An EU-wide Financial Transaction Tax ("FTT") was first proposed by the European Commission back in 2013. At that stage, it was launched with a three-fold purpose:
- to raise revenue and ensure an adequate contribution from the financial sector to tax revenues;
- to ensure the functioning of the internal market (avoid double taxation and distortion of competition); and
- to limit undesirable market behaviour and consequently stabilise markets.
As originally drawn, the proposal was extremely wide and covered the transfer of not only shares but also bonds. Moreover, the proposal would have driven business from the EU so a number of Member States refused to even consider that proposal unless it was introduced globally.
The European Commission went back to the drawing board and a group of 10 EU Member States ("Participating Member States") remain engaged in a process known as "enhanced cooperation" to introduce an FTT in those Participating Member States. That process has taken so long that a number of Member States have introduced domestic FTTs in the meantime, notably France, Italy, and (as of 16 January 2021) Spain. Other Member States, including Belgium and Greece, already have a domestic FTT in place.
Although the French, Italian, and Spanish FTTs are not identical, they do share some similarities:
- they are, in the main, charged on transfers of shares issued by French, Italian, and Spanish-incorporated companies (respectively);
- all apply irrespective of the place of tax residence or incorporation of the seller, purchaser and any agents involved, and irrespective of where the transaction is executed;
- all offer a "market-making activity" exemption of some kind;
- all apply to tax the net daily balance of taxable transactions executed by a buyer in an in-scope financial instrument; and
- in each case, it is the buyer who is the taxable person.
The introduction of the Spanish FTT, and with the end of the Brexit transitional period approaching, now may be a good time to review FTT positions across the EU.
Spanish FTT – introduced with effect from 16 January 2021.
French FTT
Italian FTT
