Though the Funds Review 2030 suggested scrapping the eight-year deemed disposal rule – which taxes unrealised gains in ETFs (exchange-traded funds) every eight years – the budget opted for a gentler tweak, lowering exit tax from 41 to 38 per cent.
That leaves would-be ETF investors wondering: is it safe to buy ETFs now on the assumption deemed disposal will disappear in coming years?
Minister for Finance Paschal Donohoe’s recent Dáil remarks about deemed disposal suggest caution, hinting any big changes are far from certain. “To be very clear, I am not giving any indication as to what will be dealt with in next year’s Finance Bill,” he said. “That would be inappropriate to do.”
His language was vague, promising a “piece of policy work” on simplifying tax treatment for small investors and how it is “an issue that will get more and more policy attention”.
Most notably he flagged the estimated €142 million cost to remove the rule. The “figure could be higher”, he said, adding it was a “significant budgetary decision” and there are “large amounts involved”.
In reality, deferred tax is not lost, it is simply delayed. Given that Irish households hold a record €168 billion in low-interest bank deposit accounts, abolition could arguably even increase total tax receipts if it encourages more participation in ETFs.
However, by stressing the apparent €142 million cost, the Minister appears to be suggesting the rule’s removal would be a significant budgetary gamble.
For now, anyone buying ETFs today should treat the deemed disposal rule as very much alive.
