Update: French and Italian FTT

A Round-Up of FTT developments across Europe

French FTT

(i) Intra-Day Netting
The French Finance Bill 2016, presented to the National Assembly on 30 September 2015, included a provision which would apply the French FTT to gross transactions, including intra-day transactions, with effect from 1 January 2017. As a reminder, under current law, French FTT only applies (broadly) to net end of day acquisitions of in scope equities. Taxing intra-day transactions would entail a fundamental change to the French FTT.

This provision was challenged by a group of French deputies from the National Assembly before the Constitutional Council (“CC”), the highest constitutional authority in France. The deputies who brought the challenge argued that taxing intra-day transactions would be contrary to the fundamental premise that French FTT applies on the transfer of ownership of in-scope securities.

Under standard market practice, the effective transfer of ownership is determined on settlement date at delivery (i.e. T+2) and not on purchase. The deputies stated the mere purchase of an in-scope security was insufficient for the French FTT to apply. The key criterion is that there must be a transfer of ownership (i.e. delivery) which was not the case where an in scope security was both bought and sold (pre-delivery) on the same day.

The CC did not consider the substantive arguments of the deputies. Instead, the CC declared the provision to be unlawful on the basis of the proposed start date of 1 January 2017. The CC ruled that the Finance Bill 2016 could only pertain to matters arising in 2016. As a procedural matter, the provision applying French FTT on gross intra-day transactions would have applied from 2017. As such, the CC declared the provision unlawful.

Accordingly, intra-day netting will continue to apply until any subsequent change in law (e.g. in a future Finance Bill), whether as part of implementation of the EU FTT or otherwise.

(ii) In-Scope Equities
The French Tax Authority has released the list of equities in-scope for French FTT for 2016 (i.e. issued by French companies with a market capitalization of over €1 billion). The list is available here.

We also set out below those equities which are new on the list for 2016, and those which were on the list for 2015 but are no longer on the list.

New on list for 2016:
• Amudi SA
• Beneteau
•DBV Technologies
• Europcar
• Faiveley
• Fonciere de Paris
• Generale de sante
• Rothschild & co
• Trigano

No longer on list:
• Bourbon
• GDF Suez
• Ipsos
• Lafarge
• Neopost
• Paris-Orleans
• Rallye

Italian FTT

Changes proposed in the Italian Financial Stability Bill
A number of changes were proposed to Italian FTT in the Italian Financial Stability Bill published in Italy's official gazette on 30 December 2015, including the following:
• Increasing the rate of FTT on equities
• Applying IFTT on a gross basis
• Expanding the range of equity derivatives in-scope
• Changing the tax rate for equity derivatives

Of these changes, we understand all have been dismissed, other than increasing the equity charge which was accepted as a recommendation, when the bill was passed on 28 December 2015. The original proposal was to increase the IFTT rates from 0.2% to 0.4% (for over the counter transactions) and to 0.2% from 0.1% (for on exchange transactions), although this is not binding. It remains unclear when any potential rate increase may be enacted.

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