Finance Act 2020

Amendments consequential on migration of shares to EU central securities depository

62. (1) The Principal Act is amended

(a) in section 172A(1)(a) by inserting the following definition after the definition of “recipient ID code”:

“‘recognised qualifying intermediary’, in relation to a relevant distribution, has the meaning assigned to it by section 172FA;”,

(b) by inserting the following section after section 172F:

“Recognised qualifying intermediaries

172FA. (1) For the purposes of this Chapter, a person shall be a recognised qualifying intermediary if the person is—

(a) a qualifying intermediary that is also a recognised clearing system, within the meaning of section 246A(2)(a), or

(b) a qualifying intermediary that is also a person who is wholly owned by a recognised clearing system, within the meaning of section 246A(2)(a).

(2) A recognised qualifying intermediary may receive relevant distributions without the deduction of dividend withholding tax and pay those relevant distributions without the deduction of dividend withholding tax to another recognised qualifying intermediary or to an authorised withholding agent so long as the recognised qualifying intermediary has obtained a notice in writing from the authorised withholding agent or the other recognised qualifying intermediary, that it is an authorised withholding agent or a recognised qualifying intermediary, as the case may be, in relation to those distributions.”,

(c) in section 172G(1) by inserting “, either directly or through one or more than one recognised qualifying intermediary,” after “makes a relevant distribution”,

(d) in section 172H—

(i) by substituting the following subsection for subsection (1):

“(1) An authorised withholding agent which is to receive, on behalf of other persons, any relevant distributions to be made to it by any company resident in the State, either directly or through one or more than one recognised qualifying intermediary, shall notify that company or that recognised qualifying intermediary, as the case may be, by way of notice in writing, that it is an authorised withholding agent in relation to those distributions.”,

(ii) in subsection (2) by inserting “either directly or through one or more than one recognised qualifying intermediary,” after “the State”, and

(iii) in subsection (3) by inserting “or the recognised qualifying intermediary, as the case may be,” after “notified the company”,

and

(e) in section 172LA—

(i) by substituting the following subsection for subsection (1):

“(1) In this section—

‘proper owner’ means the person beneficially entitled to a relevant distribution as a result of the specified event;

‘recorded owner’ means the person beneficially entitled to a relevant distribution before the specified event;

‘stockbroker’ means a member firm of the Irish Stock Exchange plc trading as Euronext Dublin or of a recognised stock exchange in another territory.”,

(ii) in subsection (2)

(I) by substituting the following paragraph for paragraph (a):

“(a) a company resident in the State has made a relevant distribution, either directly or indirectly through an intermediary, to a recorded owner on the basis of the information on the share register of the company, or on the basis of a securities account in the name of the recorded owner held by an intermediary, at a particular date,”,

(II) in paragraph (b) by substituting “the proper owner” for “another person (in this section referred to as the ‘proper owner’)”, and

(III) by substituting the following paragraph for paragraph (c):

“(c) a person (in this section referred to as an ‘accountable person’), being the relevant stockbroker or intermediary who has acted for the recorded owner in the specified event, is obliged to pay the relevant distribution to the proper owner or to an intermediary holding securities on behalf of the proper owner, which action is in this section referred to as the ‘settlement of the market claim’.”,

(iii) in subsection (3) —

(I) in paragraph (b) by inserting “or intermediary” after “relevant stockbroker”, and

(II) in paragraph (c) by inserting “or intermediary” after “relevant stockbroker”,

and

(iv) in subsection (4) by inserting “or intermediary” after “relevant stockbroker”.

(2) The Principal Act is amended in Chapter 2 of Part 19 by inserting the following section after section 545:

“Share disposals and central securities depositories

545A. (1) The migration of shares under the Migration of Participating Securities Act 2019 shall not be treated as a disposal of those shares for the purposes of the Capital Gains Tax Acts.

