Investing from Ireland

 provides information for Irish investors who wish to apply the Bogleheads® investment philosophy. There are a few peculiarities you must be aware of. This article introduces a series of them.

In particular, the taxation of ETF’s in Ireland for Irish tax domiciled residents is a significant issue and one that should be carefully researched and understood before committing to any purchases. Please ask portfolio questions in the Bogleheads forum and contact a professional advisor before acting on them.

The general guidance given in EU investing is applicable.

This page is not intended for US resident investors, as their situation is very specific. US expats who live in Ireland should look at Taxation as a US person living abroad before investing in Europe domiciled funds.

Cash
Cash deposits in High street banks in Ireland generally are insured up until €100,000 per account holder per bank as outlined by the Deposit Guarantee Scheme, Central Bank of Ireland.

High street banks have a variety of accounts ranging from demand accounts (very low interest rates), notice accounts and fixed interest deposit accounts with fixed terms (poor rates). Any interest on savings lodged in Irish banks is taxed – DIRT (Deposit Interest Retention Tax) currently at a rate of 37%. (PAYE earners under the age of 65 will pay a further 4% PRSI (Pay Related Social Insurance) of any unearned income exceeding €3,174.

Banks offer fixed term deposit accounts with low rates for example KBC 35 day notice at 0.65% AER. Regular saver accounts are available from the high street banks:


 * KBC Regular Saver: 2.5% AER; min./max. deposit €100/€1,000 per month.
 * EBS Family Savings: 1.75% AER; min./max. deposit €100/€1,000 per month.
 * Bank of Ireland 365 Monthly: 1.2% AER; no min., max. deposit €2,000 per month.

Government savings
Alternatively, the government operates a scheme of so-called “bonds” which offer “reasonable” returns that are also tax free, for example:


 * National Solidarity Bonds – 1.5% AER tax free (10 year tenure maximum of 120,000 per person)
 * National Solidarity Bonds – 0.96% AER tax free (5 year tenure maximum of 120,000 per person)

Equities and fixed income
Irish investors can invest directly into stocks, ETF’s and funds, through traditional brokers or via online platforms. The attraction and simplicity of self-investment via index ETF’s is seriously eroded by the tax treatment of funds, see tax section below.

Banks and insurance companies offer their own packaged investment products.

Funds
The main providers of “investment funds” in Ireland are insurance companies. Local insurance institutions offer a range of packaged funds which might typically include the following:


 * Mixed or managed funds with traditional asset classes such as equities, bonds, property and cash are available.
 * Multi asset funds with traditional assets classes and in addition alternative assets and / or strategies.
 * Sector specific funds that invest in specific equity sectors.

The charges on these investments can vary and may be poor value for money and certainly higher than the underlying ETF’s or index funds that these wrappers invest in irrespective of taxation.

Products that offer capital protection are available sometimes labeled “tracker bonds”, “with profit funds” and “protected funds”. These can have high charges and with returns capped. Early redemption of these products can have a serious effect upon the overall returns.

Property
Due in part to the onerous taxation of the most easily available funds, property has become a popular asset class for investment in Ireland.

US Estate Tax
Ireland has one of the oldest tax treaties with the USA, however the terms are not favorable for local investors in regards to estate taxes. Therefore for investments domiciled in the USA above $60,000 an Irish investor will be liable for the punitive US tax rate. Local estate taxes may also apply potentially raising the liability well above 40%.

Irish Inheritance Tax
The current rate of inheritance tax or CAT in Ireland is 33%. Amounts under certain thresholds are tax-free. There are 3 different threshold levels (groups) depending on the relationship between the recipient and the donor of the gift or inheritance.

Taxation of investments
Note: Due to the PRIIPs (Packaged retail investment and insurance products) requirements it is not feasible for an Irish domiciled retail investor to purchase US ETF’s or funds in any case.


 * Shares – gains are subject to tax at your income tax rate + PRSI (4% ) + USC (Universal Social Charge) (4.5% ).
 * UCITS ETFs – gains are subject to tax at a flat rate of 41%. This tax has to be applied every 8 years either through a sale or a deemed sale.
 * Certain close ended funds that are non-regulated and operate outside 7-10% of the gross price are taxed in the same way as shares. F&C Trust

Note:
 * Standard rate of income tax: 20%
 * Higher rate of income tax: 41%

Please review the table below for general taxation practice, this is subject to change and amendment and is subject in particular to the budgetary process.

Taxation of funds outside of Ireland
Regulated funds which are located in EU or EEA countries or countries with whom Ireland has a Double Tax Agreement (DTA) are taxed in a similar way to Irish regulated funds such that: All payments of income and gains from the fund are taxable at 41% for individuals.

Taxation of US ETFs
As noted above, Irish retail investors have been restricted from purchasing US domiciled ETFs since the introduction of the new PRIIPs regime on 3rd January 2018. Should access be attained to US ETF’s by an Irish tax resident (through a qualifying adviser for instance) then the risks associated with US estate taxes would apply. US domiciled funds are subject to tax at your income tax rate + PRSI (4%) + USC (Universal Social Charge) (4.5%). There is some continuing confusion with regards to this tax regime. The ETF firm will withhold (US) tax on any dividends paid to you at a rate of 30% (15% if you complete a W8-BEN form) but you can claim a credit for this withheld (US) tax in your Irish tax return which results in no net impact. A Form 11 personal tax return should be completed.