European Commission approves the proposed Directive implementing enhanced cooperation in the area of financial transaction tax


On February 14, 2013, the European Commission approved the proposed Directive on a financial transaction tax - FTT - (COM/2013/71Abre ventana nueva), following its previous proposal of September 2011 ( ventana nueva). The FTT proposal adopted for 11 Member States (France, Germany, Belgium, Austria, Slovenia, Spain, Portugal, Greece, Slovakia, Italy and Estonia) contains some changes with respect to the previous proposal, focused mainly on reinforcing legal certainty and preventing fraud and abuses, such as those which could derive from the application of the tax in a smaller geographical area than that initially envisaged.

The objective scope of the previous proposal has been maintained, that is, to tax transactions linked to the area in which the FTT will apply. The tax rates have also been maintained, i.e. 0.1% for shares and debt securities, and 0.01% for derivatives. More specifically, the proposal aims to apply the minimum tax rate mentioned to the purchase and sale of financial instruments before their netting and settlement. That concept includes repurchase and reverse repurchase transactions, securities lending, exchange of financial instruments, transfers of ownership of financial instruments between group entities, or any equivalent transaction that entails the transfer of the risk associated with a financial instrument, and the conclusion or amendment of financial derivative agreements (options, futures or swap).

Chargeability of the tax pivots on two basic principles: the residence principle and the issuance principle. The residence principle entails the charge of the tax if either one of the parties to the transaction is established in one of the Member States participating in the enhanced cooperation, regardless of where the transaction is carried out. This will be the case if the financial institution that intervenes in the transaction is established in the territorial area of application of the FTT, and if it acts in the name or behalf of a party established in that area. In turn, pursuant to the issuance principle, the financial instruments issued in the participating Member States will be taxed when they are traded, regardless of where they are traded and the place of establishment of the parties to the transaction.

In order to protect the so-called “real economy”, and just as in the previous proposal, the FTT will not apply to day-to-day financial activities of citizens and companies (such as loans, payments, insurance, deposits, etc.), nor will it apply to traditional banking investment activities in the context of the raising of capital, or to financial transactions carried out as part of restructuring operations. Refinancing activities, monetary policy and the management of public debt are excluded, and the transactions carried out with central banks, the ECB, the European Financial Stability Facility, the European Stability Mechanism and, lastly, the European Union itself, are also exempt.

As of now, a legislative procedure for consultation with the European Parliament begins. In that procedure, the proposal will be debated in the EU Council of Ministers. The 27 Member States can participate in the debates with the right to speak but not to vote. Lastly, the proposal will have to be approved by all 11 Member States participating in the enhanced cooperation. In principle, it is expected to apply starting on January 1, 2014.


  • Share in LikendIn
  • Share in Facebook
Related practice areas
Related partners