Dáil Éireann Debate, Thursday - 18 October 2018
106. Deputy James Lawless asked the Minister for Finance the rationale behind imposing taxation on passive investments every seven years as though those investments had been divested; his views on whether this may be an impediment to the use of such investments as long-term pension-style instruments; and if he will make a statement on the matter. [42991/18]
Amharc ar fhreagraFinance Act 2000 introduced the gross roll-up taxation regime for investments in certain investment undertakings and life assurance policies. The gross roll-up regime provides for a single level of taxation on investment products. Under the gross roll-up regime, there is no annual tax on income or gains arising within the investment. Instead, tax applies at an investor level upon the investor withdrawing amounts from the investment.
Finance Act 2006 introduced the concept of deemed disposals every 8 years in relation to these investments. A deemed disposal occurs 8 years following inception of a policy of life assurance or acquisition of a fund and then every 8 years thereafter. The deemed disposal rules also apply to equivalent offshore funds. Any gain on the investment which arises from the date of inception or the date of acquisition to the date of the deemed disposal is subject to tax. This ensures that income cannot be rolled up indefinitely in life assurance policies or funds without being taxed. On the ultimate disposal of the investment any tax paid which arose as a result of a deemed disposal is allowed as a credit against any final tax liability on disposal.
Investment undertakings and life assurance policies are savings and investment products which are expected to have a return over the medium term. This was the expectation when the gross roll-up regime was introduced. There are special rules in relation to the taxation of pension saving products which are designed to have a return over the long term.
