An “Exchange Traded Fund” or “ETF” is an investment fund that is traded on a regulated stock exchange. A typical ETF can be compared to a tracker fund in that it will seek to replicate a particular index. There is no separate taxation regime specifically for ETFs. ETFs, being collective investment funds, generally come within the regimes set out in the Taxes Consolidation Act 1997 for such funds.
Under the domestic fund regime, a ‘gross roll-up’ applies such that there is no annual tax on income or gains arising to a fund, but the fund has responsibility to deduct an exit tax in respect of payments made to certain unit holders in that fund. To prevent indefinite or long-term deferral of this exit tax, a disposal is deemed to occur every 8 years. For ETFs while the fund is not required to apply an exit tax, the Irish resident unit holder will be subject to tax on income and gains arising and must self-assess and include details of income and gains in a timely filing on their income tax return to Revenue.
The issues that the Deputy has raised in relation the taxation of investments were considered under the Funds Review recently conducted by my Department. In October 2024, my predecessor published the ‘Funds Sector 2030: A Framework for Open, Resilient & Developing Markets’, a wide-ranging review of the funds and asset management sector. This report sets out a series of recommendations to ensure that, in pursuit of continued growth in the funds and asset management sector, Ireland’s funds sector framework remains resilient, future-proofed, supportive of financial stability and a continued example of international best-practice.
The Funds Review Report included eight recommendations to promote increased retail participation in capital markets. Recommendations 22 and 23 of the Fund Review Report include consideration of the removal of the eight-year deemed disposal requirement for Irish domiciled funds and life products and alignment of tax rates across different investment choices.
I have heard the feedback on the need for modernisation of the existing taxation regime for funds and I recognise the complexities with the current regime for the average retail investor. The 2025 Programme for Government has committed to progress and publish an implementation plan for consideration in Budget 2026 taking into consideration the Funds Review recommendations to unlock retail investment and opportunities to grow this sector in Ireland.
This is a complex area of taxation that encompasses a wide breadth of tax legislation on domestic funds, life assurance products and offshore funds. Detailed consideration is therefore being given to the best way to bring about the necessary reforms and to support a greater level of retail investment in capital markets. It is likely given the breadth of the Funds Sector 2030 review that the delivery of associated tax measures may take place over multiple Finance Bill cycles. This work will also take account of developments at an EU level in respect of the Savings Investment Union.
