New ETF Tax Rules in Ireland: What You Need to Know (Updated 2025)

In February 2024, Revenue updated its guidance on how ETFs are taxed in Ireland through the "Offshore Funds: Taxation of Income and Gains from EU, EEA and OECD member states Part 27-04-01" guidance. This update did not receive much attention or commentary, but it has significantly impacted the amount of tax paid by Irish tax residents who hold investments in ETFs.

As a result, we have been busy helping our clients:

• Get a clear picture of their ETFs tax exposure

• Look at more tax-efficient investment options

• Understand the deemed disposal implications

• Navigate the complex reporting requirements

A word of warning - tax is complicated, and this is one of the more complex areas of Irish tax. This article provides a high-level overview. There are many nuances and caveats, but for clarity, we will focus on the key principles that affect most investors.

What Changed: Before vs. After the 2024 Guidance

Before February 2024

Offshore Funds: Taxation of Income and Gains from EU, EEA and OECD member states Part 27-04-01

Previous to the recent guidance from Revenue, profits from many ETFs were treated similarly to regular stocks and shares, being taxed as capital gains at 33%.

If you were a Non-Dom, the tax was normally payable only subject to remittance. In many cases, the capital gain did not trigger a taxable event in Ireland until funds were brought into the country. This made many people very happy!

After February 2024

Since the updated guidance, the tax treatment has become more restrictive:

• Income Tax Treatment: Gains from most ETFs are now taxable at 41% (taxed as income, not capital gains)

• No Remittance Basis: ETFs domiciled in the EU, EEA, and OECD countries are not subject to remittance for Non-Doms - all gains are immediately taxable in Ireland

• No Loss Relief: Losses on these funds cannot be written off against other capital gains

• Deemed Disposal: The 8-year deemed disposal rule applies, meaning you pay tax on gains every 8 years, even if you don't sell
  
  

Current Tax Treatment by ETF Type

Understanding how your specific ETFs are taxed depends on where they're domiciled:

Irish and EU/EEA Domiciled ETFs

• Tax Rate: 41% income tax (plus PRSI and USC may apply)

• Deemed Disposal: Tax due every 8 years on accumulated gains

• Remittance: No remittance basis relief for Non-Doms

• Loss Relief: No offset against capital gains

• Examples: Most ETFs traded on European exchanges

US Domiciled ETFs

• Tax Rate: 33% capital gains tax

• Deemed Disposal: Not applicable

• Remittance: Available for Non-Doms (subject to remittance)

• Loss Relief: Can offset against other capital gains

• Examples: ETFs traded on US exchanges (NYSE, NASDAQ)

Other Offshore ETFs

• Tax Rate: 41% income tax

• Treatment: Similar to Irish/EU ETFs

• Compliance: More complex reporting requirements

The Deemed Disposal Rule Explained

This is one of the most significant aspects of Irish ETF taxation that many investors don't understand:

How it works:

• Every 8 years from your initial investment, you're deemed to have disposed of your ETF holdings

• You pay 41% tax on any gains, even though you haven't sold

• The 8-year clock resets after each deemed disposal

• When you eventually sell, you get credit for taxes already paid

Example:

• You invest €10,000 in an Irish-domiciled ETF in January 2025

• By January 2033 (8 years later), it's worth €15,000

• You owe 41% tax on the €5,000 gain = €2,050

• This tax is due even if you don't sell the ETF

If you currently hold ETFs, here's what you should do:

1. Audit Your Portfolio: Identify the domicile of each ETF holding

2. Calculate Tax Exposure: Determine your current and future tax liabilities

3. Review Timing: Consider the 8-year deemed disposal dates

4. Assess Alternatives: Compare ETFs with other investment options

5. Professional Advice: Consult with a tax advisor familiar with these rules
   
   

Why This Matters More Than Ever

ETFs are extremely popular investments and make a lot of sense from an investment perspective, but they may not be tax-efficient in Ireland. The majority of people invest in ETFs via online brokerages like Degiro or Interactive Brokers. These platforms make investing easy, but they do not offer meaningful tax advice.

Remember, when investing, you need to consider both the potential for investment gains and how these gains are taxed. If you ignore the latter, then you will reduce your gain.

What can you do?

If you own ETFs, you need to talk to a tax advisor or get professional help. This is particularly important if you are a Non-Dom and tax resident in Ireland. The interaction between Non-Dom status and the new ETF rules creates complex planning opportunities and traps.

We can help you:

• Get a clear picture of your ETF tax exposure

• Understand your deemed disposal timeline

• Explore more tax-efficient investment options

• Develop a comprehensive investment strategy that considers both growth and tax efficiency

The tax treatment of ETFs in Ireland has become significantly more complex and expensive. Don't let poor tax planning erode your investment returns. Contact us today to review your situation and explore your options.

Note: This article provides general information only and should not be considered tax advice. Tax rules are complex and subject to change. Always consult with our qualified tax advisor about your specific circumstances.