Quote (from this link):

Gains on the transfer of certain assets are exempt from CGT. You do not have to pay CGT on gains you make on the disposal of certain assets. You do not need to pay CGT on gains from:

  • betting
  • ...

Derivatives trading is a form of betting, since one is not working with underlying assets and it is purely a zero-sum game.

Is capital gains taxable on derivatives trading in Ireland?

What about options, which is even more like betting?

What about someone betting on whether someone else will gain or lose money who is themselves trading?

It seems like there is some way of achieving CGT tax avoidance when trading by re-shaping this trading as a form of betting. Is this the case?

1 Answer 1


Most derivatives in Ireland, such as "contracts for difference" (CFDs) are subject to capital gains taxation (and sometimes to its 1% "stamp tax" on financial transfers as well).

But, the U.K. and Ireland under their exemption for "betting" allow an exemption from capital gains taxation for their residents only, which is called "spread betting". Despite being capital gains tax free:

spread betting is not particularly popular among Irish investors because it involves leverage and margin calls, which can prove very risky.

[The person interviewed] cited a statistic about those new to spread betting known in financial circles as the ‘Triple 90’: 90 per cent of traders lose 90 per cent of their money within the first 90 days of opening their account

Note also, that while spread betting is exempt from the stamp tax that applies in Ireland to transfers of certain financial instruments including many derivatives, at a 1% rate, and from the capital gains tax in Ireland, it is not necessarily exempt from all income taxation.

Specifically, Ireland, like many countries, makes a distinction between people who participate in financial activities as investors, and people who are in the trade or business of participating in financial activities, such as day traders and brokers. When professional traders participate in the market, their taxation is determined at an enterprise level based upon their overall revenues and expenditures, rather than as isolated capital gain transactions under the rules that apply to investors. A test called the "badges of trade" under Irish tax law applies when making that distinction for tax purposes:

At a very high level, if someone is buying and selling securities pretty frequently and deriving the bulk of their income from such activity, one could argue that this constitutes a ‘trade’ and that an income tax exposure arises. . . . if trading is your main source of income, then it’s taxable as income[.]

Just as spread betting gains are not taxable under the betting exception in Ireland, spread betting losses are not deductible in Irish tax law. The same source notes that:

Fixed-odds and binary financial betting is also classified as gambling and therefore any winnings generated are not subject to tax.

These latter two means of derivative trading that qualify for the betting exemption under Irish capital gains tax laws, however, are much less common than "spread betting". This is because "spread betting" is a very general type of financial play that has close analogies to ordinary derivative trading, while the other two do are basically U.K. and Irish oddities that arose mostly in response to the "betting" exception in their capital gains tax laws that aren't as flexible.

What is a spread bet?

When you spread bet, you take a position based on whether you expect the price of an instrument to rise or fall in value. You will make a profit or loss based on whether or not the market moves in your chosen direction. . . . With spread betting, you don't buy or sell the underlying asset (for example a physical share or commodity). Instead you place a bet based on whether you expect the price of a product to go up or down in value. If you expect the value of a share or commodity to rise, you would open a long position (buy). Conversely, if you expect the share or commodity to fall in value, you would take a short position (sell).

How spread betting works: what is a spread bet stake?

With spread betting, you buy or sell a pre-determined amount per point of movement for the instrument you are trading, such as £5 per point. This is known as your spread bet 'stake' size. This means that for every point that the price of the instrument moves in your favour, you will gain multiples of your stake times the number of points by which the instrument price has moved in your favour. On the other hand, you will lose multiples of your stake for every point the price moves against you.


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