(2) Subsection (3) applies in relation to shares held by a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 201438 ) whose rules require holders of interests in such shares to hold those interests by way of a co-ownership interest in a fungible pool of underlying shares.

(3) Where this subsection applies and a person disposes of a co-ownership interest referred to in subsection (2), the asset deemed to have been disposed of for the purposes of the Capital Gains Tax Acts shall be the person’s interest in the underlying shares.

(4) References to—

(a) shares quoted on a stock exchange in sections 29(1A)(b) and 980(2)(d) and (e), and

(b) shares in a company in the definition of ‘relevant assets’ in section 29A(1)(a),

shall be deemed to include references to a co-ownership interest referred to in subsection (2).”.

(3) The Principal Act is amended in section 743 by inserting the following subsection after subsection (1):

“(1A) For the purposes of subsection (1), rights in the nature of co-ownership do not include an arrangement in the nature of a co-ownership that arises solely from the following, that is to say—

(a) rules of a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 201439 ), and

(b) which rules require holders of interests in securities, held by the depository, to hold those interests by way of a co-ownership interest in a fungible pool of underlying securities.”.

(4) The Capital Acquisitions Tax Consolidation Act 2003 is amended—

(a) in section 6 by inserting the following subsection after subsection (2):

“(2A) (a) For the purposes of subsections (1)(c) and (2)(d), any property comprising shares in—

(i) a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act,

(ii) a body corporate referred to in subsection (1) of section 1312 of the Companies Act 2014 (other than a body that is referred to in subsection (2) of that section as an ‘excluded body’),

(iii) an Irish collective asset-management vehicle, or

(iv) a society registered under the Industrial and Provident Societies Acts 1893 to 2014,

shall be deemed to be situate in the State.

(b) In this subsection ‘shares’ includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—

(i) a share which represents ownership of an underlying share and which can be traded independently of the underlying share, and

(ii) in the case of shares held by a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 201440 ) whose rules require holders of interests in such shares to hold those interests by way of a co-ownership interest in a fungible pool of underlying shares, that co-ownership interest.”,

(b) in section 11 by inserting the following subsection after subsection (2):

“(2A) (a) For the purposes of subsections (1)(b) and (2)(c), any property comprising shares in—

(i) a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act,

(ii) a body corporate referred to in subsection (1) of section 1312 of the Companies Act 2014 (other than a body that is referred to in subsection (2) of that section as an ‘excluded body’),

(iii) an Irish collective asset-management vehicle, or

(iv) a society registered under the Industrial and Provident Societies Acts 1893 to 2014,

shall be deemed to be situate in the State.

(b) In this subsection ‘shares’ includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—

(i) a share which represents ownership of an underlying share and which can be traded independently of the underlying share, and

(ii) in the case of shares held by a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 201441 ) whose rules require holders of interests in such shares to hold those interests by way of a co-ownership interest in a fungible pool of underlying shares, that co-ownership interest.”,

and

(c) in section 75 by inserting the following subsection after subsection (1):

“(1A) For the avoidance of doubt, the definition of ‘collective investment scheme’ in subsection (1) does not include a central securities depository (within the meaning of Regulation 909/2014 of the European Parliament and of the Council of 23 July 201442 ) whose rules require holders of interests in securities, held by the depository, to hold those interests by way of a co-ownership interest in a fungible pool of underlying securities.”.

(5) The Stamp Duties Consolidation Act 1999 is amended in Part 6 by constituting sections 68 to 78 as Chapter 1 of that Part and inserting the following Chapter after that Chapter:

“Chapter 2

Special provisions relating to dematerialised securities

Interpretation (Chapter 2)

78A. (1) In this Chapter—

‘central securities depository’ or ‘CSD’ has the same meaning as in the CSD Regulation;

‘CSD Regulation’ means Regulation 909/2014 of the European Parliament and of the Council of 23 July 201443 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No. 236/2012;

‘dematerialised securities’ means securities in respect of which physical certificates or documents of title indicating ownership have been eliminated such that the securities exist only as accounting or book entry records;

