I propose to take Questions Nos. 264, 265, 266 and 267 together.
The deemed disposal rule is an anti-avoidance measure that applies to investments in Irish domiciled investment funds (including Irish domiciled Exchange Traded Funds or ‘ETFs’) and life assurance products, as well as equivalent offshore funds (including equivalent offshore ETFs) and certain foreign life assurance products. An ETF is an investment fund whose units are held in a recognised clearing system and are traded on a regulated stock exchange. There is no separate taxation regime for ETFs. As collective investment funds, they generally come within the regimes set out in the Taxes Consolidation Act 1997 for such funds. The domicile of the ETF will generally determine the applicable fund regime, specifically whether the ETF falls within the domestic fund regime or the offshore fund regime.
Under the deemed disposal rule for investment funds, tax is levied eight years after an investment is made, and every subsequent eight years, regardless of whether or not a disposal has in fact occurred. The tax is levied on any gain in the value of the investment from the date of acquisition to the date of the deemed disposal. On the ultimate disposal of the units in the fund, any tax paid under the deemed disposal rule is allowed as a credit against the final tax liability. The purpose of the deemed disposal rule is to prevent the indefinite roll-up of income and gains and the associated loss of tax to the Exchequer.
My Department has not undertaken specific analysis of the possible impact of the deemed disposal rule on investment in other assets such as property. However, I aware of the need to encourage and develop retail investment, and this is a priority both domestically and at the EU level, with the Savings and Investment Union.
The reduction from 41% to 38% in the taxation rate that applies to Irish and equivalent offshore funds, including ETFs that are taxed under these regimes, from 1 January 2026, is an important first step in supporting retail investment.
The next step, as announced?in Budget 2026, is the publication of a?roadmap for the taxation of retail investment in the coming months.?The roadmap will set out an approach to simplify and adapt the tax framework to further support retail investment, while retaining necessary and important anti-avoidance protections in a proportionate manner. The relevant recommendations of the Funds Review, including in relation to deemed disposal, are being considered in the development of the roadmap, as well as the European Commission’s recommendation on Savings and Investment Accounts.
Turning to the revenue raised from deemed disposal rules, I am informed by Revenue that data on the revenue raised because of the eight-year deemed disposal rule is not readily available. While it is possible to identify the amounts of tax paid by funds in respect of unit holders (being Investment Undertaking Tax (IUT)) and income tax accounted for by individuals in respect of their investments in Irish domiciled funds and offshore funds, it is not possible to provide a breakdown of the tax as between the amount relating to the eight-year deemed disposal and the amount relating to the other types of chargeable events.
The table below provides the estimated amount of overall income tax arising in 2020 to 2024 in respect of investments in investment funds, including IUT and income tax on Irish domiciled funds and certain offshore investment funds, which includes amounts in respect of ETFs. Data for 2025 is not yet available.
It is not possible to advise on the estimated individual number of investors affected by the eight-year deemed disposal each year. As already mentioned, the information available to Revenue does not allow them to isolate the tax returned by investors on account of deemed disposal rules from that which arises from other chargeable events which give rise to a tax liability.
|
Year
|
Tax on Offshore Funds*
€m
|
IUT**
€m
|
Total
€m
|
|
2024
|
*
|
73.5
|
73.5
|
|
2023
|
29.4
|
90.8
|
120.2
|
|
2022
|
33.8
|
82.1
|
115.9
|
|
2021
|
62
|
57.3
|
119.3
|
|
2020
|
33
|
39.1
|
72.1
|
|
Total
|
|
|
501
|
* Total gross tax liability on income / gains from offshore funds per Form 11 return. Form 11 data for 2024 and 2025 is not yet available.
** IUT represents the gross amount of tax paid to Revenue. It is not possible to identify whether the figures for IUT represent amounts taxed at 25% in respect of corporate investors or 41% in respect of individual investors.
