Written answers

Tuesday, 21 June 2022

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael)
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170. To ask the Minister for Finance if he will consider raising tax exemption limits for people aged 65 years or over or provide further extra tax credits to mitigate against the rising cost of living; and if he will make a statement on the matter. [32330/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The general position is that all tax expenditures and reliefs, including measures of the type mentioned by the Deputy, fall to be considered as part of the annual Budget and Finance Bill process.

The tax code provides for a number of tax credits and reliefs for those aged 65 and over.

The current age exemptions limits mean that single, widowed or surviving civil partners aged 65 or older do not pay any income tax if they earn less than €18,000 per annum with a threshold of €36,000 in place for a married couple or civil partners where one person is 65 years of age or older. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.

Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies, the individual or couple is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit.  Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.  It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.

Persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less.

As such, the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. 

Additional guidance on the range of tax credits and reliefs that may be available for individuals over 65 years of age can be found in Tax and Duty Manual Part 15-01-26, which can be located at the following link – Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-26.pdf.

With regard to the cost of living increases, the Government is acutely aware of the cost pressures currently facing businesses and households, including people aged 65 years or over, and has responded to help alleviate some of this burden.  On a cumulative basis, the Government has announced €2.4 billion in cost of living measures since last October.  These measures include changes in tax and social welfare, the provision of an energy credit for households and a temporary reduction in the rate of VAT on the supply of certain energy products.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Social Democrats)
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171. To ask the Minister for Finance the rationale behind the current tax regime for Exchange-traded funds in Ireland, including the higher-than-previous tax rate applied to gains and the approach to deemed disposal; and if he will make a statement on the matter. [32370/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The term “Exchange Traded Fund” or “ETF” is a general investment industry term that refers to a wide range of investments. ETF investments can take many different legal and regulatory forms even where they are established within the same jurisdiction.

An 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.  Being 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.

Where the domestic fund regime applies, 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.  Where the offshore fund regime applies, the applicable tax treatment depends on the location and nature of the fund.

Income and gains arising from investments into Irish and EU domiciled ETFs are subject to income tax at a rate of 41% on a self-assessment basis. Such income and gains are not subject to Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) liabilities.   This charge to tax does not apply in the case of unit holders who are non-resident. In the case of non-resident investors, liability to tax on gains from the fund will be determined in their home jurisdiction.

To assist taxpayers in determining the appropriate tax treatment for investments in ETFs, Revenue has published guidance which is available at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-01a-03.pdf.

There are currently no plans to review the taxation of Exchange Traded Funds.


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