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Day Trading & CGT

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Comments

  • Registered Users, Registered Users 2 Posts: 1,714 ✭✭✭Ryaner


    The 30 day rule is a 28 day rule in Ireland as they mention weeks not days - https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

    It only applies really to selling and rebuying to show a loss. The rules don't have anything to stop someone selling at a gain, then rebuying again afterwards as they still owe on the gain, excluding the CGT allowance. Doing this is common enough in the US, to the point where there are entire companies based around helping you use the CGT allowance as it is much higher over there.


  • Registered Users, Registered Users 2 Posts: 1,162 ✭✭✭LawBoy2018


    As you are 'lawboy', do you happen to have access to Maguire, Irish Capital Gains Tax? I haven't been back in the college library to have a look. I'm sure it would have a passage on this if there was any ambiguity.

    I'll check for you tomorrow when I'm on my work laptop sir! I looked into this recently though for a client and we concluded that the Revenue guidance cited above was pretty black and white.


  • Registered Users, Registered Users 2 Posts: 281 ✭✭AlkalineAcid


    LawBoy2018 wrote: »
    It's true, you can't. You need to wait 30 days.

    Thanks. Do you have a source for the tax law?


  • Registered Users, Registered Users 2 Posts: 281 ✭✭AlkalineAcid


    Ryaner wrote: »
    The 30 day rule is a 28 day rule in Ireland as they mention weeks not days - https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

    It only applies really to selling and rebuying to show a loss. The rules don't have anything to stop someone selling at a gain, then rebuying again afterwards as they still owe on the gain, excluding the CGT allowance. Doing this is common enough in the US, to the point where there are entire companies based around helping you use the CGT allowance as it is much higher over there.

    So if I buy 100 shares of AAPL on Monday for $100 and sell for $98 on Tuesday, then buy 100 shares of MSFT for $100 on Wednesday and sell for $103 on Thursday, do I owe taxes on $300 gains at end of year because I can’t offset my AAPL loss within 28 days of purchase? For simplicity in this example I never trade AAPL or MSFT again after this.

    Can I offset my $200 loss on AAPL to show only $100 gains from my $300 MSFT profit?


  • Registered Users, Registered Users 2 Posts: 1,714 ✭✭✭Ryaner


    So if I buy 100 shares of AAPL on Monday for $100 and sell for $98 on Tuesday, then buy 100 shares of MSFT for $100 on Wednesday and sell for $103 on Thursday, do I owe taxes on $300 gains at end of year because I can’t offset my AAPL loss within 28 days of purchase? For simplicity in this example I never trade AAPL or MSFT again after this.

    Can I offset my $200 loss on AAPL to show only $100 gains from my $300 MSFT profit?

    In that case you likely can't offset the loss as the two stocks are likely off the same class. Although since the Revenue example only mentions a single share, you could probably argue that you can offset the loss.
    In the real world, if you were actually trading that close together, and often, Revenue would likely determine the stock trading was a trade and a whole set of other rules start to apply.

    My example was based around how people sell then rebuy the same share to raise their cost basis.
    E.g. buy 100 shares @ 100. End of the year sell 100 shares @ 110, then rebuy. You declare the 1000 gain which falls under the CGT limit and pay no tax.


  • Posts: 0 [Deleted User]


    Hey guys, what kind of expenses can you offset against CGT? Specifically I'm wondering if I can deduct the cost of a new laptop and smartphone required for online trading.


  • Registered Users Posts: 7 dolandduck


    Hey guys, stumbled on this thread couple of days ago looking for answers on wash sale rule and I'm happy to say this is one of the best sources of info on Irish taxes I've seen to date! Props!

    Particular shoutout and thanks to @inisfree0504 for, first of educating me that we can actually read the full tax act legislation online and then more specifically pointing out the relevant part on wash sale. Also to @Crimson_Ghost for likewise confirm and pointing out the discrepancy between legislation and revenue website.

