Tax Treatment of Exchange Traded Funds*

April 24, 2015

Revenue have issued a Guidance Note on the tax treatment of Exchange Traded Funds (ETFs) outlining their view of the tax treatment of income and gains from investments in such products with effect from 1 January 2014.  Revenue’s view on the tax treatment is summarised in the following table:

Place ETF is Domiciled** Income Gains

Deemed Sale

After 8 Years
Ireland

Income Tax @ 41% 

No PRSI or USC

Income Tax @ 41%

No PRSI or USC

 Yes
EU

Income Tax @ 41% No PRSI or USC

Income Tax @ 41%

No PRSI or USC

 Yes
US, EEA State and other OECD Treaty Countries Income Tax @ marginal rates plus PRSI and USC CGT @ 33% No
Non EU, non-EEA and non-OECD Treaty Country Income Tax @ marginal rates plus PRSI and USC Income Tax @ marginal rates plus PRSI and USC No

The above represents the Revenue’s view with effect from 1 January 2014 and if a taxpayer files a return and pays tax on this basis the tax treatment will be accepted by Revenue.  In the case of EU ETFs that are not regulated under the UCITS Directive*** it is open to a taxpayer, based on a consideration of the structure of the fund and the regulatory regime to which it is subject, to take a different view than that outlined above by Revenue.  However, taxpayers should be aware that if a different view is taken the basis on which the view is taken should be recorded as the tax treatment may be queried by Revenue in the event of a Revenue audit.

The Guidance Note also confirms that income and gains from investments in Exchange Traded Commodities (ETCs) are not subject to the tax regime applicable to offshore funds assuming that the investments have been structured as debt instruments.   Gains are subject to CGT and income is subject to income tax at marginal tax rates plus PRSI and USC.  

* An EFT is a collective investment fund that is traded on a regulated stock exchange.
** Country of Origin of ETF in which it is regulated.
*** UCITS Directive refers to the European Union (EU) UCITS IV Directive that was adopted in 2009 UCITS refers to undertakings for collective investment in transferable securities.