I propose to take Questions Nos. 138 and 139 together.
Exit tax on investments in collective investment undertakings is generally deducted on the occurrence of a chargeable event. Such chargeable events can arise –
- on the making of relevant payments;
- on the redemption of units;
- on the transfer by a unit holder of their entitlement to units;
- on the appropriation or cancellation of units by a fund to discharge tax payable on a gain arising from a transfer of units by a unit holder; and,
- on the ending of an 8-year period beginning with acquisition and each subsequent 8- year period.
Exit tax must always be deducted from payments to investors with the exception of specific categories of investors such as a pension scheme, a life assurance company or a non-resident individual provided the investment undertaking is in possession of the appropriate declarations in advance of the chargeable event.
The following persons may be entitled to a repayment of the exit tax deducted provided the conditions in the following sections of the Taxes Consolidation Act 1997 are satisfied -
- a permanently incapacitated individual who is exempt from income tax under section 189 in respect of income arising from the investment of compensation payments in respect of personal injury claims;
- the trustees of a ‘qualifying trust’ within section 189A where the investment is held as part of the trust fund of the qualifying trust, provided that income from the trust or investment returns from investment of the trust funds is the sole or main income of the incapacitated individual;
- a thalidomide victim who is exempt from income tax under section 192 in respect of income arising from the investment of compensation payments made by the Minister for Health and Children or by the foundation Conterganstiftung für behinderte Menschen;
- income which has arisen to an individual as a result of the investment of a relevant payment within the meaning of such under section 205A, which is generally payments relating to the Magdalen Laundries.
The investment undertaking must deduct the exit tax in the normal manner, but the individual or trust may be entitled to a repayment of the exit tax. The exit tax can be reclaimed, where appropriate, when the annual tax return is submitted to Revenue.
I am advised by Revenue that further detailed information on the operation of exit tax on investments in investment undertakings can be found at the following link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-01a-02.pdf.
I am further advised by Revenue that the question of whether transferring investment amounts between financial companies will trigger any tax liability depends on the facts of each case. If the amount is being transferred from one investment undertaking to another, then it will, as outlined above, trigger an exit tax event. However, if the amount is held is some other type of investment product, such as a term deposit account, it may not.