Revenue taxes your unrealised gains at year 8 and year 16 — even though you haven't sold a single unit. Over 20 years at 7% annual return, that's €58,345 in total exit tax versus €53,613 under the 33% CGT regime. The compounding drag means you end up with €24,891 less (10.4%) compared to holding direct stocks.
Deemed disposal events
Year
Tax owed
Portfolio after
Year 8
€9,304
€71,388
Year 16
€27,380
€158,788
Frequently asked questions
What is deemed disposal?
Deemed disposal is an Irish tax rule that treats you as having sold and immediately repurchased your ETF units every 8 years, even if you haven't sold anything. You owe exit tax on the unrealised gain at that point — requiring you to fund a tax bill without actually realising any cash.
Why is the ETF exit tax rate 41% instead of the 33% CGT rate?
Irish-domiciled ETFs and many other collective investment funds are subject to 'exit tax' rather than CGT. The exit tax rate is 41% (for individuals). This is a higher rate than the 33% CGT rate that applies to direct stock holdings, making ETFs tax-inefficient for long-term Irish investors.
Does deemed disposal apply to all ETFs?
Deemed disposal applies to Irish-domiciled ETFs and most EU/EEA-domiciled funds (e.g. UCITS funds). It does not apply to individual shares, ETFs domiciled in non-EU countries (though those have their own complications), or certain investment trusts. Most popular index ETFs available to Irish investors (e.g. Vanguard, iShares UCITS range) are subject to deemed disposal.
Can I avoid the 8-year deemed disposal rule?
There is no straightforward way to avoid deemed disposal for standard UCITS ETFs. Some alternatives include holding individual shares (subject to 33% CGT on disposal only), using a pension (contributions grow tax-free), or using structured products. Revenue has noted possible future reforms, but as of 2025 the rule remains in place.
Is the tax paid on deemed disposal recoverable?
Yes — partially. When you eventually sell the ETF, the tax paid on any deemed disposal is credited against your final exit tax liability. However, because you paid the tax early (before selling), you lose the compounding benefit of that cash over the intervening years. This is the core 'tax drag' shown in this calculator.
Assumes Irish-domiciled funds subject to deemed disposal. Exit tax rate 41%. CGT comparison assumes 33% on disposal only. Annual €1,270 CGT exemption not modelled. Deemed disposal tax credit on final exit not modelled — actual ETF penalty may be slightly lower. Illustration only — not financial or tax advice. Rates correct as of 2025 budget.