Hi, due to the tax rules with investing in ETF’s from Ireland I am going to need select an ETF with accumulating dividends. Is this possible on Trading 212?
Thanks!
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Yes, T212 offers access to both accumulating and distributing ETFs, and you can always request any that are not yet on the platform.
JustETF.com’s a great resource for checking whether an ETF is accumulating or distributing, and researching many other things, such as ongoing cost, fund domicile etc.
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What rules are you referring to?
For US ETFs, dividends are subject to Income Tax + PRSI + USC (40% + 8% + 4% = 52%) and 33% CGT on overall gains for higher rate earners. For lower rate earners it’s Income Tax + PRSI + USC (20% + 4% + 4% roughly = 28%) and 33% CGT on overall gains.
Be careful, if you’re going for Irish or EU ETFs, for some reason the government make us pay tax on growth every 8 years even if you don’t sell, because they’re bastards.
Then I think with US ETFs they tax too?
It’s insane. If you earn €1000 profit in dividends, the Irish government take 33% immediately, then ~52% of the remainder, leaving you with ~€320 is all. And I’m not even including American tax. You might even up with ~€300 on your €1000 earned?
Hi @obrienciaran, that is all very useful information, thanks.
It does unfortunately sound like we get a very bad deal as investors in Ireland with the tax system.
The rules I was referring to are the deemed disposal rules on ETF’s which look likes it will cause a headache. So far I have only invested in stocks as this appears much cleaner.
I really like what the ETF’s offer, but as I will be investing small amounts each month I was concerned of the impact this will have on calculating my taxes down the road.
I also thought that accumulating dividends would help make the tax process smoother.
Thanks
Out of interest: are there any tax/savings advantages in Ireland over the UK? It does seem a relatively raw deal. I only ask as I’m eligible for citizenship.
Just checking to be clear… is this for an investor domiciled in Ireland only or any investor in EU that holds Irish registered ETFs?
Lets put it this way, I am eligible for citizenship in the UK and I was looking there to set up an ISA. Unfortunately you need to be a resident.
I spoke with an accountant friend and his best recommendation was Post Office bought Prize Bonds (Aka Premium Bonds in the UK).
Everything I explained is for an Irish resident who pays tax in Ireland.
As for the domicile of ETFS: Irish and EU registered ETFs are treated differently to US registered ETFs in that every 8 years the government taxes us on growth whether or not we sell on EU and Irish ETFs but not on US ETFs.
I am no expert but my understanding is that the UK has a much more attractive tax landscape than in Ireland for retail investors.
There are are no ISA options for investing in Ireland and you pay a very high rate of tax immediately. There is just a small annual capital gains allowance.
That’s it unless I’m missing something!
I do like the accumulating dividends also. It’s an unexpected treat seeing them come into your account.
The deemed disposal rule relates to EU and Irish domiciled ETFs only and dictates that the government take tax on gains every 8 years even if you don’t sell. Great for taxing the big boys, not so good for the small investor.
The current tax is a special rate of 41% on al returns (dividends/gains). I read we’ve been restricted from purchasing US domiciled ETFs. I’m not sure what these restrictions are but it seems that 8 year rule will likely apply to all ETFs available to us on Trading212. Maybe @David @Team212 can answer this question.
Also if after you pay the 41% tax and your investment falls, you can claim tax back after you sell.
You’re right. Capital gains allowance of 1270 euro per year. The balance is taxed at 33% CGT. Then various forms of income tax on that balance.
I’m not sure how possible it is for Irish who can claim UK citizenship to avail of any benefits without being domiciled there,
I think I’m almost there with getting my head around the tax on ETF’s in Ireland. I appreciate your input @obrienciaran.
Am I right in saying that if I invest in an accumulative ETF, I don’t have to worry about tax at all until the 8 year point?
Also, I’m struggling to locate the ETF’s on Trading 212 that have accumulating dividends. If there was a way of showing this on the instrument details @Team212 that would be great!
Thanks!
Mind you, I’m no expert. I work for a financial firm so usually bounce my questions off my colleagues, so I’m only giving you second hand information.
Yes you don’t need to worry about the 41% tax on ETFs until year 8 provided you don’t sell any holdings (which triggers a taxable event). Unless you are holding US Domiciled ETFs and then you don’t need to worry about the 41% tax at all as it doesn’t exist. Though Irish people are restricted from holding US domiciled ETFs so I’m not sure are we offered any on T212.
For UK there is a small annual tax free allowance (£2000 at the moment) anything above that you’ll pay tax relative to your income tax band.
| Band | Rate | Lower Limit | Upper Limit |
|---|---|---|---|
| basic rate | 7.5% | 0 | £37,500 |
| higher rate | 32.5% | £37,500 | £150,000 |
| additional rate | 38.1% | £150,000 | - |
Keep in mind these “limits” are not based on your dividends, but they are based on your overall pre-tax income from all sources.
i.e if your pretax salary from your company is 38000 you’ll pay 32.5% tax on all dividends above £2000