The Irish tax treatment of Eletctronically Traded Funds (ETFs) is complex. It depends on two factors, the Funds’
a) Domicile
b) Structure
There are three possible treatments:
1. Normal Income Tax/CGT treatment
Where this applies:
(i) Dividends are taxed at marginal rates of Income Tax/PRSI/Universal Social Charge
(ii) Gains are taxed at CGT rate of 33%
(iii) Losses on other disposals including similar ETFs may offset these gains
2. Offshore Fund treatment
This depends on the fund structure and only where the fund is domiciled in an EU/EEA/OECD State with which Ireland has a Double Tax Agreement. Where this applies:
(i) Dividends and gains are taxed at a flat rate of 41%
(ii) PRSI and USC do not apply to dividends
(iii) No loss relief for losses on other disposals including similar ETFs
(iv) If the ETF is held for eight years any gain in value is taxed at 41% even if there is no disposal.
(v) For non-domiciled investors, the remittance basis of taxation does not apply to gains. It does apply to dividends.
(vi) There is also a 41% charge at date of death on any uplift in market value.
3. Funds domiciled in non-Double Tax Agreement (DTA) countries
Where funds are located in such jurisdictions e.g. tax havens:
(i) Marginal rates of Income Tax/PRSI and USC arise on both dividends and gains
(ii) No loss relief for other disposals including on similar ETFs
(iii) Remittance basis applies to gains
Bitcoin spot ETF
We have reviewed the prospectuses of some of the recent spot Bitcoin offerings, notably from Blackrock and Franklin Templeton
These are US domiciled i.e. in a DTA country.
Large tranches of units known as "creation units" or "creation baskets" are sold to large investors. Units are not sold directly to the public.
The larger investors trade the units on secondary markets. Public investors can buy and sell on those markets but not directly with the fund.
The unit price may be at a premium or discount to the net asset value of the fund.
Under Irish legislation this means the:
1. Gains are taxed at CGT rate 33%
2. Loss Relief is available
3. There is no 8-year tax on deemed gains
Jacobi Fund
This is domiciled in Guernsey, Channel Islands i.e. a non-DTA location.
Therefore, both dividends and gains are subject to marginal rates of Income Tax/PRSI/USC
No loss relief is available against gains.
For more information please check out our cryptocurrency taxation services or contact us.