so much for the replies 🙂

[@malone_financial]

@@carrie20074 No problem, thanks for the question

[@prabagaran.s1285]

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 ?

[@funzeye]

What about UK domiciled, does that still fall under EU rules since Brexit!? thanks.

[@malone_financial]

I believe so yea

[@acfran8586]

hello Malone!

[@elynchfitnut]

Does this count for something like money cube?

[@malone_financial]

Hey Evan, I'm not currently a money cube user so you'd have to explain the details for me to comment - cheers!

[@tysontn]

I started investing in vanguard ftse all world since few months.. every month I buy 1 units....do I still have to show this at the end of the year...and would it be taxed..if I don't sell this and keep investing the dividends in same fund

[@malone_financial]

Depends on a few factors. First of all is it an 'accumulating' or 'distributing' ETF? If you're being paid the dividends directly into your brokerage account then you'll need to pay 41% tax on them as part of your tax return (even if you're reinvesting them). If it's an accumulating ETF then the dividends should be automatically reinvested within the fund and no tax will be due. In terms of not selling units, the deemed disposal rules will apply every 8 years as I mentioned in the video (this is 8 years from EACH investment in the ETF).

[@dylanobyrne8534]

Hey Malone I might’ve misunderstood this but from what I can gather from the video you said that the tax that revenue take every 8 years as deemed disposal can be taken away from the tax due at the time you eventually decide to sell?

[@malone_financial]

Correct! You get a tax credit for the deemed disposal tax you paid throughout the life of your ETF investment against any gains realized on actual disposal

[@dylanobyrne8534]

@@malone_financial So technically you never really pay deemed disposal then?

[@malone_financial]

@@dylanobyrne8534 That's one way of looking at it - the net tax on the investment is the same either way. It's just Revenue's way of collecting tax income over the life of your investment, as opposed to having to wait until you sell (which could be 20, 30 or 40 years in the future). You also get a tax refund of your deemed disposal tax, if when you sell your investment, you end up selling at a loss (because you can't be taxed on an investment where you have made a net loss)

[@dylanobyrne8534]

@@malone_financial So at the end of the day you’re actually just paying the 41% exit tax just over time rather than all at once?

[@malone_financial]

@@dylanobyrne8534 Correct - and the reason for this is because Revenue don't want to have to wait decades to collect tax

[@louisacarroll1062]

Hi Dan, this is very informative content. I have a question, that I need to clarify the answer to. If I was to invest in one of these funds and never withdraw from the fund. So after 8 years, the deemed disposal tax is calculated and paid and then after another 8 years more deemed disposal tax in calculated an paid. Then I die and leave these Funds in my will to my child. Can my child claim a credit for all the deemed disposal tax of their inheritance tax (if inheritance tax is calculated as due)? Thanks again for your help and great videos.

[@malone_financial]

Hey Louisa, correct. As per s747E(5) TCA 97, income tax paid under deemed disposal on death is treated as an amount of CGT paid and therefore qualifies for the CGT/CAT offset under s104 CATCA. In other words, a credit will be available

[@louisacarroll1062]

Thank you - you are super fast!

[@louisacarroll1062]

Hi Dan, I Have just discovered, if you own shares in a US corporation and are not a US citizen or US resident, and you die, the IRS will charge Estate tax up to 40% of the entire value of your shares less USD60k. This is even if you leave the shares to your spouse. So was thinking of selling and re-investing in an Irish Domiciled ETF. My understanding is, that if you hold these ETF’s jointly with a spouse, then the surviving unit holder becomes beneficially entitled to all the units and no exit tax is triggered. If you know this to be true - please can you confirm? Very much appreciated. Thanks

[@louisacarroll1062]

Just to clarify - no exit tax is triggered on the death of one of the unit holder.

[@carlosf.2927]

Did you take the last guidance of Revenue into account before uploading this video?

[@malone_financial]

Any guidance that came out after the upload date wasn't accounted for for obvious reasons.