    What I will add is another wrinkle I don't recall anyone mentioning here and that's the actual revenue manual on the 4 week rule (wash sale): https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-03.pdf

    If yous read that carefully, you will see that, while worded slightly differently, the actual revenue manual agrees with the tax act legislation in that a wash sale rule situation only arrises if the shares are reacquired.

    This means that only the example on the revenue website is incorrect and inconsistent with everything else!

    To sum it up this is how wash sale works, just like in any other country:

    e.g. 1: no reacquisition.

    1. Buy 5 shares of stock A
    2. Sell 5 shares stock A in less than 4 weeks for a loss. That loss can be used against any other future gain.

    e.g. 2: reacquisition.

    1. Buy 5 shares of stock A
    2. Sell 5 shares stock A in less than 4 weeks for a loss.
    3. Buy back (reacquire) 5 shares of stock A within 4 weeks of the disposal. That loss cannot be used against any other gain, except the gain on the reacquired shares.

    e.g. 3: partial reacquisition.

    1. Buy 5 shares of stock A
    2. Sell 5 shares stock A in less than 4 weeks for a loss.
    3. Buy back (reacquire) only 3 shares of stock A within 4 weeks of the disposal. That loss on 3 shares cannot be used against any other gain, except the gain on the 3 reacquired shares. The loss on the other 2 shares which were not reacquired can be used against any other gain, just like e.g. 1


    So to put it in lay mans terms that anyone reading this thread in the future could understand - your losses never "disappear", wash sale or not. They either get used up by the reacquired shares or they get used up by other gains if no shares were reacquired. This is how every other country does it and this is how Ireland does it, in its legislation, in its revenue manual.

    So the example on the revenue website, which to quote again https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

    is incorrect, Jane can set her loss against any other gain she may make. Why? Because neither legislation, nor actual revenue manual prohibits it! So please spread the word and put pressure on revenue to fix the egregiously misleading example on their website. Because it only benefits revenue. There's no issue for revenue if you don't claim losses and pay more tax...

    Meanwhile I'm especially disappointed to learn of the quality of accountants that we seem to have in Ireland. Here's an article which incorrectly states wash sale rule and that in example 2 the loss is "gone forever" and can't be used against other gain, essentially parroting the incorrect example on revenue website https://irishfinancial.ie/the-wash-sale-4-week-rule-ireland-everything-you-need-to-know/

    It was written by an accountant! https://irishfinancial.ie/about/

    He also has a youtube channel where he's spreading the same miss-information on wash sale rule https://www.youtube.com/watch?v=xj_5GRxeX-k&ab_channel=WalterDunphy

    The sad part is that he's presenting himself as an accountant who's suppose to understand investments - yet he makes this massive error.

    Unfortunately, I've seen a few of his videos and he makes errors often...

    Now I do appreciate his efforts to bring general financial education to the Irish masses, something sorely needed, but at the same time I would not trust him to do my taxes haha.

    I'm actually not saying he's exception, oh no, he's the norm. The general point i'm making, is that this isn't a unique incidence, I've heard people talk to different accountants about some issue and get different answers and I've heard people talk to different revenue personal and get different answers on some issue. All the accountants I've talked to, none of them even know about the deemed disposal of ETFs rule that Ireland has...

    So the sad truth, when it comes to investments: You cannot trust accountants. You cannot trust revenue personnel. The only person you can trust is yourself and your own reading of Tax Act legislation. I'd say revenue manuals are ok too, but if anything seems suspicious, suggest to go level deeper (Tax Act legislation) rather than higher (revenue website), because as we learned, only source of truth is the legislation.

    Thanks for reading.



  • Registered Users Posts: 7 dolandduck


    Have something else for you guys I think you're gonna love this:

    I have an interesting potential loophole regarding Irish ETFs you might want to hear... how to avoid the deemed disposal indefinitely, yet all within Irish tax system! Beat them at their own game!

