Author Topic: Just learned Ireland taxes investment income at 41%  (Read 13786 times)

Reddiger

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Just learned Ireland taxes investment income at 41%
« on: August 12, 2014, 05:21:29 AM »
Hi guys.

I've been lurking since April and jumped in with two feet into the world of FI thanks to you Mustachian badasses and MMM himself.

I'm 25 and have started to put lots of money into the only index funds I could access at a reasonable price from Ireland (we have terrible investment infrastructure here), through Rabodirect. They're ticking away nicely with no issues and I'm enjoying the process of automating my funds. They don't pay dividends, but unfortunately I'm extremely limited in choices here.

The real problem is, as I learned today, that the Irish government has decided that taxing investment income at 41% is a very fair thing to do (this is a raise from 33% the year before). This is done either every 8 years or on sale, whichever comes first. They also tax savings account interest at the same rate.

Am I right in thinking that this effectively slashes the average year on year investment return I can count on from 7% to roughly 4%? That then barely beats inflation and will mean I will have to invest for nearly twice as long to be able to retire. I'd love to hear my maths is completely wrong on that!

I'm not sure what to do now. I feel very disheartened. Any mustachian advice out there? Is investing still worth it?

I'm honestly feeling a bit crushed. It's like the government is very actively trying to discourage people from being sensible with their money.

PloddingInsight

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Re: Just learned Ireland taxes investment income at 41%
« Reply #1 on: August 12, 2014, 05:41:08 AM »
In the states we have various tax-advantaged accounts that can be used -- 401ks and IRAs and so on.  Is something like that available in Ireland?

Reddiger

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Re: Just learned Ireland taxes investment income at 41%
« Reply #2 on: August 12, 2014, 07:57:11 AM »
Well, we have these state savings options: http://www.anpost.ie/anpost/maincontent/personal+customers/money+matters/savings+and+investments/. To my eyes, their returns are awful, though there is next to 0 risk on them.

There are some pension funds you can buy privately which I can contribute to tax-free up to a value of 15% of my salary until I'm 30, then 20% thereafter. You can choose how aggressive you want to be with how that money is invested, as you would expect. The problem with those is that you can't withdraw at all until you hit 60, so it's not really a good plan for those of us interested in early retirement.

Should I be investing the 15% in that pension even though I won't be able to touch it until I'm 60?
« Last Edit: August 12, 2014, 08:38:21 AM by Reddiger »

theonethatgotaway

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Re: Just learned Ireland taxes investment income at 41%
« Reply #3 on: August 12, 2014, 09:18:06 AM »
Sorry op, just did a few Google early retirement ireland searches and couldn't find anything (that mentioned before 50). I know my UK friends and family would be shocked at a prospect of early retirement due to how society is set up over there, but I really don't know about how to direct you to something useful for this. Perhaps visiting a local financial advisor would be best.

Good news: Perhaps you could be the first to collect and present this info online!

skunkfunk

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Re: Just learned Ireland taxes investment income at 41%
« Reply #4 on: August 12, 2014, 09:24:51 AM »
If it's really as bleak as you say, I suggest you either plan to move somewhere cheaper after saving your money, or move now somewhere it's more beneficial to save.

Cpa Cat

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Re: Just learned Ireland taxes investment income at 41%
« Reply #5 on: August 12, 2014, 09:32:05 AM »
Well, we have these state savings options: Should I be investing the 15% in that pension even though I won't be able to touch it until I'm 60?

Yes, absolutely. You will still need money between the ages of 60-death. Even with early retirement in the picture, you're looking at 20-40 years of your retirement taking place after the age of 60. This should be the first place you invest - at least until your post-60 retirement is fully funded.

After you've socked away 15% there, you now need to look elsewhere. What about property? With investment income being taxed so heavily, it certainly places a heavier value in home ownership. Having a paid-off home will reduce your overall retirement expenses.

It looks like you can generate up to 10,000 E/year from renting out a room in your house without incurring problems.

How is rental income taxed?

What kinds of insurance products are available? In the USA, we'd generally advise people to stay away from annuities or whole life, but it's possible that those are tax-advantaged options in Ireland.

What about government bonds?

