Dáil Éireann Debate, Thursday - 7 May 2026
243. Deputy Ken O'Flynn asked the Tánaiste and Minister for Finance to identify any EU or OECD jurisdiction that applies a taxation mechanism equivalent to Ireland’s deemed disposal regime, including the taxation of unrealised gains within regulated retail investment funds; and if no such jurisdiction exists, to set out the policy rationale for maintaining such a regime in Ireland. [33771/26]
Amharc ar fhreagra244. Deputy Ken O'Flynn asked the Tánaiste and Minister for Finance to outline the effective tax rates applicable to Exchange Traded Fund investments under the deemed disposal regime compared with the standard capital gains tax rate applied to direct equity investments; and to confirm whether any internal assessment has been conducted on the relative impact of these differing rates. [33772/26]
Amharc ar fhreagra245. Deputy Ken O'Flynn asked the Tánaiste and Minister for Finance the policy rationale for the prohibition on offsetting losses within the deemed disposal regime, including whether any review has been undertaken of this restriction in comparison with standard capital gains tax treatment. [33773/26]
Amharc ar fhreagra250. Deputy Ken O'Flynn asked the Tánaiste and Minister for Finance to provide a detailed timeline for the publication of the roadmap on the taxation of retail investment, including whether the roadmap will include specific proposals relating to deemed disposal; and if so, to provide details. [33778/26]
Amharc ar fhreagraI propose to take Questions Nos. 243, 244, 245 and 250 together.
Individual jurisdictions design their tax systems to meet their specific requirements, and deemed disposal was introduced in Ireland in order to prevent indefinite roll-up, as an anti-avoidance measure, in response to actual investor behaviour at the time. I am aware that earlier this year the Dutch House of Representatives passed legislation to introduce a flat rate tax of 36% on actual returns from savings and investments, as well as unrealized gains, effective from 1 January 2028. I would also note that a number of OECD jurisdictions have a special framework to encourage investment, with a range of different beneficial tax treatments for investments. My Department is carefully considering the range of approaches across other jurisdictions, as well as the European Commission blueprint for a Savings and Investment Account, as part of the work underway to develop a new approach to the taxation of retail investment.
Turning to the differences between the taxation of investment funds and direct investments, where, for example, an Irish resident individual invests directly in a company by acquiring shares rather than investing in an investment fund, any income payments received (dividends) are subject to income tax at the individual’s marginal rate and gains from the disposal of shares are subject to Capital Gains Tax (CGT) at a rate of 33%. In contrast, where an individual has invested in a domestic investment fund the gross roll-up regime applies, such that there is no annual tax on income or gains arising to a fund, but the fund has responsibility to deduct on exit, known as investment undertaking tax (IUT) in respect of payments made to certain unit holders in that fund, and the deemed disposal rule applies. However, for certain investment funds where the units are held on a recognised clearing system, such as the case with ETFs, the fund is not required to deduct exit tax, and the investor must self-assess the tax due. Whether the investment fund accounts for exit tax or that tax is collected through self-assessment, the amount of the gain is subject to tax at a rate of 38% for individuals, or 25% if the investor is a company (a higher rate can apply where the investment fund is a personal portfolio investment undertaking).
The rate of tax applicable to investment funds may be distinguished from the rates applicable to income and gains from other investment products due to availability of the ‘gross roll-up’ regime, where the income and gains can roll-up tax free within the fund. Investment funds make multiple disposals of assets over the lifetime of the fund which are not individually taxed. The value that passes to an investor in an investment fund, in respect of which tax at a rate of 38% generally applies, will reflect a combination of both the income and gains from the underlying investments in the fund.
Loss relief is not available in respect of losses arising on disposals of units in investment funds which are subject to the gross-roll up regime. IUT is not a tax on investors, but on the fund itself and the fund is required to compute the tax, deduct the tax and return it to Revenue. Irish tax legislation specifically provides that IUT is a liability of the fund. Therefore, as the investor is not taxed on the gain arising on a chargeable event, the investor is accordingly not entitled to relief in respect of losses arising.
I am committed to taking the necessary action to support retail investment in Ireland. Budget 2026 introduced a reduction in the taxation rate that applies to Irish and equivalent offshore funds and Irish and certain foreign life assurance products, from 41% to 38%. This change also applies to investments in Exchange-Traded Funds (ETFs) that are taxed under these regimes.
Budget 2026 also included a commitment to publishing a roadmap for the taxation of retail investment, setting 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 roadmap will be published in the coming months. The roadmap will take the Funds Review and the European Commission's Savings and Investment Account recommendation into consideration. A key aspect of the roadmap is the development of a new Irish investment account that aims to reduce the complexities related to retail investment taxation and allow Irish people to grow their savings more efficiently.
