How to avoid paying tax on investments? Thinking long term when I cash out.

Emigrate before cashing out, to less socialist loon driven country. So long as you don't return, you can also ignore the three year bollox.

Stocks or EFTs or both?

EFTs are due CGT after 8 years of you don't sell.

Who knows what things will be like in 2 years, never mind 20.

All you can do is plan with the information you have today.

Have a look at the OP's other threads before you decide to reply.

No house? Where do you live?

If the loan is not paid back, the collateral would be liquidated - which would trigger CGT on any gain.

The scheme proposed above is no more tax compliant than a suggestion to cash them in at 100% and just not tell Revenue.

The fact that someone might have an anecdote that they know someone who did this and got away with it should not be confused with proof that it is a way to avoid tax legitimately.

Seems that it was the case back in 2018 according to Brendan Burgess.

Also the law in UK , in similar circumstances.

What is the tax position on a repossession of a property?

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Question:

Is capital gains tax due on a property that was repossessed by the bank after the owner died? 

Arthur Weller replies: 

If you look at HMRC’s Capital Gains manual you can see that when a property is repossessed it is deemed as though the debtor sold it. If you look at CG30540 you can see that the personal representatives of the deceased are treated as having acquired the property at its market value on the day of death, and the capital gain is calculated accordingly. 

No CGT on your own residence. CGT due on any capital gain from other property. No capital gain means no CGT

You must be envisioning some sort of edge case scenario where you buy a property, don't keep up repayments such that the accrued interest eats up not only your own deposit plus whatever capital gain was on top of your purchase price.

No. Your house is your principal private residence, so any gain is exempt.

But, in general, if you grant a charge over an asset, any dealings with the asset by the chargee are treated for CGT purposes as though the chargee were your agent — Taxes Consolidation Act 1997 s. 537(2).

So, if you own a commercial property, and you mortgage it, and then default, and the chargee gets an order for possession, when the chargee sells or otherwise disposes of the property you are taxed as though you had disposed of it and the proceeds of the disposal had accrued to you. E.g. if you originally bought the property for €1 million and some years later you default on your loan and the chargee sells it for €1.4 million, you are liable to CGT on a gain of €400,000.

Points to note:

1. The amount that you borrowed, or the amount that is owed later, or the amount of interest that you paid or didn't pay don't enter into this calculation at all — just the acquisition cost of the building when you acquired or enhanced it, and the disposal proceeds when the chargee (as your agent) disposes of it.
2. Granting the mortgage is not a disposal for CGT purposes. Str8outtaWuhan reports above that he took out a loan against his crypto and "Revenue didn't come knocking". They wouldn't — neither taking out a loan nor mortgaging your property to secure a loan is an event with CGT implications. He didn't default on the loan, so the chargee never exercised his security or sold the crypto, so there never was a disposal by the chargee.
3. The repossession of the property - where the chargee goes to court and gets an order giving him possession of the property - also isn't a CGT event. There's no disposal until the chargee disposes of the property. (But he will usually do that fairly quickly, since his whole purpose in taking possession of the property is to recover the amount owing to him.)

We also need to take note of s. 571. Because it's your property that was repossessed and sold, you're liable to CGT. But, very often, people who have had their properties repossessed and sold are a bit short of assets so, forseeably, collecting CGT from them can be a bit difficult. A wise and far-sighted legislature has spotted this problem, and has enacted that any amount of CGT arising on the disposal of the property can also be assessed against and recovered from the chargee who disposed of it.

Which means that lenders (unless they are particularly dim) will only treat an asset as security for an amount not more than the after-tax proceeds they might realise on selling the asset. They can be called upon to settle the borrower's CGT bill so they want to know that, even after they have settled it, there will be enough left over to clear the debt to them.

I'm not sure what you mean by "use it to validate transactions"?

On edit: Normally, when you grant someone security over an asset, his interest in the asset is limited to using it to recover what is owed to him. He can't just take it and treat it as his own absolutely. So, if I owe you €1,000, you can seize the secured asset and sell it to get your €1,000. If you in fact sell it for €1,200, you have to pay the extra €200 to me, which you wouldn't have to do if seizing the secured asset mean you became outright owner.

This cuts both ways. If you only succeed in selling the asset for €800, you're still owed €200 and you can chase me for it.

Statements of Revenue practice will be based on the assumption that security interests are structured like this. But of course they don't have to be. There's nothing to stop you and me entering into an agreement under which:

• You give me €1,000
• I transfer my holding of ETH to you
• If I don't repay the €1,000 after (say) 1 year you get to keep the ETH; they become yours absolutely
• Your recourse is limited to that; if by then the ETH is worth less than €1,000, tough; I don't owe you anything.

The thing is, Revenue are going to look at that and say (correctly) that this isnot a security interest in my holding of ETH at all; it's a sale option. It's quite obvious that if, at the end of the year, if the ETH holding is worth less than €1,000, I'm going to "default" on the "loan"; I'm not going to pay you €1,000 to recover a holding of ETH worth, say, €750; even if I want ETH I can go into the market and use the same €1,000 to buy ETH worth, well, €1,000. Conversely, if the ETH are worth €1,200 then of course I'm going to pay you €1,000 to acquire a holding of ETH worth €1,200; if necessary I'll borrow from someone else to complete the transaction.

In other words, this isn't a security interest at all; it's a put option. You've given me the right to sell you a fixed quantity of ETH for €1,000 in a year's time. If I exercise that option, that'll be a disposal, and I'll be liable to CGT on any gain.

Tl;dr: You can't make the Revenue treat a transaction as a loan or a mortgage or whatever by writing the word "loan" or "mortgage" on the document. The Revenue will look at the substance of the transaction and, if it's in fact a sale or an option or whatever, they will assess it on that basis.

I'm not investing in property, I'm buying a house to live in. All of these risks you mention re. mortgage etc. they all exist regardless of paying AVCs. In fact, you have far less disposable income when paying into a pension and also paying off a mortgage.

Anyway, I'm strongly considering buying one of these nifty prefabricated houses that are all the rage now. And guess what? I can pay cash right now as I have enough saved up from my 20s to afford it!

I don't think that gains being tax-free makes it a worse investment. But I take your point that investing in your home means that, to realise your investment, you might have to move house at a time when you otherwise wouldn't.

But this comes back to what your investment objectives are. If tax minimisation is your priority, that's a constraint you may be willing to accept. The important thing is to think clearly, recognise the trade-off that you're making, and be sure it's a trade-off you want to make.

Even in a slow market, houses are readily saleable, if you want to sell. They're much more saleable, for instance, than a shareholding in an unlisted company, which is another investment that people make. The issue is that if your home is also the whole or virtually the whole of your investment, you're accepting a risk that your desire to realise your investment may conflict with your desire to continue living in the home you're already in.