It also seems that you have a capital gains exemption each year? Use it.
« Last Edit: August 12, 2014, 09:34:43 AM by Cpa Cat »

former player

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Re: Just learned Ireland taxes investment income at 41%
« Reply #6 on: August 12, 2014, 10:08:31 AM »
What about property? With investment income being taxed so heavily, it certainly places a heavier value in home ownership. Having a paid-off home will reduce your overall retirement expenses.
Property in Ireland has had a pretty rocky record in recent memory.  The property crash and subsequent need to rescue the banks is a large part of the reason taxes are so high.  I suppose that with the economy getting a bit better, there is a hope that future political changes will reduce taxes on investments: they won't necessarily always be that high.

The EU has a free market in capital, which means that OP can stash his cash in any of the 28 member States, and if he does so in any of the Euro States he doesn't have to worry about exchange rates and money changing costs.  Unfortunately, I suspect that tax-free options in other member States tend to only apply to their own residents (the ISA option in the UK is certainly limited in this way), and that ROI tax will still payable on holdings abroad as long as OP is still resident in ROI.  Holding money abroad also tends to make one an object of suspicion to the tax authorities, which doesn't help.  So until OP has the sort of money at which serious tax planning becomes affordable, I doubt there are any backdoor routes around the problem.

Absolutely take advantage of tax free pension contributions, as self-funding a gap between early retirement and 60 is much easier than funding a pension from 60 onwards (which will be for an unknown length of time, and has bigger inflation variables to deal with).  Depending on the terms of the scheme, front-loading a pension from age 25 could bring a very decent return.  It would be worth comparing schemes carefully to find one where you can take maximum advantage of being able to build up contributions early in a career but stopping contributions when you take early retirement.

Jack

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Re: Just learned Ireland taxes investment income at 41%
« Reply #7 on: August 12, 2014, 11:42:32 AM »
What about property? With investment income being taxed so heavily, it certainly places a heavier value in home ownership. Having a paid-off home will reduce your overall retirement expenses.
Property in Ireland has had a pretty rocky record in recent memory.  The property crash and subsequent need to rescue the banks is a large part of the reason taxes are so high.  I suppose that with the economy getting a bit better, there is a hope that future political changes will reduce taxes on investments: they won't necessarily always be that high.

Property values might be rocky, but those only matter if you're fix-and-flipping. What about property rental cash flow for buy-and-hold?

NearlyThere

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Re: Just learned Ireland taxes investment income at 41%
« Reply #8 on: August 13, 2014, 02:05:09 PM »
Reddiger, definitely open a pension. Other than that An Post Instalment Savings Schemes are the only other option before a taxable account right now.

Look for buy to let as an investment and depending on where you are in the country you can pick a type of market for this. Carlingford, louth is great for stags and hens, as is Galway. If you're in the city plan for a something near the IFSC if you can afford the deposit.

Reddiger

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Re: Just learned Ireland taxes investment income at 41%
« Reply #9 on: August 14, 2014, 02:59:44 AM »
Thank you all very much for taking the time to reply to me. I really appreciate it. It's a great community on here and that's part of what makes ER seem so do-able! Also cool to see a fellow Irishman on here!

I've set up talks with three different pension providers to see what they can offer me. One in particular is attractive because it offers an index fund tracking the S&P 500 as an investment option with the pension stash, and with my limited knowledge I tend to err to Buffett on these matters. They all make their charges pretty damn hard to find and compare though, so we'll see how that goes.

Rental cash flow might well be an option in a few years. I live in Dublin and actually work in the IFSC so I know first hand how attractive those apartments can be. I'm tempted to plan for buying one in which to live and rent out one bedroom, trying to get as close to that tax free 10k income from that private tenant situation as I can.

I currently rent in a cheaper part of the city so I could also just buy-to-let as you say - I cycle the 5 miles to and from work each day so living in the IFSC might actually end up more expensive for me (no cheap supermarkets and such)... Hmm. Something to think about there. The thing is, that buy-to-let income would be taxed at 41%, I think, and with average current rental prices (1400 per month for a two bed apartment) I'd be just shy of 10 k post-tax earnings on the property anyway, so at current prices it's basically a wash right now. I'll keep a close eye on the situation.