[@carlosf.2927]

@@malone_financial I think they published the guidance at the end of 2021. It is impossible for me to understand that, I would love you publish a video about Taxation of ETFs, I think from now American ETFs pay 41% and DD rule apply for them unless that American ETF is not "similar" to an Irish one. I'm not sure if I misunderstood but they say if Irish tax resident buy an "offshore" ETF they must make a declaration using a form (I understand any ETF outside Ireland, right?) When the declaration must be done? I reckon you are the most appropriate person to explain it, you know a lot of Irish low and ETFs

[@euStiuMaiBine]

make a video about crypto

[@tangoargento24]

I didnt invest and im already stress with all this complicated stuff😂

[@malone_financial]

It's honestly not complicated! Don't let it put you off

[@how-to-live-right]

That all is so sad. Paying taxes each 8 years just eats all your profit. I can’t believe such a stupid thing exists. Do you protest against it in your country? In Ukraine we have to pay 19,5% on capital gain. But no tax reliefs. Income tax is also 19,5% for employees and 5% for self-employed.

[@malone_financial]

It is what it is. There are reasons for the 41% tax. There might be changes in the future that are more favourable to investors! 🙏

[@outlierstudio9849]

I'm sorry but the ETF calculations are totally way off, they're much worse than presented here! You've made the common mistake of assuming you can pay off the deemed disposal from other income, rather than selling the fund to do it. This is simply not feasible in practice. Most people will have to sell their fund to cover the deemed disposal tax. This is what destroys compounding! With deemed disposal where you actually have to sell your fund every 8 years the 10k returns will be closer to 25k worth at year 20, i.e. 150% return which significantly less than even 262% of the High Rate Tax payer case of CGT+IT. If you really want to allow the ETF tax to be payed from other capital, then to actually make the comparison fair you have to add that exact capital amount to the High Rate Taxpayer and Standard Rate Taxpayer cases on year 8 and 16 to make an actual fair comparison! Why? very simple, the capital to pay the deemed disposal tax had to come from somewhere and that money has permanently left your possession and went to taxman. So you had a magical external capital injection that went to pay off the ETF taxman, fine, but then you have to add the exact same capital injection to the other cases. To exemplify with examples. ETF case: start with 10k. 8 years later value is 20k. Need to pay deemed disposal at 4.1k. You happen to have 4.1k "in your bank account". So your net worth is 20k ETF + 4.1k in bank account. So you pay tax man 4.1k. Now your net worth is just 20k. Another 8 years later grows to 40k. Exit whole investment, pay 8.2k tax. Final net worth is 31.8k now. Total return 125% Stock case (i.e. US domicile ETF): start with 10k. 8 years later value is 20k. You don't need to pay any tax. You happen to have 4.1k "in your bank account". So your net worth is 20k Stock + 4.1k in bank account. Now your net worth is just 24.1k. You go ahead and actually invest that 4.1k into stock and have the whole 24.1k compound! Another 8 years later grows to 48.2k. Exit whole investment, pay 7.95k tax. Final net worth is 40.25k now. Total return 185% Comparing ETF vs stock, 27% more return for stock after 16 years (and that gap just grows wider and wider with time...)

[@ciaranmccormack4434]

Dan I have a question, how does the Irish government tax your investments if you don’t declare them?

[@malone_financial]

It’s your responsibility to declare your gains and income for taxation purposes. It’s an offence to evade tax via non-disclosure. Brokers like DEGIRO provided Revenue with information about your investing activity, so even if you get away with it in the short term, the chickens will eventually come home to roost - they always do. Always declare.

[@phillipfortinbras3896]

Dan where can I find a spreadsheet to show the detail over 16?years ?

[@malone_financial]

The spreadsheet in the video? Unfortunately I've since lost it as it was on an old college Google account that got deactivated. I'll likely do a redo of this video whenever there's a significant change in the tax legislation