The Finance Bill published last week puts further detail on and provides legislative underpinning for the new personal investment accounts. So we are taking the chance this week to run through in a quick-fire style a series of recent readers\u2019 questions on various aspects of the personal investment account scheme as providers start working on the shape of products that they will offer under the scheme.<\/p>\n
As a non-resident Irish citizen but with a PPSN, can I invest in the proposed investment scheme?<\/p>\n
BP<\/p>\n
No, you cannot open an account unless you are over 18, resident in the State and hold a PPS number. The fact that you are an Irish citizen is irrelevant. And if someone opens an account and subsequently moves outside the State, they can no longer contribute to the account during any period when they are non-resident.<\/p>\n
Money you would put in the investment scheme would be money you had likely already paid tax on (maybe at 52 per cent or 55 per cent if you are self employed). Why should this money be taxed again? It makes more sense to tax gain, not original contributions. It isn\u2019t like you are getting a tax credit or deduction with your contributions. This investment scheme doesn\u2019t make sense to me. You could actually lose money and yet still pay the 1 per cent tax.<\/p>\n
AM<\/p>\n
Taxing money you have already paid tax on is nothing new in Ireland or other jurisdictions \u2013 think VAT, excise on petrol and even customs duty on online shopping outside the EU. Or deposit interest retention tax (Dirt), capital gains tax and exit tax on savings and investments.<\/p>\n
You are certainly correct that you could be taxed at 1 per cent on part of your fund even if it makes a loss in a given year, as long as its balance exceeds \u20ac50,000. That is the outcome of the Government decision to follow the Swedish model for such investments rather than the UK individual savings account model. I can only assume that was done (a) for simplicity and (b) to allow the Government set the tax rate at as low an advertised figure as possible.<\/p>\n
Can I invest overseas in the new scheme?<\/p>\n
RW<\/p>\n
You can as long as it is through an investment account provider registered with Revenue for the purposes of providing these accounts. A register will be available as the scheme gets up and running. What investments they offer and in which markets remains to be seen.<\/p>\n
My wife and I will have approx \u20ac60k to deposit in the investment scheme next July. Are we limited to a total of \u20ac12,000 deposited annually or could we both take out a separate plan to let us deposit \u20ac24,000 during the year?<\/p>\n
BN<\/p>\n
You are each limited to contributions of up to \u20ac12,000 in any tax year. You cannot hold a joint account but you can each hold an account, allowing you to invest \u20ac24,000 between you.<\/p>\n
[\u00a0First-time buyers account for almost two-thirds of Irish mortgage transactionsOpens in new window<\/a>\u00a0]<\/p>\n Can I transfer my existing vanguard ETF to this investment account (new one) without any tax if it\u2019s less than \u20ac12k threshold? Or should I sell this and transfer?<\/p>\n AP<\/p>\n This has cropped up a few times. The purpose of the new personal investment account is to encourage new investment by people of savings largely held in deposit accounts.<\/p>\n There is nothing to stop you moving money from an existing investment \u2013 such as your Vanguard ETF \u2013 to one of these new accounts as long as you stay within the contribution limits but each will be treated on a stand-alone basis so you will have to settle any tax due on the Vanguard investment before lodging the money to one of the new accounts.<\/p>\n In sum, no, you will not be able to avoid existing tax liabilities on an investment simply by transferring it to one of the personal investment accounts. <\/p>\n Am I reading the rules wrong, or could investors do the following: build up gains under the \u20ac50k limit and when nearing it, withdrawing some funds (free of CGT). Rinse and repeat, like making bread from a sourdough starter? <\/p>\n BL<\/p>\n As long as the balance of the account stays below \u20ac50,000, no tax is due. The account provider will be obliged to keep tabs on the account balance each day over the course of the year and if the balance exceeds it on any day, the account starts being liable for tax.<\/p>\n But as long as the particular investment is liquid enough, there is nothing to stop you withdrawing funds from the accounts on occasion as you approach the limit to avoid tax, although you obviously are limiting your potential investment gains.<\/p>\n