Right now a 50-60k 20% down payment is a way off for me - nearly two years pre-tax salary so my only real worry with this is that prices will have skyrocketed by the time I can afford it (probably 4-5 years at my current salary, which will hopefully go up). That's not the worst worry to have, though - hopefully that would mean the economy is roaring again and investment tax will be down!

Would you recommend putting any money in these small-yield An Post accounts?

And should I be concentrating all my savings on building up cash for a down payment, would you say, or continue to split my savings 60/40 as I have been the last few months between index funds and cash savings (in a permanent TSB, 2.75% AER savings account)? I suppose that depends on my goals and aversion to risk, but I'm very much the most inexperienced and stupid person in this room (and I mean this in the good way that one should aim to be) so I reckon I should just ask you experts what the best thing to do is to add to my own research :D

The available money for my normal savings will of course shrink by about a third given my projected pension payments which will slow me down here a bit. I do agree with you all though that a pension is almost certainly a good idea - I just hope I get relatively lucky with the stock market value when I hit 60!

Moonwaves

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Re: Just learned Ireland taxes investment income at 41%
« Reply #10 on: August 14, 2014, 03:47:56 AM »
As far as potential BTL property advice goes, you could do worse than checking out the askaboutmoney forums. Lots of landlords (successful, struggling and failed varieties) there and good advice with regard to the type of property and location. And also how to do it in the most tax efficient way. They're possibly a bit more conventional than MMM but there are a few fans there, too and an occasional mention of this website. There's a fun thread on whether or not prize bonds are currently offering a better return on investment than ordinary savings accounts, too - I think that's one of my favourites for illustrating how abysmal interest rates are at the moment (note that those who've "invested" large amounts of money have it to spare and still have better yielding investments in shares etc., too  - but it's still interesting to read).

NearlyThere

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Re: Just learned Ireland taxes investment income at 41%
« Reply #11 on: August 17, 2014, 07:46:28 AM »
I'd only open the An post account as a saving precursor. To get you in the saving mode at a higher rate. I'm resident up north, so I work on UK accounts, but for me my plan is as follows:

- Fill NISA (not available to you) Invested in Vanguard Life Strategy 100 Acc  - £15,000 per annum
- Pension SIPP - Invested in Vanguard Life Strategy 100 Acc - Up to £40,000 per annum
- Taxable account - whatever's left. Though I haven't gotten to this level yet

Now just thinking.... Once you have your pension plan up at a level you are happy with, why not just start investing in a taxable account. Open an investing account and follow a plan of putting as much into it as possible. Whatever's extra.

Ultimately the goal right now is to get your saving rate as low as possible. This will open the most opportunities for saving or investing in a property as quickly as possible. This is what I'm doing in a nutshell, but I'm a little luckier in that I have my tax advantage accounts already planned by the government.

Alabaster

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Re: Just learned Ireland taxes investment income at 41%
« Reply #12 on: August 17, 2014, 01:45:11 PM »
Sounds awful. I'd move.

alwaysonit

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Re: Just learned Ireland taxes investment income at 41%
« Reply #13 on: August 20, 2014, 03:15:02 PM »
Iím also an Irish citizen and am in the same age bracket as you, although Iím not an Irish tax resident.
I second the advice to check out askaboutmoney.com.
How much did it cost you to access the funds through Rabo? Whatís the TER and one off fee? And did you invest in a Vanguard account through them? Investing through iShares or Saxo seems to be a popular choice for Irish investors.
If you could PM me what the pension providers offer you that would be appreciated.

Reddiger

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Re: Just learned Ireland taxes investment income at 41%
« Reply #14 on: August 28, 2014, 07:42:15 AM »
Thanks for all the replies people - apologies I've been swamped with work so only just getting the change to respond now.

When you say get my savings rate as low as possible, do you mean aim to have as little in cash savings as possible with the majority in investments and pensions?

I agree that I should get cracking on the pension and I'm in the process of talking to a few providers about what they offer. Charges seem quite steep on average - 5% per block of money in (e.g. Ä5 for every Ä100 I put in in a month) which somewhat lessens the nice tax advantages of pension funds in my view. Nonetheless, it may be an unfortunate reality of the Irish pension market that I have to deal with.

