750. Deputy Seán Kyne asked the Tánaiste and Minister for Finance in regard to the deemed disposal rule on electronic funds transfer (EFTs) whether our EU partners have more favourable rules, whether he believes this rule is a disincentive to EFT investment and encourages investors into the housing market as an alternative investment, whether he will carry out a review of the deemed disposal rule; and if he will make a statement on the matter. [56605/26]

I believe the Deputy is asking about exchange-traded funds (ETFs). An ETF is an investment fund that is traded on a regulated stock exchange. There is no separate taxation regime specifically for ETFs. ETFs, being collective investment funds, 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. This response confines itself to the position for domestic ETFs and ETFs deemed ‘equivalent’ to a domestic ETF located in the EU, EEA or an OECD Member State with which Ireland has a double tax agreement (OECD/DTA state).

For domestic investment funds, which include ETFs, the gross roll-up regime applies and there is no annual tax on income or gains arising to a fund. However, the fund has responsibility to deduct an exit tax when certain chargeable events occur, usually related to the transfer of value to the unit holder in the fund. In respect of payments made to certain unit holders in that fund. This exit tax, known as Investment Undertaking Tax (IUT), applies at a rate of 38% from 1 January 2026 in respect of Irish resident individual investors. To prevent indefinite or long-term deferral of this exit tax, and the associated loss of tax to the Exchequer, the deemed disposal rule was introduced in 2006.

Under the deemed disposal rule, tax is levied every eight years after an investment is made, and every subsequent eight years, regardless of whether a disposal has in fact occurred. The tax is levied on any gain in the value of the investment from the date of acquisition to the date of the deemed disposal. On the ultimate disposal of the investment, any tax paid is allowed as a credit against the final tax liability.

The Central Bank published a report in December 2025, ‘Retail Investor Participation in Ireland Consumer Research and Analysis’, which found that “the decision to invest is driven by a complex interplay of factors, including economic conditions, personal financial circumstances and psychological biases”.

It is notable that historically, participating in capital markets has not been viewed as an option for most Irish consumers. This combined with periods of significant market volatility may have played a role in the development of a financial culture with relatively low levels of trust and risk appetite, which favours cash and deposits over investments. The analysis suggests that the key obstacles to investment identified by non-investors are a lack of financial resources, psychological or emotional barriers and knowledge and understanding gaps. Taxation was not identified as a significant consideration for non-investors. However, it is the case that for existing retail investors, taxation was identified as a factor in their investment decision. According to the Central Bank’s research, 35% of investors reported that tax is a factor when considering an investment product. A key consideration is value, determined by the return on investment, after fees and tax have been deducted. This Central Bank research and analysis is also being considered in the context of the work underway on the roadmap for the taxation of retail investment.

The roadmap will set out an approach to simplify and adapt the tax framework to further support retail investment, while retaining necessary and important anti-avoidance protections in a proportionate manner. The roadmap will be published soon and the work underway includes careful consideration of the existing taxation rules. The roadmap will also take the European Commission's Savings and Investment Account Recommendation and the recommendations of the Funds Sector Review, including in relation to the issue of the deemed disposal rule, into consideration.

As the Deputy may be aware, at the first annual Savings and Investment Forum on 31 March 2026, I announced my intention to implement a new investment account, similar to the savings and investment account models operating in other jurisdictions. This account is a key aspect of the roadmap, and it aims to reduce the complexities related to retail investment taxation and allow retail investors to grow their savings more efficiently.