4 ms·

Ireland taxes income and capital gains very heavily, and has some truly obscene structures like deemed disposal (taking 41% of your _unrealized_ gains in ETF's)

Ireland taxes income and capital gains very heavily, and has some truly obscene structures like deemed disposal (taking 41% of your _unrealized_ gains in ETF's). I remember how much it stung handing over 52% of my options to the government so they could waste it on being stupid and incompetent. They even have a history of going after people's private retirement savings after the fact - https://www.oireachtas.ie/en/debates/question/2024-02-22/119/ https://www.oireachtas.ie/en/debates/question/2024-02-22/119... - and I have ZERO confidence they won't simply steal people's retirement savings when convenient. How else are they going to bail out the farmers destroyed by climate change? (See the IFA's recent complaints about the "weather" that they caused) """ It was charged on the market value of assets in pension schemes held on 30 June in each year at a rate of 0.6% (2011 to 2013), 0.75% (2014) and 0.15% (2015).""" Not to mention that the companies handling retirement plans, etc. have gotten used to ripping off the whole country for ages because there were no better options. Want to put €100 in to a retirement plan? Well, we're going to take €5, just because, and also 1% of your investment every year, all so we can underperform a simple index fund (thankfully you can't invest in good index funds in Europe because the US ones won't file a KID form). BUT! Your primary residence? You can sell that for 10 million more than you paid for it and not owe a cent in taxes. Too bad for all the chumps who rent and have to invest in the market! I wonder why everyone puts their money in houses? It's an absurd ripoff of a country in every way.

