S.I. No. 596 of 2001

Finance Act, 2001 (Section 57) (Commencement) Order, 2001

Made by the Minister for Finance

I, Charlie McCreevy T.D., Minister for Finance, in exercise of the powers conferred on me by section 57 of the Finance Act, 2001 ( No. 7 of 2001 ), hereby order as follows:

1.   This Order may be cited as the Finance Act, 2001 (Section 57) (Commencement) Order, 2001.

2.   The 1st day of January 2002, is appointed as the day on which section 57 of the Finance Act, 2001 ( No. 7 of 2001 ), comes into operation.

S.I. No. 596 of 2001

Explanatory note for S.I.

(This note is not part of the Instrument and does not purport to be a legal interpretation)

This order appoints the 1st day of January 2002 as the date for the coming into operation of section 57 of the Finance Act, 2001 . Section 57 amends the Taxes Consolidation Act, 1997 in order to provide for the measures announced in the Budget 2001 in relation to the tax treatment of credit union dividends and interest and in relation to tax exemptions for certain medium and long-term accounts held in credit unions and other financial institutions.

Under existing arrangements, there are two types of account in credit unions - regular share accounts and deposit accounts. Section 57 of the Finance Act, 2001 allows for the creation of two additional types of account - a special share account and a special term share account. The present tax treatment of regular share accounts - liability of credit union members to declare dividends to the Revenue Commissioners and pay tax thereon at one's marginal rate of tax - will remain the same under the new measures; the existing similar liability for deposit account interest will be replaced however by the automatic deduction of Retention tax.

As regards the new special share and special term share accounts these are being created solely for the purposes of giving effect to the taxation provisions and do not create any new rights for the purposes of the Credit Union Act, 1997 . While one of the conditions attaching to the special term share account is that no more than £500 (€635) per month can be deposited in such an account, there will be no restriction on a credit union member depositing any amount in excess of this sum in any of the other accounts i.e. a deposit account, regular share account or special share account.