Moving, for now, is not really on the cards for me. I love Ireland and I've lived outside of it for more than half of my life in the past and still feel most at home here. I've never lived in Canada, the U.S. or Australia so if I were to move I might perhaps be looking in those countries. The problem is they're all so damn far away from my family here - it would be hard to justify even semi-frequent trips home given how much flights would cost and how much of a drain on holiday allowance they would be, and yet I know I would want to make those trips anyway...

Rabo index funds are fairly new and they only offer the BlackRock trackers. Charges of 0.75% on entry and exit and a yearly fee of 0.45%. Cheapest and certainly easiest way to invest as an Irish person that I've found so far.

I'm going to dig into askaboutmoney.com once work quietens down and I have some spare capacity to research.

Thanks for everything guys (and girls)!

Moonwaves

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Re: Just learned Ireland taxes investment income at 41%
« Reply #15 on: August 28, 2014, 10:43:16 AM »
Iím also an Irish citizen and am in the same age bracket as you, although Iím not an Irish tax resident.
....
How much did it cost you to access the funds through Rabo? Whatís the TER and one off fee?
Just in case you weren't already aware of it, if you're not resident in Ireland, you won't be able to open or maintain an account with Rabo there. I had a savings account with them (never made it as far as having enough to open any investment accounts but to get them you do have to have a savings account first) and had to close it once I'd left Ireland. I doubt that has changed in the last few years.

aidan

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Re: Just learned Ireland taxes investment income at 41%
« Reply #16 on: January 19, 2016, 05:04:24 AM »
How did you get on with the rabodirect.  Is is a good investment option for ireland residents

money_bunny

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Re: Just learned Ireland taxes investment income at 41%
« Reply #17 on: January 19, 2016, 06:02:02 AM »
What about Eastern Europe if the USA is too far?


Irishtache

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Re: Just learned Ireland taxes investment income at 41%
« Reply #18 on: January 19, 2016, 06:14:38 AM »
Hi Reddiger. I'll also second Askaboutmoney.com for info on Irish issues. By the way, non EU domiciled ETF funds are taxed at the 33% rather than 41%.

mohawkbrah

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Re: Just learned Ireland taxes investment income at 41%
« Reply #19 on: January 19, 2016, 06:48:51 AM »
thats disgusting. Any government that thinks putting up higher taxes to get more money is an idiot. Just from the responses from this thread shows that anyone with half a mind and a fair bit of FU money is going to leave the country.

damn shame too because i was planning on moving to ireland before hearing about this.

Jack

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Re: Just learned Ireland taxes investment income at 41%
« Reply #20 on: January 19, 2016, 08:48:31 AM »
damn shame too because i was planning on moving to ireland before hearing about this.

Can we assume investment income in Northern Ireland would be taxed the same as in England? (Or did you want to move specifically to the country of Ireland, not just the island?)

mohawkbrah

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Re: Just learned Ireland taxes investment income at 41%
« Reply #21 on: January 19, 2016, 09:07:06 AM »
damn shame too because i was planning on moving to ireland before hearing about this.

Can we assume investment income in Northern Ireland would be taxed the same as in England? (Or did you want to move specifically to the country of Ireland, not just the island?)

i wanted to homestead with some acreage in the republic of ireland. not northern ireland. You can get building land a heck of a lot cheaper in ROI than northern ireland

force majeure

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Re: Just learned Ireland taxes investment income at 41%
« Reply #22 on: January 19, 2016, 12:28:34 PM »
Reddiger,

Ireland is a difficult country in which to try and retire early. The Government dont want people doing this.
They are only interested in taxing the vast middle section of society, by keeping them working and in debt. As you say, 41% tax on funds/ETFs, which then gets distributed out to a bloated public sector, and to scobies in the form of generous welfare benefits. Believe me, the only way is to out earn or out save your peers, or get the hell out.


FM



force majeure

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Re: Just learned Ireland taxes investment income at 41%
« Reply #23 on: January 19, 2016, 01:00:03 PM »
Before anyone pipes back with response, tax shelter / pension structure. We are talking here about retiring early. I cant wait until age 60. I watched my father drop dead shortly after that age, he worked hard all his life, dreamed about kayak trips he never got to take.