    So personally I'm basically a day trader. I didn't plan for it, just ... fell into it. Was trading options and realised that's it's more profitable to sell options with short expiry. So I day trade options every day, 10s of them. I have 100s of transactions a month. It's all for income. Motive is income. So according to "badges of a trade" i'm a trader. Heard as much from various sources online, accountants etc.

    Now here's the interesting bit. Normally options (or stock) are CGT rules, but when you're a trader, you fall into Income Tax rules and pay income tax on any profit.

    That got me thinking then, what about my other assets that i also hold long term? I don't want to pay Income Tax on those, I want to pay more advantageous CGT! So I was talking to an accountant about this and asking, how does revenue view asset segregation? Are my long term assets also subject to Income Tax or still CGT? What If have them on different broker accounts, clear separation etc. 

    The response I got is this: "once you open income tax registration, you are trading. Tax is on you personally, not on your separate accounts. If you are trading all your incomes on shares , ETF etc will be subject to income tax doesn't matter how long you keep them."

    Now this same accountant didn't seem to know the deemed disposal rule, so take it with grain of salt, but to be honest i think it makes sense. If you are a trader, all your income from trading activity, buying/selling stock, options, ETFs etc will fall under Income Tax.

    Now here's the kicker you should see by now...

    If I'm a "trader" and follow Income Tax rules, no matter what I trade and how long I hold it - then what's stopping me from buying and holding ETF indefinitely? If I'm a "trader" then ETF is just another thing i "trade". So I don't need to report its purchases on form 11, nor do i need to pay deemed disposal. ETF is just another asset I "trade" as part of my "trading" activity. I just happen to hold it for long time...

    The only thing I need to do is maintain my trader status. So keep trading. Keep selling options etc. If anyone else want's to do this, risk free, simply buy & sell something like BRK.B stock every day. Just buy and sell stock immediately, loosing nothing but few cents cost of broker commissions. All you need to do is keep up the impression that you are a trader. That's shown by volume of trades daily, short holding frequency, motive etc. If the revenue asks "wow you trade so much but have little to no profits/income?" you can say "so do 99% of other stock traders, who loose money or break even at best" - a well known statistic.

    So once you buy & sell a lot of shares every day, no matter how much you profit, it's hard to prove you are not a trader. And once you're a trader doesn't matter what else you hold and how long 🙂

    Now Income Tax is higher rate (max 52%) compared to deemed disposal (41%) but:

    1. your gains can compound indefinitely.

    2. you can cease trading any time by closing your income tax registration to go back to deemed disposal if you wish.

    3. if you're retired and solely living off your "trading" income, then you might start selling some ETFs at that point and if you're under 20k a year you could be paying next to no tax (the usual income tax band rules). But to be honest, you'd have to be making at least 100k+ pure profit to be paying 41% tax rate. So much better than flat 41% from deemed disposal "no matter what amount". 

    So, Am I insane or what? 🙂 all feedback welcome 🙂 


    Particularly interested if @inisfree0504 or @Crimson_Ghost might know any legislation we could bear on this, particularly income tax. This all hinges on whether revenue see different assets as separate entities, some for CGT, some for IT, some for DD.

    One accountant says they are all the same. Once Im a trader under IT, it's all under IT. but so far it's one accountant and today we learned not to trust accountants too much haha



  • Registered Users, Registered Users 2 Posts: 1,162 ✭✭✭LawBoy2018


    But you said that you will be holding the ETFs long term, rather than trading them regularly. For that reason I would imagine they would be subject to the deemed disposal rules.



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  • Registered Users Posts: 7 dolandduck


    As i mentioned, the key question is whether all my assets in my stock broker account are considered for IT or not. The one accountant I asked said that once I'm designated a trader, with income tax registration etc and I'm carrying on a legit trade, i.e. day trading stock, then indeed all my assets in my broker account will be subject to IT rules, no matter what i trade or how long i trade it for.

    So once i'm day trading something, i can also be long holding an ETF as "just another one of my trades" that just happens to be a very long running trade...

