Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

A sale of shares is normally chargeable to stamp duty at a rate of 1% of the consideration and is payable by the purchaser. I am advised by Revenue that where a company purchases its own shares, the stamp duty treatment depends on the form in which the shares are held and the method by which the purchases are effected. For shares held in certificated, or paper, form, they may be bought back in two ways. The first is by means of a standard stock transfer form. The second is where the shareholder and the company enter into a contract or share purchase agreement for the sale of the shares, following which the shareholder hands over the share certificates to the company.

Where a company purchases its own shares by means of a stock transfer form, a stamp duty charge arises. Where a company enters into a contract or share purchase agreement, Revenue accepts there is no stamp duty chargeable on the transaction by virtue of section 31 of the Stamp Duties Consolidation Act 1999. That section provides for stamp duty to be charged in respect of any contract or agreement for the sale of any estate or interest in any property as if it were an actual conveyance on sale of the estate, interest or property. However, it specifically excludes from its scope the sale of certain property, including shares. Accordingly, where a company purchases its own shares by means of a contract or agreement, no charge to stamp duty arises. For shares held in uncertificated, or dematerialised, form, the shares may be bought back via a securities settlement system. Euroclear Bank operates the securities settlement system for trading in Irish shares. Where a company purchases its own shares via a securities settlement system, it has been a long-standing Revenue practice to confirm that stamp duty is not chargeable.

In advance of budget 2023, officials in my Department carried out a preliminary examination of issues relating to the stamp duty treatment of share buy-backs, as was flagged in the tax strategy group papers. On the conclusion of that preliminary examination, Department officials recommended that no changes should be introduced in the Finance Bill 2022 and that the Department should carry out a more in-depth analysis of this issue in the year ahead. Owing to resource limitations and other exigencies that demanded the priority application of those limited resources, it did not prove possible for this work to be carried out in 2023. However, I expect that, if possible, the matter of the stamp duty treatment of share buy-backs will be considered in greater detail in advance of the next budget. Therefore, I do not propose to accept the amendment.