The fund Ireland likes is the fund the IRS punishes.
Many of Europe’s ETFs are domiciled in Ireland. For an American, those are exactly the funds the US tax code treats worst, and Ireland has a harsh regime of its own for funds. Your portfolio needs a plan before the move.
Two systems, one fund
Banks and brokers in Ireland offer the local UCITS ETF first, the fund built for European investors. For a US taxpayer it is the worst choice on the shelf. The United States treats nearly every fund domiciled outside the US as a passive foreign investment company, and Ireland taxes funds under a regime of its own. Hold the wrong fund and both apply.
What a PFIC is
A foreign company is a PFIC when most of its income is passive or most of its assets produce passive income. A fund that holds shares and bonds meets that test by design, so a European ETF or mutual fund is a PFIC in the hands of an American.
The default treatment is punitive by intent. Gains and larger distributions are spread back over the years you held the fund, taxed at the highest ordinary income rate of each year and charged interest on top. Two elections soften it: a qualified electing fund election, which needs an annual information statement that most European funds never issue, and a mark-to-market election, which taxes each year’s rise in value as ordinary income. Every PFIC usually means a Form 8621 every year. The mechanics are set out under PFICs, ETFs and Form 8621.
What Ireland does to funds
| Point | Rule |
|---|---|
| Rate on fund gains and income | 38 per cent since 1 January 2026 |
| Deemed disposal | Every 8 years, even without a sale |
| Losses | No offset against gains |
| For comparison: shares | Capital gains tax of 31 per cent, annual exemption €1,270 |
Source: Finance Act 2025 (No. 18 of 2025), section 37; Taxes Consolidation Act 1997, as set out on our page on ETF and fund tax. Retrieved 24 August 2026.
The regime covers Irish and other EU funds and the foreign funds Revenue treats as equivalent. Our page on ETFs and fund tax in Ireland walks through each rule and the confusing term exit tax.
The double trap
Put the two together and an Irish UCITS ETF in an American’s account is taxed by Ireland at 38 per cent, with a deemed sale every eight years, and by the United States under the PFIC rules, with an interest charge and a Form 8621 a year. The foreign tax credit rarely lines up with either timetable, because the two countries tax different events in different years.
What Americans in Ireland usually hold instead are individual shares and US-domiciled funds in a US brokerage account that accepts clients living abroad. US-domiciled funds are outside the PFIC rules. How Ireland treats a particular US fund, and what the remittance basis changes about it, is a fund-by-fund question to settle before the move. Which banks serve Americans abroad is covered under brokerage accounts for US citizens in Europe.
What to settle before you move
- Keep your US brokerage account open and confirm that the broker serves clients with an Irish address.
- List every fund you hold, with its domicile, so nothing turns into a PFIC by accident.
- Decide the order of sales while you are still taxed only in the US, if a position has to go.
- Plan which account pays your Irish life, so investment income stays where it belongs. Our page on US taxes while living in Ireland explains why that matters on the remittance basis.
More for Americans moving to Ireland
A fund review before the first Irish tax year
Relocation USA to Ireland includes a review of your funds against both tax systems, your US reporting set up and your Irish registration. $7,500 per household.