I would rather have a modest early retirement and get to do the things I dream of.

electriceagle

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Re: Just learned Ireland taxes investment income at 41%
« Reply #24 on: January 19, 2016, 02:38:55 PM »
Really, your only option for ER in a tax regime like yours is to leave.

http://www.irishtimes.com/life-and-style/generation-emigration/one-in-six-irish-born-people-now-live-abroad-1.2354097

Apparently, one in six Irish born people now live abroad. Perhaps they know what they're doing.

bacchi

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Re: Just learned Ireland taxes investment income at 41%
« Reply #25 on: January 19, 2016, 03:38:53 PM »
This chart has the 41% tax on cash deposits. For shares, there's only the 1% stamp duty, dividend tax, and cap gains at 33%. The PRSI does look onerous, from what I can tell.

http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

faramund

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Re: Just learned Ireland taxes investment income at 41%
« Reply #26 on: January 19, 2016, 04:52:46 PM »
This chart has the 41% tax on cash deposits. For shares, there's only the 1% stamp duty, dividend tax, and cap gains at 33%. The PRSI does look onerous, from what I can tell.

http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

This makes Ireland sound not quite so bad. In Australia, in comparison, there's no specific tax on deposits, but any interest is counted as income, which for me means 39% - which is pretty similar. On shares, we don't have stamp duty tax, and there is no dividend tax - but once again its counted as income and we have capital gains that is 40% if you hold for 1 year, or otherwise 20% - so again, pretty similar, maybe Ireland's a bit worse.

From what I can tell, in many countries its hard to beat inflation - just with deposits and their corresponding taxation. But if you can find a good index fund, you won't be comparatively too badly off. I don't think you have to move countries!

Also, do you Vanguard in Ireland? Vanguard seems to almost always have the lowest fees.

ShoulderThingThatGoesUp

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Re: Just learned Ireland taxes investment income at 41%
« Reply #27 on: January 20, 2016, 05:28:55 AM »
Goodness, that's unpleasant. Doesn't Canada pretty much take any non-criminal that wants to come? Have you considered that? Plenty of good farmland in Canada if you're interested in homesteading.

(In the USA I'm in the 15% tax bracket so dividends get taxed at about that, plus I pay 3-ish percent to the state of Pennsylvania. I pay no long-term capital gains taxes because of my income tax bracket. I make $90,000 a year so it's not like you have to be low-income to have this tax situation. Of course the federal government is trying to achieve Greece-level debts so maybe this will change.)

Retire-Canada

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Re: Just learned Ireland taxes investment income at 41%
« Reply #28 on: January 20, 2016, 09:06:07 AM »
Doesn't Canada pretty much take any non-criminal that wants to come?

No we don't.

StockBeard

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Re: Just learned Ireland taxes investment income at 41%
« Reply #29 on: January 20, 2016, 12:39:36 PM »
This is done either every 8 years or on sale, whichever comes first.
Wow. So even if you're in there for the long run, they basically trigger a taxable event on the current value of your investments minus the value they had 8 years ago, considering it as capital gain? Way to prevent people from thinking "long term" here.

There has to be ways to bypass some of that, as others mention, maybe some tax-protected investment vectors exist? I believe for example in France that life insurances are the main vector people seem to use for ER because they are tax sheltered, very similar to 401k in the US.

Doubleh

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Re: Just learned Ireland taxes investment income at 41%
« Reply #30 on: January 23, 2016, 02:08:41 AM »
I don't have any Ireland specific information, but here's a couple of things to consider:

1. Ireland introduced some pretty drastic tax changes as a result of the havoc wrought by the financial crisis. They may or may not stay in place for the duration. If retirement is many years ahead I'd suggest to just focus on saving for now and reassess the lie of the land as you get closer to pulling the plug. Governments change and a decade is a long time in tax planning.

2. Have you looked at ETFs? These are basically funds that you buy as imdividual company shares, so they are similar to buy and sell as individual shares. In fact many ETFs sold in the UK including vanguard are Irish domiciled companies due in part to the favourable corporation tax there. If you can buy these it would give you access to broad index funds at vanguard fee levels and you shouldn't have to pay a large % for holding them.