    To be honest, revenue could still try sue me and say im using tax rules to unfair advantage etc. but it gets even more grey:


    If I'm trading and all my stuff is IT at max 52% rate, yet if I file my ETF holdings under Deemed Disposal, then they might come down on me saying im trying to dodge 52% tax with 41% tax 😄

    If I consider ETF to be under IT and don't file it, don't pay Deemed Disposal tax every 8 years etc. They could say im abusing IT rules to dodge Deemed Disposal tax every 8 years 😄

    lose lose? 



  • Registered Users, Registered Users 2 Posts: 1,162 ✭✭✭LawBoy2018


    I think you were given bad advice tbh. You need to speak with a tax advisor, rather than an accountant. It seems straightforward to me but maybe I'm missing something?

    I hold both ETFs and equities in my Trading212 account, yet both assets are subject to separate tax regimes.



  • Registered Users Posts: 7 dolandduck


    Is "tax advisor" not an accountant? I though they were synonymous?

    Are you saying there's a separate profession "tax advisor" that is different to accountant and/or revenue officer (any links, suggestions?)? Either way, accountants are suppose to know the tax right? I only got an answer from the accountant because I asked, but I could have just handed her over my trading activity and asked to do my taxes for me and she would have made that same determination anyway without telling me and thus did a tax return on my behalf with those (incorrect?) assumptions. Who's liable then?

    Otherwise how else is this suppose to work? Am I suppose to separately talk to some tax advisor and then tell accountant how to do their job :D ? Doesn't sound right...

    "I hold both ETFs and equities in my Trading212 account, yet both assets are subject to separate tax regimes."

    Question, are your equities long term holdings, i.e. you're expecting to pay CGT on that? if so then you as a person are classed as investor from tax pov. So yes, its DD tax for ETF and CGT for other equity you hold, IT for dividends etc.

    But the accountant said, when you're day trading, you as a person are classed as a trader, you open income tax registration (which I have) and at that point your proceeds are subject to IT (which seems correct, I verified this in many sources) and also any other assets in your trading account are also subject to IT no matter how long you hold them (this bit is unverified so far).

    I'm guessing the clarification is there to make revenue life easier. Once you're for sure a "trader" with at least some of your assets, it would be hard to prove you're not a trader with your other assets as well. Like, with "badges of a trade" being vague as they are, it's hard enough to determine if you're a "trader" or not normally, considering you are literally day trading all your assets every day. So then to try and make one determination for sub section of your assets and another for another subsection just sounds like a lot of work - so they "simplify".



  • Registered Users Posts: 7 dolandduck


    To think another way as well. Once you're a trader, you're essentially running a business. Just like a "sole trader" or you could even open limited liability company. In a "business" you have different tax regimes as you may know. When you're a sole trader, you pay Income Tax on your trading profits. With LLC you pay corporation tax, which is lower than personal income tax (stock day traders often open LLC for that reason).

    So when you open an income tax registration with the business of "stock market investing" it's literally a business, so you make income tax returns on trading profits and trading loses, what you trade within that business - doesn't matter (by my understanding). Could be currency, shares, options, ETF etc.



  • Registered Users, Registered Users 2 Posts: 1,162 ✭✭✭LawBoy2018


    You would be surprised by how little some accountants know about tax. Some tax advisors are accountants and vice versa, they're two separate qualifications here in Ireland.

    I understand what you're saying, but my instinct (without doing the relevant DD) is that your analysis is incorrect. I would have thought that each transaction would be assessed individually from Revenue's POV, but you're saying that you were advised to the contrary? As in, if you were trading Apple shares regularly, you may be subject to income tax rather than CGT - however, you wouldn't really be designated as a "trader" per se.

    It would be great if we could get someone with more experience in Tax to chime in, I only worked in Tax for 2 years.

    Also, which Income Tax Return Form will you be submitting? The Form 11 I'm guessing?



