0:00 exchange traded funds are a popular
0:01 investment vehicle for many investors
0:03 because of their ease and low expense
0:05 ratio but it's important to know that in
0:07 Ireland the taxes are very different for
0:09 ETFs versus any other asset in Ireland
0:11 there's a tax code deem disposal which
0:13 is by far the worst hacks you could
0:15 possibly be exposed to this is where
0:17 every eight years you are deemed for the
0:19 purpose of your taxes to have sold your
0:21 ETFs and are liable for 41 tax on all
0:24 profits you've made over the eight years
0:25 on this ETF this means you have to pay
0:27 41 on the amount the ETF has increased
0:30 plus the dividends you've received over
0:32 these eight years you must pay this
0:33 every eight year anniversary of the
0:35 purchase of this ETF for example if you
0:37 own eight ETFs you have to pay this tax
0:39 on all age ETFs and if you lose money on
0:42 any one of the ETFs you cannot set this
0:44 loss against any other taxes that you
0:46 owe whereas when you sell any other
0:47 asset in Ireland at a loss you can get a
0:50 tax credit that you can use against the
0:51 profits of any other asset that you sell
0:53 in that same year in Ireland there's a
0:55 capital gains allowance of 1 270 euros
0:58 per year which means if you sell it you
1:00 can make a profit of 1 270 euros
1:03 tax-free however there is no exemption
1:05 in Ireland for ETFs you also have to pay
1:07 25 on dividends earned in Ireland so it
1:10 makes a lot more sense to buy
1:11 accumulating ETFs instead of
1:13 Distributing ETFs for the purposes of
1:15 saving this 25 on your dividends because
1:17 this really adds up over a long time
1:19 there isn't much difference in the
1:20 performance of either here is a graph of
1:22 accumulating and distributing S P 500
1:25 ETF and as you can see they're very
1:26 similar even when all this taken into
1:28 account it's safe to say that while ETFs
1:30 are taxed incredibly highly in Ireland
1:31 they are still the best source of
1:33 passive income and protection against
1:34 inflation you can get the only other
1:36 passive income in Ireland that would
1:38 beat the performance in terms of
1:39 earnings is buying a property you plan
1:41 to rent out but doing this requires a
1:43 lot of upfront capital and taking on
1:44 debt for most people buying ETFs like
1:46 the S P 500 gives you an almost eight
1:49 percent annual return When adjusted for
1:51 inflation with essentially no effort the
1:53 only effort required is to set up a
1:54 brokerage account and to remember to buy
1:56 the ETF once a month and it's still a
1:58 much better investment than leaving your
1:59 money in the the banks in Ireland banks
2:01 are providing you at essentially a zero
2:03 percent return on your money and you
2:04 still have to pay dirt tax which is a
2:06 tax on the interest you earn on your
2:07 savings which is 33 even with this eight
2:10 percent difference in tax it still makes
2:12 sense to buy an S P 500 ETF instead of
2:14 leaving your money in the bank if you
2:16 were to save 500 a month for 40 years
2:18 you would have 240 000 in your bank
2:20 whereas if you bought 500 worth of an S
2:22 P 500 ETF you would have 1.5 million
2:24 assuming an 8 annual return however
2:27 because of this deemed disposal tax in
2:29 Ireland you would have just 500 000
2:31 after 40 years so doubling your money
2:33 and this is only if you sell 41 of your
2:35 ETFs to pay the taxes that you owe at
2:37 the end of every eight years in reality
2:39 you would be able to put some of your
2:41 own cash that you have from your job to
2:43 pay some of this tax off so now you
2:44 really see why I said this tax is the
2:46 worst tax to be exposed to it's also
2:48 very clear to see that buying ETFs in
2:50 Ireland isn't as good of an investment
2:52 as you may have taught before
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