3. Many readers of this site are in the USA so much advice is build around what works there. Most of this is universal ie be diversified, minimise fees. But it sounds like Ireland has a peculiar landscape so I'd be looking for Ireland centric investing information to see what others do there. For example as I mentioned corp tax there is pretty low by global standards. Does this mean it's better to invest through a company, or start a business? What are others doing in that environment? Renting out s room as you mentioned sounds like a pretty good start to building wealth.

4. Lastly assuming you're an Irish citizen and not a U.S. taxpayer, mobility can be your secret weapon. You can choose between earning enough to retire in Ireland, or to travel somewhere else in the eu where taxes mean you can retire on less and establish your residence there, either when you're ready to retire or before. Thanks to eu you can chose to become resident in any country so can shop around for a better regime. UK is actually surprisingly favourable for ER and of course speaks (almost!) the same language. But I could be interested in France, Italy or Greece. Unlike US, most countries don't continue to tax you on your worldwide income once you stop being resident there. This means if you moved to say UK, you would likely pay UK taxes on your worldwide income (some exceptions) and Irish tax on any income which is sourced from Ireland. This does mean you may need to get your Stache out of Ireland to avoid those high taxes so if this is an option you'd consider that is something to explore further.

BattlaP

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Re: Just learned Ireland taxes investment income at 41%
« Reply #31 on: January 23, 2016, 02:31:21 AM »
This chart has the 41% tax on cash deposits. For shares, there's only the 1% stamp duty, dividend tax, and cap gains at 33%. The PRSI does look onerous, from what I can tell.

http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

This makes Ireland sound not quite so bad. In Australia, in comparison, there's no specific tax on deposits, but any interest is counted as income, which for me means 39% - which is pretty similar. On shares, we don't have stamp duty tax, and there is no dividend tax - but once again its counted as income and we have capital gains that is 40% if you hold for 1 year, or otherwise 20% - so again, pretty similar, maybe Ireland's a bit worse.

From what I can tell, in many countries its hard to beat inflation - just with deposits and their corresponding taxation. But if you can find a good index fund, you won't be comparatively too badly off. I don't think you have to move countries!

Also, do you Vanguard in Ireland? Vanguard seems to almost always have the lowest fees.

Yeah but dude the first $18000 of any income is tax free here (aus).. investment income or not. Sounds like the Irish'd be paying 30% or higher from the first dollar on.

faramund

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Re: Just learned Ireland taxes investment income at 41%
« Reply #32 on: January 23, 2016, 03:08:52 AM »
This chart has the 41% tax on cash deposits. For shares, there's only the 1% stamp duty, dividend tax, and cap gains at 33%. The PRSI does look onerous, from what I can tell.

http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

This makes Ireland sound not quite so bad. In Australia, in comparison, there's no specific tax on deposits, but any interest is counted as income, which for me means 39% - which is pretty similar. On shares, we don't have stamp duty tax, and there is no dividend tax - but once again its counted as income and we have capital gains that is 40% if you hold for 1 year, or otherwise 20% - so again, pretty similar, maybe Ireland's a bit worse.

From what I can tell, in many countries its hard to beat inflation - just with deposits and their corresponding taxation. But if you can find a good index fund, you won't be comparatively too badly off. I don't think you have to move countries!

Also, do you Vanguard in Ireland? Vanguard seems to almost always have the lowest fees.

Yeah but dude the first $18000 of any income is tax free here (aus).. investment income or not. Sounds like the Irish'd be paying 30% or higher from the first dollar on.
I agree, that sounds, like what he said, but from some quick googling it looks like Ireland has some tax free threshold areas like Aus.
http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax/how_your_tax_is_calculated.html
and
http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

BattlaP

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Re: Just learned Ireland taxes investment income at 41%
« Reply #33 on: January 23, 2016, 02:56:49 PM »

I agree, that sounds, like what he said, but from some quick googling it looks like Ireland has some tax free threshold areas like Aus.
http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax/how_your_tax_is_calculated.html
and
http://www.oneview.mercer.ie/how-to-save-and-invest/tax-on-saving-and-investments.html

It looks like those thresholds don't apply to CGT - it doesn't count as standard income (which is shit). There is a Ä1,270 'personal exemption' for CGT which looks like in an ER case it would be the 'tax-free threshold' for an income composed totally of CGT but that's nothing. There is some consideration for 'indexation' that would lessen your tax burden based on inflation.

