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European Commission proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax. COM(2013) 71 final. Issued Brussels, 14.2. 2013.


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The Council of the European Union

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 113 thereof,

Having regard to Council Decision 2013/52/EU of 22 January 2013 authorising enhanced cooperation in the area of financial transaction tax,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national Parliaments,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the European Economic and Social Committee,

Acting in accordance with a special legislative procedure,


  1. In 2011, the Commission took note of a debate on-going at all levels on additional taxation of the financial sector. The debate originates from the desire to ensure that the financial sector fairly and substantially contributes to the costs of the crisis and that it is taxed in a fair way vis-à-vis other sectors for the future, to dis-incentivise excessively risky activities by financial institutions, to complement regulatory measures aimed at avoiding future crises and to generate additional revenue for general budgets or specific policy purposes.
  2. By Decision 2013/52/EU the Council authorised enhanced cooperation between Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (hereinafter "participating Member States") in the area of financial transaction tax (FTT).
  3. In order to prevent distortions through measures taken unilaterally by the participating Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to improve the proper functioning of the internal market, it is important that the basic features of a FTT in the participating Member States are harmonised at Union level. Incentives for tax arbitrage between the participating Member States and allocation distortions between financial markets in those States, as well as possibilities for double or non-taxation should thereby be avoided.
  4. The improvement of the operation of the internal market, in particular the avoidance of distortions between the participating Member States requires that a FTT applies to a broadly determined range of financial institutions and transactions, to trade in a wide range of financial instruments, including structured products, both in the organised markets and "over-the-counter", as well as to the conclusion of all derivative contracts and to material modifications of the operations concerned.
  5. In principle, each transfer agreed upon, of one or more financial instruments, is linked to a given transaction which in turn should be subject to FTT on account of such agreed transfer. Since an exchange of financial instruments gives rise to two such transfers, each such exchange should be considered as giving rise to two transactions, so as to avoid circumvention of the tax. By way of repurchase and reverse repurchase and securities lending and borrowing agreements, a financial instrument is put at the disposal of a given person for a specified period of time. All such agreements, as well as their material modification, should therefore be considered as giving rise to one transaction only.
  6. In order to preserve the efficient and transparent functioning of financial markets or the public debt management, it is necessary to exclude certain entities from the scope of the FTT, in as much as these are exercising functions which are not considered to be trading activity in itself but rather facilitating trade or protecting the management of public debt. However, entities excluded specifically because of their central role for the functioning of financial markets or public debt management should be made subject to the rules that ensure the proper payment of the tax to the tax authorities and the verification of the payment.
  7. The imposition of FTT should not negatively affect the refinancing possibilities of financial institutions and States, nor monetary policies in general. Therefore, transactions with the European Central Bank, the European Financial Stability Facility, the European Stability Mechanism, the European Union where it exercises the function of management of its assets, of balance of payment loans and of similar activities, and the central banks of Member States should not be subject to FTT.
  8. With the exception of the conclusion or material modification of derivative contracts, the trade on primary markets and transactions relevant for citizens and businesses such as conclusion of insurance contracts, mortgage lending, consumer credits or payment services should be excluded from the scope of FTT, so as not to undermine the raising of capital by companies and governments and to avoid impact on households.
  9. The provisions of Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital continue to be fully applicable. Article 5(1)(e) and (2) of that Directive is relevant to the area covered by this Directive and prohibits, subject to Article 6(1)(a) of that Directive, the imposition of any tax whatsoever on the transactions referred to in its provisions. Transactions in respect of which Directive 2008/7/EC prohibits or could prohibit the imposition of taxes should therefore not be subject to FTT. Independently from the extent to which Directive 2008/7/EC prohibits taxation of the issuance of shares and units collective investment undertakings, considerations of tax neutrality require a single treatment of issuances by all these undertakings. The redemption of shares and units thus issued are however not in the nature of a primary market transaction and should thus be taxable.
  10. The chargeability and taxable amount should be harmonised so as to avoid distortions in the internal market.
  11. The moment of chargeability should not be unduly delayed and should coincide with the moment where the financial transaction occurs.
  12. In order to allow for the taxable amount to be determined as easily as possible so as to limit costs for businesses and for tax administrations, in the case of financial transactions other than those related to derivatives contracts reference should be made normally to the consideration granted in the context of the transaction. Where no consideration is granted or where the consideration granted is lower than the market price, the market price should be referred to as a fair reflection of the value of the transaction. Equally for reasons of ease of calculation, where derivatives contracts are purchased/sold, transferred, exchanged, concluded or where these operations are materially modified, the notional amount referred to in the contract should be used.
  13. In the interest of equal treatment, a single tax rate should apply within each category of transactions, namely trade in financial instruments other than derivatives and material modification of the operations concerned, on the one hand, and the purchase/sale, transfer, exchange, conclusion of derivatives contracts, and material modification of these operations on the other hand.
  14. In order to concentrate the taxation on the financial sector as such rather than on citizens and because financial institutions execute the vast majority of transactions on financial markets, the tax should apply to those institutions, whether they trade in their own name, in the name of other persons, for their own account or for the account of other persons.
  15. Because of the high mobility of financial transactions and in order to help mitigating potential tax avoidance, the FTT should be applied on the basis of the residence principle. To further minimise the risk of relocation of transactions, while maintaining a single reference to “establishment” for ease of application, this principle should be supplemented by elements of the issuance principle. Thus, for transactions in certain financial instruments, the persons involved should be considered established in the participating Member State in which the instrument has been issued.
  16. The minimum tax rates should be set at a level sufficiently high for the harmonisation objective of a common FTT to be achieved. At the same time, they have to be low enough so that delocalisation risks are minimised.
  17. It should be avoided that any side of a single transaction be taxed more than once. Therefore, where a financial institution acts in the name or for the account of another financial institution, only that other financial institution should pay the tax.
  18. In order for the FTT to be levied in an accurate and timely manner, the participating Member States should be obliged to take the necessary measures.
  19. In order to prevent tax fraud and evasion the participating Member States should be obliged to adopt appropriate measures.
  20. In order to prevent tax avoidance and abuse through artificial schemes, it is necessary to provide for a general anti-abuse rule. A specific rule based on the same principles should be added with a view to address the particular problems linked to depositary receipts and similar securities.
  21. In order to allow the adoption of more detailed rules in certain technical areas, regarding registration, accounting, reporting obligations and other obligations intended to ensure that FTT due to the tax authorities is effectively paid to the tax authorities, and their timely adaptation as appropriate, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of specifying the measures necessary to this effect. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing-up delegated acts, should ensure a timely and appropriate transmission of relevant documents to the Council.
  22. In order to ensure uniform conditions for the implementation of this Directive, as regards the collection of the tax in the participating Member States, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers.
  23. Since market operators will need some time to adjust to the new rules, an appropriate period of time should be provided for between the adoption of the national rules necessary to comply with this Directive and the application of those rules.
  24. Since the objective of this Directive, namely to harmonise the essential features of a FTT within the participating Member States at Union level, cannot be sufficiently achieved by these Member States and can therefore, by reason of improving the proper functioning of the Single Market, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve this objective,



Adapted from the original documents © European Union, 1995-2013. Responsibility for the adaptation lies entirely with KPMG International.


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