Exit Tax

Exit tax is the Irish tax regime applied to gains from life-assurance investment bonds and most regulated investment funds — including UCITS funds, ETFs domiciled in the EU, and unit-linked life products. The rate is 41%, charged on the gain (proceeds minus original investment), and there is no annual personal exemption.

The defining feature of exit tax is deemed disposal. Every eight years, the Revenue treats the investor as if they had sold the fund at its current market value, and exit tax is charged on the gain — even though no actual sale has happened. The tax paid is credited against the eventual final disposal so the investor isn’t double-taxed, but the cash drag from the eight-year charge can erode long-term compounding.

Exit tax is materially different from CGT (33%, with a €1,270 annual exemption, no deemed disposal). For an investor who can choose the wrapper, this often pushes them toward CGT-treated assets — direct shares, certain UK-domiciled ETFs, or US-domiciled stocks — over Irish/EU-domiciled funds. The choice is product-specific and trips up many DIY investors.

There is an ongoing policy review of exit tax and fund taxation; nothing has changed materially yet but watch for Budget updates. Use the compound interest calculator to model the long-run drag of exit tax versus alternatives.