  • Registered Users Posts: 7 dolandduck


    "You would be surprised by how little some accountants know about tax. Some tax advisors are accountants and vice versa, they're two separate qualifications here in Ireland."

    i still don't get then, how are accountants able to do your tax returns (form 11) for you if they don't understand the taxes? Isn't that a bit like trying to do a math problem without knowing how multiplication works? XD

    "I would have thought that each transaction would be assessed individually from Revenue's POV, but you're saying that you were advised to the contrary?"

    yeah. I don't think she was tax advisor, just an accountant. so not 100% sold on this either. but it does give something to think about and sounds plausible.

    "As in, if you were trading Apple shares regularly, you may be subject to income tax rather than CGT - however, you wouldn't really be designated as a "trader" per se."

    If you're trading Apple shares regularly, that is viewed as income and thus you need to pay Income Tax on that. Many sources I've seen seem to agree on this.


    General "trading" from revenue POV

    Now let's step back a bit and looked at trading (not "stock trading", just a "trade", i.e. side hustle, secondary income etc.), how do you pay income tax on your trade / secondary income? This is a broad question general question. Let's say you do some part time freelance on Upwork or something, or have a side hustle. That's all subject to Income Tax. So how do you pay it?

    The answer is, if you make less than 5k per year, or your turnover is less than 30k a year, you can file that as mere extra income on Form 12. You don't need to specify source of that, so it's kinda loose and ambiguous - grand. However if you're over those (small) limits (i.e. make more than 5k or turnover more than 30k), then things start to get a lot tighter and more defined. You are now a "chargeable person" and have to get an Income Tax registration and report your profits as trade income on Form 11 (i.e. Section B INCOME FROM TRADES, PROFESSIONS OR VOCATIONS).

    You can have as many of these side hustles as you want and you report them as individual trades under Section B, starting with most prominent trade first.

    Now, if say you're doing freelance on Upwork, then all activity related to that is a trade and subject to Income Tax rules. You report profits as trade income and pay IT on that. You can reduce tax by expenses like work equipment, laptops, perhaps courses to up-skill for your trade, etc. You have an income tax registration open for this and you report on Section B on Form 11.

    That's my understanding of how any "trade" works.


    Back to Stock market

    Now let's look at "stock market dealing". Using the word "dealing" to distinguish from "trading" - they mean the same of course, but trying to use a different word from "trade"/"trading" to distinguish from the general definition of a "trade" (from revenue POV) made in section just above.

    Normally everyone is assumed to be "investor" when it comes to stock market and is subject to CGT rules.

    But if you're deriving an income from the stock market via dealing, that is treated as a "trade" and thus subject to Income Tax rules. To be extra clear, the income is from "dealing/trading", i.e. buying and selling securities (stocks / options etc) and not dividends. Dividends are income too, yes, but they have an entirely separate section on Form 11, so you can an "investor" and still derive income from your shares via dividends and still remain an "investor" from revenue POV. Dividends (especially foreign, like USA stock) also have special treatment due to double taxation agreements between Ireland and foreign nations. So yes, dividends is income, but entirely separate kind to a "trade" income. (SIDE NOTE FOR ANY INVESTORS READING: you still have to open income tax registration in order to file Form 11 if your dividends exceed 5k a year! But you still file them in the dividend section of form 11, not as "trade" income).

    Now I asked revenue in the past how they view investing v day trading and also asked how that affects the rest of the holdings.

    "In relation to profit made from day trading, this is treated as a trade and should be returned as a trade income on your Income Tax return."

    So they confirmed that there definitely is a notion of investing vs trading when it comes to stock market. It's treated as trade and returned as trade income. The response was kinda vague enough that it could be read a few different ways, but overall I don't think they answered my second question about asset segregation. So it's still not clear if everything falls under IT or not, once you're a trader. They gave this line on CGT there:

    "Therefore CGT is payable on any long term stocks/ shares you sell"

    It sounds almost as if they are saying that there is asset segregation? There is "long term" and "short term". This is a notion that is much clearer in countries like USA. They literally have a short term capital gain rate, which is basically IT rate and long term capital gain rate, that is CGT rate. And USA has a clear time frame. Short term is less than 1 year holding (iirc) and long term is more than 1 year holding. However, I've seen elsewhere mentioned that Ireland doesn't have such short term / long term notions at all, at very least, not clearly defined with time frames or anything like that.

