Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

A stamp duty charge of 1% normally applies to the purchase of shares. However, I am advised by Revenue that the stamp duty treatment of share buybacks depends on the form in which the shares are held and the method by which the buybacks are affected.

Share buyback refers to the practice whereby a company purchases or buys back its own shares. For shares held in certificated or paper form, the shares 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 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. For shares held in uncertificated or electronic form, the shares may be bought back via an electronic settlement system.

Shares bought back by means of a stock transfer form are chargeable to stamp duty. Where a company enters into a contract or share purchase agreement, Revenue accepts that there is no stamp duty chargeable on the transaction by virtue of section 31(1)(b) of the Stamp Duties Consolidation Act 1999. For shares bought back via an electronic settlement system, it has been a long-standing Revenue practice to confirm that stamp duty does not apply to such transactions. Revenue estimates that based on prior year transactions, the revenue forgone on share buybacks is between €5 million and €20 million in each calendar year. However, Revenue is unable to gather comprehensive data on share buybacks that occur and are not subject to stamp duty as companies have no obligation to report this information. The wide variation in the estimated annual yield forgone is because share buyback programmes are implemented on an irregular basis by a limited number of companies.

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