Individual investors resident in Ireland could be in line for a significant reduction in their tax liabilities as the government considers cutting the exit tax payable on exchange-traded funds (ETFs).
Ireland is a recognised global leader in the ETF market, controlling 70% of the EU’s entire share. Yet critics have long argued that the country’s 41% exit tax rate, which applies to income from all funds for Irish-resident individual investors, deters domestic retail investors from ETFs, blocking them from the benefits and holding back further strengthening of Ireland’s position.
Enterprise Minister Peter Burke has confirmed that the government is examining how other countries tax gains from ETFs ahead of proposed changes in Budget 2026.
What Are ETFs?
ETFs are pooled investment vehicles that trade on stock exchanges like shares and track the performance of an index, sector, asset class, or strategy. They offer investors low-cost, diversified exposure to global and domestic markets and are popular for their transparency, liquidity, and cost-efficiency.
Current Tax Treatment in Ireland
The benefits outlined above make ETFs a favourite option among both institutional and retail investors worldwide. Yet the country’s high rate of exit tax makes Irish-domiciled ETFs less attractive for retail investors.
The 41% exit tax means that, in Ireland, cashing in ETFs comes with a higher tax burden than direct equity investments, which fall under the Capital Gains Tax (CGT) regime and are therefore subject to 33% tax. In addition, exit tax doesn’t just apply to proceeds when assets are disposed of. Under the “deemed disposal” rule, asset holders are liable to pay tax after eight years, regardless of whether they hold on to the assets or not.
This also creates and extra administrative burden for long-term savers. And it can lead to unexpected liabilities when ETFs are included as part of an estate, complicating inheritance planning.
Proposed Reforms: Fairer, Simpler, More Competitive
All of this puts people off from using ETFs as a long-term wealth-building tool, leading to accusations that Irish tax policy is penalising domestic investors.
Momentum for change started to build seriously with the publication in October 2024 of the government’s Funds Sector 2030 strategy. Among this policy paper’s recommendations was a proposal to bring the exit tax on ETFs and unit-linked funds in line with CGT at 33%. The review also proposes removing the eight-year deemed disposal rule.
These changes would streamline the tax system, support savers, and enhance Ireland’s appeal as a fund domicile, especially as global competition intensifies. A 33% tax rate means more money would stay in the hands of investors, while ending the deemed disposal rule would eliminate a confusing and complex feature of ETF investing in Ireland.
Lower tax and reduced complexity would particularly appeal to pension savers, first-time investors, and those seeking diversified growth. And without automatic tax charges after eight years, ETFs would become more viable for long-term and intergenerational wealth planning.
If these proposals are adopted as part of Budget 2026 as is now being suggested, we can expect to see more domestic capital invested in markets, and a strengthening of Ireland’s standing as an investment destination on the global stage. For Irish investors, it may be time to give ETFs another look.
Speak to an investment and tax specialist in your area to find out more about ETFs and tax-efficient wealth management strategies.