    This poses big problem of ambiguity, even IF revenue supports asset segregation for stock market dealer, how long is "long term" and how short is "short term"? They don't define. Stock market dealers can be holding their positions for a day, days, weeks, even months and still all with a same view of making "short term gains". I think USA designation is best where anything over 1 year holding is deemed investment - don't know any stock market dealer than holds anything for 1+ years as part of their "regular trading activity".

    So after the ambiguous response from revenue, I asked follow up question, for which i'm waiting a response on to this day....

    Tired of waiting on revenue i spoke to accountant, asked the same questions, even asked about separate broker accounts to "separate my assets" etc. The response I got from accountant that, I mentioned previously, seems to disambiguate and simplify this whole situation to the point that it seems plausible. To reiterate what accountant said:

    "once you open income tax registration, you are trading. Tax is on you personally, not on your separate accounts. If you are trading all your incomes on shares , ETF etc will be subject to income tax doesn't matter how long you keep them."

    So dissecting the above (and other voice messages talking about same so i wont transcribe them here) let's see if we can answer the questions:

    Are you investor or trader (stock market dealer)?

    That depends on 6 badges of a trade: size, frequency, volume of transactions, motive etc. (most grey area, but anyone I talked to, they viewed my short term dealing in stock options as a "trade" for purposes of Income Tax)

    If you are a "trader" (stock market dealer), how is this know?

    You open an income tax registration for your "trade" with revenue and file Form 11 each year on your trading profits. I have this open. Interestingly, I opened this so i can file dividend income on Form 11, anticipating the day when I make over 5k dividends, which necessitate income tax registration as mentioned earlier in this message.

    The accountant further added:

    "If you start trading you open income tax registration, and if you cease trading you close it down.. you either trading ... or you cease trading.. revenue will want to see at least a year break between trading and gain for cgt ..."

    Once you're a trader, with an open income tax registration, how are other, "long term" stock market assets treated, how are ETFs treated do they fall under IT or CGT/DD?

    All your assets are subject to IT, not matter what you hold, or how long. (allegedly).

    So unlike USA where in a single broker account you can have a notion of "short" term and "long" term gains that are subject to IT and CGT respectively, Ireland seems to simplify the whole thing in that either everything is CGT/DD (i.e. you're "investor") or everything is IT (i.e. you're a "trader"), because Ireland has no notion of short term / long term gains like USA. Seemingly. That one message from revenue above casts some doubt with reference "Therefore CGT is payable on any long term stocks/ shares you sell" but even then, there's not definition anywhere to what "long term" is.



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  • Registered Users Posts: 1 LIFECANSUCK


    Thanks for this. So much confusion out there. I'm looking at day trading the NYSE to see if it's possible/profitable from Ireland. Being able to net off losses is crucial.



  • Registered Users Posts: 1 5KULK3R


    Reading further down this thread it just seems to get more off the rails.

    Here's my two cents worth, and a question.

    In day-trading when you make a realized profit or loss that is a taxable event and adding the fees you get total cost.

    A. Taxable event is when you make a realized P&L

    B. You pay 33% CGT on those events

    Therefore, I presume I can I add up all the total fees, total costs, total P&L over a longer period of time containing many individual trades, and then enter that into information into CGT form? Keeping evidence of the transactions, IDs etc.. ? Is this true?

    Thank you.

    Further context: Crypto Trading

    Post edited by 5KULK3R on


  • Registered Users Posts: 1 daytrader183


    Just to add on to this, would using a prop firm to trade change any of this as you are not using your own assets to trade with and receive an invoice from said company, if profitable. Would income tax only apply to this?



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