tmnvix 3y ago
A similar story in NZ. 0% tax on capital gains when selling a property. There is a so-called 'brightline test' which means that if you hold a property for less than two years or purchase a property with the intention of selling it for a profit you are expected to pay tax on those gains, but in practice this doesn't happen. Still waiting for the day that the tax department gets serious about questioning people's intent (as it is plain to everyone that yield is abysmal and capital gains is the real game - has been for decades).
- CalRobert 3y ago
  The dialog about this in Ireland is "you can't tax HOUSES that's your gran's HOME you MONSTER!" (gran lives in dun laoghaire, poor thing) but 4 people renting a flat commuting to Dublin from Athlone with a few euro in trading212 or whatever are robber barons who should be taxed to the hilt. Not to mention the health service is appallingly bad and getting anything done takes an eternity. And I failed to mention, it's not just the lack of capital gains tax, it's the lack of meaningful property tax. My own prop taxes were €103 a year (for a dump in Offaly admittedly) but they're close to zero for the most part. So local renters work hard and pay mountains of tax to provide infrastructure (though most of it is crap stroads admittedly) making your own house worth more, so making you richer, and that value is never captured at any point or allowed to help the people who made it possible.
- robocat 3y ago
  Nitpick: Your information on the brightline test seems incorrect. AFAIK: Intention doesn't matter for property - instead the brightline rule matters. Intent matters for NZ shares. Intent matters for foreign shares costing <$50k in total. Intent also doesn't matter for crypto. The bright-line capital gains tax rules look at the purchase and sale dates and there's a bunch of extra conditions so it can't easily be avoided. The bright-line property rule looks at whether the property was acquired: • on or after 27 March 2021 and sold within 5 years for qualifying new builds or within 10 years for all other properties • between 29 March 2018 and 26 March 2021 and sold within 5 years Changes are coming For properties sold on or after 1 July 2024, the bright-line property rule will only apply if the property is sold within 2 years of acquiring it. https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pay/the-brightline-property-rule https://www.ird.govt.nz/property/buying-and-selling/when-you...
nickpp 3y ago
I believe there are European-based low-cost ETFs that closely mirror the US ones. Both from Vanguard (VWCE, VWRA come to mind) and BlackRock (IWDA).
- rsynnott 3y ago
  Yeah, I'm not totally sure what they're complaining about there? Cheapest US S&P500 is 0.03% TER, as far as I can see... And so is the cheapest UTCITS one (SPDR). The ones you've linked are world index trackers, so they're a little more expensive (as you'd expect; they'll typically have to manage about 2000 stocks vs 500, on many markets); they're also accumulating, which again adds a little cost (due to differing US rules on taxation of accumulating funds, accumulating funds are much rarer there, but they're well worth the few bps extra TER in most tax regimes in Europe).
rsynnott 3y ago
The tax burden on the average person in Ireland isn't actually all that high; IIRC you have to be earning over 120k or so before your total tax burden is high for Europe. It's heavily biased towards the top. > truly obscene structures like deemed disposal (taking 41% of your _unrealized_ gains in ETF's). The thing about deemed disposal is, it's essentially a wealth tax, but it's a fairly well-targeted one as they go; generally it only makes sense to invest in ETFs after you've maxed pension contributions, because the tax relief on pension contributions is so generous. Anyone buying ETFs outside of a pension can be assumed to be decently well-off. The trouble with deemed disposal is that it is difficult to administer. It was originally introduced to deter a form of tax avoidance where people would accumulate money, and gains, in gross roll-up funds (ie non-dividend paying accumulating funds) administered by life companies, forever, then use other engineering to pass it onto descendants largely untaxed, thereby allowing very wealthy people to avoid _ever_ having to pay tax on gains. As such, it wasn't designed with ETFs in mind. People do I think _overstress_ the difficulty of administration a bit, but it could certainly be made easier (for instance by forcing brokers to administer it, as some other European countries do for _their_ weirder taxes). One quirk is that even _distributing_ ETFs, both gains and dividends, are taxed under exit tax; in practice, this means that in most circumstances no-one should ever buy a distributing ETF (if you're taxed as if you're in a gross rollup product, might as well take advantage of the gross rollup), but, exit tax being lower than income+usc+prsi, there are edge cases for heavily dividend-oriented ETFs where this treatment is actually beneficial. > Want to put €100 in to a retirement plan? Well, we're going to take €5, just because, and also 1% of your investment every year, all so we can underperform a simple index fund Is this an occupational pension?! If so you should raise it with your employer; those fees are very, very bad in this day and age. If it's a PRSA just move to a proper provider. Most occupational pensions and PRSAs should allow some form of passive index investment. My entire pension is in a fund tracking the MSCI AWCI index; I also have ETFs which track the MSCI World index. They perform similarly, both pretty close to the indexes (which are slightly different; 'World', confusingly, is developed-world only); the fees on the pension provider fund are a little higher than the ETF, though. > BUT! Your primary residence? You can sell that for 10 million more than you paid for it and not owe a cent in taxes. Of course, then you'll have to buy somewhere else to live... I think the early-naughties housing crisis _was_ fuelled by bad tax policy; there were at the time in practice quite a few incentives to invest in buy-to-let property. The current crisis, though, not so much; taxation of buy-to-let has been tightened up a lot, and small landlords are leaving the market. Then, and particularly now, anyone who is investing in property in preference to fully funding a pension invested in equities wants their head examined. I'd argue more or less the same for anyone investing in property _after_ maxing the pension, tbh, but I think there's maybe _some_ room for argument there?

tmnvix 3y ago

A similar story in NZ. 0% tax on capital gains when selling a property. There is a so-called 'brightline test' which means that if you hold a property for less than two years or purchase a property with the intention of selling it for a profit you are expected to pay tax on those gains, but in practice this doesn't happen. Still waiting for the day that the tax department gets serious about questioning people's intent (as it is plain to everyone that yield is abysmal and capital gains is the real game - has been for decades).

CalRobert 3y ago
The dialog about this in Ireland is "you can't tax HOUSES that's your gran's HOME you MONSTER!" (gran lives in dun laoghaire, poor thing) but 4 people renting a flat commuting to Dublin from Athlone with a few euro in trading212 or whatever are robber barons who should be taxed to the hilt. Not to mention the health service is appallingly bad and getting anything done takes an eternity. And I failed to mention, it's not just the lack of capital gains tax, it's the lack of meaningful property tax. My own prop taxes were €103 a year (for a dump in Offaly admittedly) but they're close to zero for the most part. So local renters work hard and pay mountains of tax to provide infrastructure (though most of it is crap stroads admittedly) making your own house worth more, so making you richer, and that value is never captured at any point or allowed to help the people who made it possible.
robocat 3y ago
Nitpick: Your information on the brightline test seems incorrect. AFAIK: Intention doesn't matter for property - instead the brightline rule matters. Intent matters for NZ shares. Intent matters for foreign shares costing <$50k in total. Intent also doesn't matter for crypto. The bright-line capital gains tax rules look at the purchase and sale dates and there's a bunch of extra conditions so it can't easily be avoided. The bright-line property rule looks at whether the property was acquired: • on or after 27 March 2021 and sold within 5 years for qualifying new builds or within 10 years for all other properties • between 29 March 2018 and 26 March 2021 and sold within 5 years Changes are coming For properties sold on or after 1 July 2024, the bright-line property rule will only apply if the property is sold within 2 years of acquiring it. https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pay/the-brightline-property-rule https://www.ird.govt.nz/property/buying-and-selling/when-you...