‘depository receipt’ means a security which represents ownership of an underlying security and which can be traded independently of the underlying security;

‘immobilisation’ means the act of concentrating the location of securities in, or on behalf of, a CSD in a way that enables subsequent transfers of interests in those securities to be made by book entry;

‘interest in securities’ means—

(a) any legal or equitable interest or right in, or in relation to, a security,

(b) a depository receipt,

(c) an indirect interest or right in, or in relation to, underlying securities arising from the immobilisation or dematerialisation of the securities, or

(d) without prejudice to the generality of paragraph (c), an interest or right in, or in relation to, securities which are held in, or on behalf of, a CSD, the rules of which require holders of interests or rights in, or in relation to, securities to hold those interests or rights by way of a co-ownership interest in a fungible pool of underlying securities;

‘relevant system’ means a securities settlement system that is operated by a CSD;

‘securities’ means any stocks or marketable securities;

‘securities settlement system’ means a formal arrangement with common rules and standardised arrangements for the execution of transfer orders by electronic means;

‘third country CSD’ means a CSD located outside the European Union that would come within the CSD Regulation if it were located in the European Union;

‘transfer order’ means a properly authenticated instruction to transfer an interest in securities.

(2) A reference to a CSD in this Chapter includes a reference to a third country CSD.

(3) This Chapter applies solely to the transfer of interests in dematerialised securities.

Transfer of interest in securities through relevant system

78B. (1) Where a transfer order effects a transfer of an interest in securities through a relevant system, the transfer order shall, for all purposes of this Act, be deemed to be an executed instrument of conveyance or transfer of such securities, the date of execution of which shall be deemed to be the date of execution of the transfer order.

(2) A transfer order that effects a transfer of an interest in securities outside a relevant system shall be deemed to be a transfer order effecting such a transfer through a relevant system and subsection (1) shall apply accordingly.

(3) Where a transfer of an interest in securities is effected by a transfer order relating to a single netted settlement of two or more contracts for the transfer of interests in the same type of securities, each individual contract constituting the single netted settlement shall be deemed to be a transfer order and subsection (1) shall apply accordingly.

Relief for intermediaries and clearing houses

78C. In relation to a transfer order or a deemed transfer order referred to in section 78B—

(a) the exemption from stamp duty under section 75(3) in relation to a recognised intermediary (within the meaning of subsection (1) of that section) in respect of certain instruments of transfer shall also apply in respect of the transfer order or deemed transfer order and section 75 shall apply accordingly, and

(b) the exemption from stamp duty under section 75A(2) in relation to a recognised clearing house (within the meaning of subsection (1) of that section) in respect of certain instruments of transfer shall also apply in respect of the transfer order or deemed transfer order and section 75A shall apply accordingly.

Duty charged

78D. (1) Where a transfer order, or a deemed transfer order, is, by virtue of section 78B, chargeable with stamp duty under or by reference to the heading ‘CONVEYANCE or TRANSFER on sale of any stocks or marketable securities’ in Schedule 1, duty shall be charged under that heading at the rate of one per cent of the consideration for the transfer to which the transfer order, or deemed transfer order, gives effect.

(2) Notwithstanding subsection (1) —

(a) where a transfer operates as a voluntary disposition inter vivos, the reference in that subsection to the consideration for the transfer shall, in relation to the duty to be charged, be construed as a reference to the value of the interest transferred, and

(b) where the calculation results in an amount that is not a multiple of one cent, the amount so calculated shall be rounded to the nearest cent, and any half of a cent shall be rounded up to the next whole cent.

Payment of duty

78E. (1) Subject to subsection (2), any duty charged by virtue of section 78B shall be due and payable on, and shall be paid to the Commissioners on, the date on which the transfer order, or deemed transfer order is executed.