Anyway OP it's worth looking at some of the fine print on CGT from the point of view of a small, entirely dividend income because that is what your ER income would be. The highest tax rates would likely only be applicable to people with an income from working. Or at least they should. And if they don't, come to Australia - we've got plenty of you guys here already.

irishcol

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Re: Just learned Ireland taxes investment income at 41%
« Reply #34 on: January 27, 2016, 01:23:54 PM »
I live in Ireland and have been using Rabodirect for investments also. I've about a year's after tax salary invested in the same index funds you talk about. It's gone down so far, I would invest more in it but for reasons I'll mention later.
I have some different interpretations of the taxes and retirement ages to what's been posted here.

First, most pension schemes can allow retirement from age 50 on. I expect to have to argue a lot about this, but it is apparently possible.
Secondly, I'm not entirely clear whether investment income is treated the same as any other income and is therefore at anything up to 52% tax (if your total income is over 70,044), or could be as low as just PRSI plus the lowest level of USC if you're living off it in retirement. Or is it CGT and straight 41% after the Ä1,270 allowance. Rabo say to inform the Revenue, I've sent in a form but heard nothing back yet.
That 8 year rule really, really sucks - I hope the government gets rid of it soon but then there's probably not a lot of votes in helping investors.

I'm aiming to retire at 42 so initially I didn't put anything into my pension over the minimum 2% my employer requires. However, having looked at it properly I am contributing my current maximum of 20% (I'm 32). I got a raise of nearly that much last year as I got promoted so my take home is close to the same but I'm getting the pension contribution as a bonus - the way I look at it anyway.

Finally, There are 2 (at least) other tax shelters available in Ireland: The Employment Incentive Scheme (EIS) and Film Relief. The EIS can give you relief at the top rate of 40% if you put away money for 4 years. I plan to start doing this in 3 years time but I'm planning a refurbishment of my house (and possible wedding) in the next 3 years which will eat up my spare cash. Not sure about the Film Relief but it could potentially be good.

Kaspian

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Re: Just learned Ireland taxes investment income at 41%
« Reply #35 on: January 27, 2016, 11:28:29 PM »
In Canada, income funds (e.g., bonds, savings interest, etc.) are taxed at the full rate.  So yeah, probably close to your 40% here as well.  Reinvested dividends from domestic funds are not taxed as heavily.  Capital gains (from selling) are taxed at half the marginal rate.  So, it's best to keep the income side of a portfolio in a tax shelter and the equity/growth portion (e.g., US S&P500 index, Canadian index, etc.) in the standard non-sheltered account.  (And you are fully correct--often keeping income funds in a non-sheltered account does not have a great return after taxes and inflation.)  Is there an independent investment advisor (one time fee) or accountant you could speak to make sure you've explored all possible UK/Irish tax shelters for your income funds?

Geekenstein

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Re: Just learned Ireland taxes investment income at 41%
« Reply #36 on: January 28, 2016, 06:52:13 PM »
Is there an independent investment advisor (one time fee) or accountant you could speak to make sure you've explored all possible UK/Irish tax shelters for your income funds?

^^^ This.

It sounds like you have decisions to make that are pretty substantial.  I don't know what Irish government regulations look like but they can't be a whole lot easier to parse than ours.  Social Security here used to require a sherpa.  If it is possible, sitting down with a financial planner could save you huge amounts of time, money, and frustration.  I avoid them at all possible, but in some cases you just can't.

peterpatch

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Re: Just learned Ireland taxes investment income at 41%
« Reply #37 on: February 06, 2016, 03:09:20 PM »
Doesn't Canada pretty much take any non-criminal that wants to come?

No we don't.

Yeah I don't know what would've given someone that idea. The OP might be able to fast track into Canada and other "New World" countries under special immigration programs. USA, Canada, Australia, New Zealand are all relatively immigration friendly and would be easy cultures for an Irishman to adapt to.

Also If you're ~10 years away from retirement then you have the option of just saving the money in something really safe and taking a wait and see approach, maybe the government will lower taxes substantially in the next decade.