Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 5

Dividend payments by credit unions

Overview

Dividends paid or credited on all share accounts held by members of Credit Unions within the DIRT regime with effect from 1 January 2014.

Prior to 1 January 2014 dividends received by a member in respect of shares held in a regular share account were not liable to DIRT and were taxable at the members marginal income tax rate. The member was also obliged to declare the dividend income on his or her tax return.

Special medium and long-term share accounts held in Credit Unions and opened in the period 1st January 2002 to 15th October 2013 qualified for a measure of tax relief in certain circumstances. These special term share accounts allowed a member of a Credit Union who is an individual, to opt to hold shares in the account for a minimum term of either 3 or 5 years. A tax exemption applied:

  • for the first €480 p.a. of dividends received where the funds are invested for a minimum of three years, and
  • for the first €635 p.a. of dividends received where the funds are invested for a minimum of five years.

Any dividends received in excess of the €480 / €635 limits are liable, to the appropriate rate of DIRT (39% from 1 January 2017).

Annual returns, with details of all new special term share account holders, had to be made by the Credit Unions to the Revenue Commissioners. Similar tax exemptions are available under Chapter 4 of this Part in relation to interest on deposits held in special 3 and 5 year term accounts with other relevant deposit-taking financial institutions.

An individual could not hold a special term share account and a special term (deposit) account at the same time.

Chapter 5 contains the following sections:

  • Section 267A which is an interpretation section.
  • Section 267AA as inserted by section 23 of the Finance (No 2) Act 2013 providing for the taxation of dividends in regular share accounts with effect from 1 January 2014.
  • Section 267B which provides for elections to open
    • special share accounts
    • special term share accounts [opened in the period 1st January 2002 to 15th October 2013]
    and also provides that such accounts come within the DIRT regime.
  • Section 267C which provides exemptions for certain amounts of dividends paid on special term share accounts.
  • Section 267D which contains conditions and details of declarations in relation to special term share accounts.
  • Section 267E which provides that returns must be made by Credit Unions in relation to special term share accounts.
  • Section 267F which contains supplementary provisions.

The provisions of this Chapter commenced by way of Ministerial order with effect from 1 January 2002.

267A Interpretation (Chapter 5)

Summary

This section is the interpretation section for Chapter 5 of Part 8. Some of the definitions are used to apply the same meaning to terms as they have in the interpretation section for the main DIRT Chapter i.e. Chapter 4 of this Part.

Details

Definitions

(1) “appropriate tax” has the same meaning as in section 256(1).

“dividend” means a dividend on shares declared by a credit union at its annual general meeting.

“long term share account” means an account opened before 16 October 2013 by an individual credit union member in which each share is to be held in the account for a minimum period of 5 years.

“medium term share account” means an account opened before 16 October 2013 by an individual credit union member in which each share is to be held in the account for a minimum period of 3 years.

“regular share account” means an account, other than a special share account or special term share account.

“relevant deposit” has the same meaning as in section 256(1).

“relevant deposit taker” has the same meaning as in section 256(1).

“relevant interest” has the same meaning as in section 256(1).

“savings” includes shares and deposits.

“share” has the same meaning as in section 2(1) of the Credit Union Act 1997.

“special share account” means an account in which shares are held on terms under which the member has agreed with the credit union that the shares and dividends thereon are to be subject to the DIRT provisions of Chapter 4 of this Part i.e. Part 8.

“special term account” has the same meaning as in section 256(1).

“special term share account” means a medium term share account or a long term share account in respect of which the conditions of section 267D(1) are satisfied, and a declaration of the kind mentioned in section 267D(2) is made.

(2) The section also provides that dividends credited to a member’s account are treated, for the purposes of the application by the Chapter of the DIRT provisions, as if they were dividends paid.

Relevant Date: Finance Act 2019