THE RATE OF ‘deemed disposal’ tax on investment funds will reduce from 38% to 35% from January, finance minister Simon Harris has announced. 

Deemed disposal is a tax that applies every eight years to collective investments such as exchange-traded funds (ETFs), a specific type of fund which allows buyers to track the performance of a group of shares.

It was introduced by the Irish government during the Celtic Tiger to avoid people keeping their money in funds for decades on end without triggering a tax.

In other countries, buying into an ETF is seen as an easy way to invest in the broader stock market, which tends to be a good investment over the long term, rather than the riskier option of investing in individual equities.

But in Ireland, the deemed disposal rule means you have to pay tax on any gains in your ETF after eight years, even if they haven’t been realised – that is, that have increased in value but not yet been sold. 

While some countries do have some kind of tax on unrealised gains, the amount tends to be pretty small until the investment is actually sold. 

Deemed disposal has long been seen as a barrier to savers in Ireland investing their money.

The rate was reduced from 41% to 38% in Budget 2026, despite an extensive Department of Finance review of the funds sector published in 2024 recommending that the rule be scrapped altogether.

For the second year running, the government opted not to scrap the rule. Instead, Harris opted to reduce the rate again. 

“I am pleased to announce a reduction in the rates of tax that apply to investors in Irish and equivalent offshore funds, and Irish and foreign life assurance products, including Investment Undertaking Tax and Life Assurance Exit Tax, from 38% to 35% from 1 January 2027,” he told the Dáil.

He also confirmed that deemed disposal will not apply on the new personal investment scheme that is due to open next July. 

Tax partner at Grant Thornton Brian Murphy told The Journal that while he would have liked to have seen Harris go further, the reduction in the rate was a positive move.  

He said:

The deemed disposal rules have been a bugbear of the industry for some time.

Murphy noted that Harris did allude to continuing to keep the rules under consideration. 

“I would maintain hope that there will be further amendments – maybe not in the Finance Bill in the next couple of weeks, but certainly in the next 12 months, or maybe even in the next budget cycle – that would bring an end, ideally, but certainly continued improvement of the deemed disposal rule.”

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‘Something we need to move beyond’

The Fine Gael leader previously acknowledged that the rate is “too high” and that he was aware that some policy measures that already exist are “hindering investment”.

“We will now intensively continue the work on the wider regime, including the rate of taxation, deemed disposal and the administrative burden facing investors, and I intend to make further progress on removing these barriers to investment,” he told the Dáil earlier today. 

Speaking to The Journal this afternoon, Harris said deemed disposal is “something that we need to move beyond”. 

He said there was “a limitation on what I was able to do in any one budget” due to the income tax package and other measures that were introduced. 

“We did now reduce deemed disposal for the second year in a row. You’ll remember my predecessor Paschal Donohoe reduced it last year by three points, and I’m reducing it now by another three.”

Referring back to the remarks in his Budget 2027 speech, Harris added: “I do want to use this 12 months to move beyond deemed disposal and to look at what is a better architecture.”