(2) Notwithstanding subsection (1), the Commissioners may enter into an agreement with a CSD, or other party, in such form and on such terms and conditions as they think fit, in relation to the payment of stamp duty and where such an agreement is in force, any duty paid in accordance with the agreement shall be deemed to have been paid to the Commissioners on the date on which it became due and payable.

(3) Notwithstanding section 2(3), the transfer order, or deemed transfer order, that is charged to stamp duty by virtue of section 78B shall not be required to be stamped and, accordingly, sections 4, 6, 8, 11, 14, 20, 127 and 129(1) shall not apply.

(4) For the purposes of subsections (3) and (4) of section 2, the transfer order, or deemed transfer order, that is charged to stamp duty by virtue of section 78B shall be deemed to be duly stamped with the proper stamp duty when such duty, and any interest relating to such duty, is paid to the Commissioners.

(5) Where duty that is due and payable on the date on which the transfer order, or deemed transfer order, is executed is paid after that date, interest shall be charged on that duty, calculated in accordance with section 159D from the date on which the transfer order, or deemed transfer order, is executed to the date of payment of the unpaid duty.

Assessments and appeals

78F. (1) If, at any time and for any reason, it appears that no or insufficient duty has been paid to the Commissioners, they shall make an assessment of such amount of duty or additional duty as, to the best of their knowledge, information and belief, ought to be charged, levied and paid and the accountable person shall be liable for the payment of the duty so assessed.

(2) If, at any time and for any reason, it appears that an assessment is incorrect, the Commissioners shall make such other assessment as they consider appropriate and this other assessment shall be substituted for the first-mentioned assessment.

(3) An accountable person aggrieved by an assessment made on that person under this section may appeal the assessment to the Appeal Commissioners, in accordance with section 949I of the Taxes Consolidation Act 1997 , within the period of 30 days after the date of the notice of assessment.

(4) In default of an appeal, in accordance with subsection (3), being made by an accountable person to whom a notice of assessment has been issued, the assessment made on the person is final and conclusive.

Overpayment and repayment of duty

78G (1) Where, on a claim in accordance with subsection (2), it is proved to the satisfaction of the Commissioners that there has been an overpayment of duty in relation to a charge to duty by virtue of section 78B, the overpayment shall be repaid.

(2) A claim for repayment shall be made in such form and manner as may be decided by the Commissioners.

(3) A claim for repayment shall be made within the period of 4 years from the date of execution of the transfer order or deemed transfer order giving rise to the claim.

Obligations and penalties

78H. (1) Where a transfer order, or a deemed transfer order, effects a transfer of an interest in securities, a CSD, a transferee or a person acting on a transferee’s behalf in relation to the transfer of the interest in securities, as the case may be, shall—

(a) retain evidence in legible written form, or readily convertible into such a form, in sufficient detail to establish the amount of duty, if any, with which the transfer order or deemed transfer order was chargeable,

(b) retain the evidence referred to in paragraph (a) for a period of 6 years from the date on which the transfer order or deemed transfer order was executed, and

(c) make any such evidence available to the Commissioners on request.

(2) A CSD, a transferee or a person acting on a transferee’s behalf in relation to the transfer of the interest in securities, as the case may be, who fails to comply with subsection (1) shall be liable to a penalty of €1,265.

American depositary receipts

78I. Nothing in this Chapter shall preclude the operation of section 90 in relation to the exemption from the charge to stamp duty for American depositary receipts within the meaning of that section.

Migration of securities

78J. Stamp duty shall not be chargeable on the migration of securities under the Migration of Participating Securities Act 2019 .”.

(6) This section shall come into operation on such day as the Minister for Finance may appoint by order.

38 OJ No. L257, 28.8.2014, p.1

39 OJ No. L257, 28.8.2014, p.1

40 OJ No. L257, 28.8.2014, p.1

41 OJ No. L257, 28.8.2014, p.1

42 OJ No. L257, 28.8.2014, p.1

43 OJ No. L257, 28.08.2014, p.1