Regarding ETFs--it might be worth adding that the "deemed disposal" rule requires you to pay tax on an ETF every 8 years even if you haven't sold. This rule is peculiar to Ireland and greatly detracts from index fund/ passive strategies because the compounding effect loses much of its power
Agreed, its covered it in a separate post but I’ll stick in here so that it’s clear. The deemed disposal rule is the single reason I have no exposure to ETFs. A completely regressive tax that needs to be abolished
Hi Wolf. It might be outside the scope of the article but an EIIS is pretty tax efficient, albeit risky, as you are investing in a start up. Nice way to get in early like some of the VCs and, if it all goes wrong, you’ve only lost, at most, 60% of your investment.
Hi, thanks for the comment. I have never properly looked into it. Its definitely a higher risk and I would imagine the due diligence process who take a lot longer given there would be very little information readily available compared to a publicly traded company. Definitely an option if you have your eye on a particular start up though. I am assuming you are capping the loss at 60% because the other 40% relates to the tax relief?
I am. And obviously I am assuming you have enough tax accumulated to be able to write off the entirety of that 40%. It’s deffo a riskier option due to the limited availability of information. You’re basically taking a punt on the business but, if even 1 or 2 of them hit, you’ll make up any losses incurred on the others.
Regarding ETFs--it might be worth adding that the "deemed disposal" rule requires you to pay tax on an ETF every 8 years even if you haven't sold. This rule is peculiar to Ireland and greatly detracts from index fund/ passive strategies because the compounding effect loses much of its power
Agreed, its covered it in a separate post but I’ll stick in here so that it’s clear. The deemed disposal rule is the single reason I have no exposure to ETFs. A completely regressive tax that needs to be abolished
Hi Wolf. It might be outside the scope of the article but an EIIS is pretty tax efficient, albeit risky, as you are investing in a start up. Nice way to get in early like some of the VCs and, if it all goes wrong, you’ve only lost, at most, 60% of your investment.
Hi, thanks for the comment. I have never properly looked into it. Its definitely a higher risk and I would imagine the due diligence process who take a lot longer given there would be very little information readily available compared to a publicly traded company. Definitely an option if you have your eye on a particular start up though. I am assuming you are capping the loss at 60% because the other 40% relates to the tax relief?
I am. And obviously I am assuming you have enough tax accumulated to be able to write off the entirety of that 40%. It’s deffo a riskier option due to the limited availability of information. You’re basically taking a punt on the business but, if even 1 or 2 of them hit, you’ll make up any losses incurred on the others.
This was incredibly helpful and answered a lot of questions I had, thank you!!
Hi Kirsten, thanks for the feedback - glad you found it of value