nickpp 3y ago

I believe there are European-based low-cost ETFs that closely mirror the US ones. Both from Vanguard (VWCE, VWRA come to mind) and BlackRock (IWDA).

rsynnott 3y ago
Yeah, I'm not totally sure what they're complaining about there? Cheapest US S&P500 is 0.03% TER, as far as I can see... And so is the cheapest UTCITS one (SPDR). The ones you've linked are world index trackers, so they're a little more expensive (as you'd expect; they'll typically have to manage about 2000 stocks vs 500, on many markets); they're also accumulating, which again adds a little cost (due to differing US rules on taxation of accumulating funds, accumulating funds are much rarer there, but they're well worth the few bps extra TER in most tax regimes in Europe).

rsynnott 3y ago

The tax burden on the average person in Ireland isn't actually all that high; IIRC you have to be earning over 120k or so before your total tax burden is high for Europe. It's heavily biased towards the top. > truly obscene structures like deemed disposal (taking 41% of your _unrealized_ gains in ETF's). The thing about deemed disposal is, it's essentially a wealth tax, but it's a fairly well-targeted one as they go; generally it only makes sense to invest in ETFs after you've maxed pension contributions, because the tax relief on pension contributions is so generous. Anyone buying ETFs outside of a pension can be assumed to be decently well-off. The trouble with deemed disposal is that it is difficult to administer. It was originally introduced to deter a form of tax avoidance where people would accumulate money, and gains, in gross roll-up funds (ie non-dividend paying accumulating funds) administered by life companies, forever, then use other engineering to pass it onto descendants largely untaxed, thereby allowing very wealthy people to avoid _ever_ having to pay tax on gains. As such, it wasn't designed with ETFs in mind. People do I think _overstress_ the difficulty of administration a bit, but it could certainly be made easier (for instance by forcing brokers to administer it, as some other European countries do for _their_ weirder taxes). One quirk is that even _distributing_ ETFs, both gains and dividends, are taxed under exit tax; in practice, this means that in most circumstances no-one should ever buy a distributing ETF (if you're taxed as if you're in a gross rollup product, might as well take advantage of the gross rollup), but, exit tax being lower than income+usc+prsi, there are edge cases for heavily dividend-oriented ETFs where this treatment is actually beneficial. > Want to put €100 in to a retirement plan? Well, we're going to take €5, just because, and also 1% of your investment every year, all so we can underperform a simple index fund Is this an occupational pension?! If so you should raise it with your employer; those fees are very, very bad in this day and age. If it's a PRSA just move to a proper provider. Most occupational pensions and PRSAs should allow some form of passive index investment. My entire pension is in a fund tracking the MSCI AWCI index; I also have ETFs which track the MSCI World index. They perform similarly, both pretty close to the indexes (which are slightly different; 'World', confusingly, is developed-world only); the fees on the pension provider fund are a little higher than the ETF, though. > BUT! Your primary residence? You can sell that for 10 million more than you paid for it and not owe a cent in taxes. Of course, then you'll have to buy somewhere else to live... I think the early-naughties housing crisis _was_ fuelled by bad tax policy; there were at the time in practice quite a few incentives to invest in buy-to-let property. The current crisis, though, not so much; taxation of buy-to-let has been tightened up a lot, and small landlords are leaving the market. Then, and particularly now, anyone who is investing in property in preference to fully funding a pension invested in equities wants their head examined. I'd argue more or less the same for anyone investing in property _after_ maxing the pension, tbh, but I think there's maybe _some_ room for argument there?