Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I move amendment No. 173:

In page 81, to delete lines 37 to 39, and in page 82, to delete lines 1 and 2 and substitute the following: “(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”.

I propose to take amendments Nos. 173 to 175, inclusive, together. They all amend the section and relate to new arrangements that will apply for the issue of new Irish securities and the settlement of trades in Irish securities.

Amendments to the Capital Acquisitions Tax Consolidation Act 2003 were contained in the draft Finance Bill and are being further amended now. The Stamp Duties Consolidation Act 1999 was not amended in the draft Bill and it is being amended now.

Trades in Irish corporate securities are currently settled in a central securities depository, CSD, in the UK known as CREST. This CSD is operated by Euroclear UK and Ireland, EUI, a UK incorporated company. Stamp duty is chargeable on the transfer of securities within the CREST system. Revenue has an agreement with EUI since 1996 for the collection and payment of this stamp duty.

Following Brexit, it will no longer be possible for trades in Irish securities to be settled in a CSD that is not based in an EU member state. The EU has approved a temporary equivalence arrangement for CREST to cover the transition period.

In October 2018, Euronext, the owner of the Irish Stock Exchange, announced that it had selected another company in the Euroclear Group - Euroclear Bank Belgium - as its preferred long-term settlement provider post-Brexit. The Migration of Participating Securities Act 2019 has been enacted to enable existing securities to migrate from EUI to the Belgian CSD on 30 March, 2021.

The main Irish tax impacted by the migration of Irish securities to the Belgian CSD will be stamp duty. Euroclear Bank is developing the necessary IT systems to enable the collection and payment of stamp duty within its existing Belgian CSD. My officials and Revenue officials have been engaged in ongoing discussions with Euroclear Bank to agree the new arrangements. Unfortunately, it was not possible to finalise the stamp duty legislation that would underpin the new arrangements in time for its inclusion in the Bill, as drafted.

This is now being done in this amendment.

The current legislative provisions underpinning the stamp duty charge where dematerialised or uncertificated securities are transferred within an electronic settlement system are contained in Part 6 of the Stamp Duties Consolidation Act 1999. To adapt the traditional stamp duty charge on the execution of a written document to an electronic securities settlement system, the charge is applied to an electronic instruction given by the operator of an electronic securities settlement system to transfer a security within that system. Such an operator must have entered into an agreement with Revenue for the payment of stamp duty. EUI is the only operator to have such an agreement. After 30 March 2021, EUI will no longer be an operator for the purposes of the stamp duty charge and the existing stamp duty provisions will cease to be relevant. For this reason, new provisions are being inserted into the Stamp Duties Consolidation Act 1999, as a new chapter 2 in Part 6, which are intended to come into operation on 30 March 2021. While these will be stand-alone provisions, they will to a large extent be modelled on the existing provisions.

The new provisions will be wider in scope than the existing ones. They will apply not just to transfers of securities within the Belgian CSD but to any other transfers of dematerialised Irish securities. They will also apply to certain indirect interests in Irish securities such as depository receipts and depository interests. After Brexit, it will be possible for trades in depository interests in Irish securities to be settled in the CREST system and transfers of these depository interests will be chargeable to stamp duty. Both Euroclear Bank and EUI will enter into arrangements with Revenue for the collection and payment of stamp duty. I may bring forward a Report Stage amendment in respect of this section.

Amendments to the Capital Acquisitions Tax Consolidation Act 2003 were included in the Finance Bill on publication in section 60(4). These amendments related to the charge to gift tax and inheritance tax on the receipt of interests in Irish shares. However, different wording to describe the same matter is now being used for the stamp duty amendments. To ensure consistency and clarity, the capital acquisitions tax amendments in the Bill as published are now being amended to align with the relevant stamp duty amendments.

I recommend these amendments to the committee.