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Financial Transaction Tax

Business tax

The topic of a European financial transaction tax (“EU FTT”) has been debated and discussed with vigour since the 2008 financial crisis. There has been growing political pressure that the financial sector should contribute more to pay for the financial crisis which it is popularly perceived as having caused.

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European financial transaction tax

Despite there being no agreement on a global level or even on an EU level, the European Commission has remained committed to introducing an EU FTT. The lack of consensus on an EU level has led to 11 EU Member States seeking to introduce an EU FTT under the Enhanced Cooperation Procedure (“ECP”).

While these FTT discussions are on-going, the French and Italian governments have implemented unilateral FTTs.


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Current Status

The Commission released its first EU FTT proposed directive in September 2011 which was intended to apply across all 27 Member States. Objections were raised particularly from Ireland, Luxembourg, Malta and the UK, who expressed concern about pushing forward with an EU FTT in the absence of a global framework, fearing that it would place the EU at a competitive disadvantage. Notwithstanding these objections, a minority group of Member States decided to press on under ECP. There are presently 11 Member States participating in the ECP (“FTT Zone”) with others able to join subsequently. The major territories that are part of the FTT zone include France, Germany, Italy and Spain.

The EC released a revised proposed directive in February 2013. The proposed EU FTT is potentially very broad and may cover a wide range of financial instruments, including, bonds, equities, derivatives and structured products. The revised directive significantly broadened the scope of the EU FTT from the original proposal through the use of both the residence and issuer principle (the original version only used the residence principle). The directive imposes a minimum rate of 0.1%, except for derivatives which will be taxed at a rate of 0.01% on the derivatives notional value. This proposal has proved to be controversial with the 11 participating Member States being unable to agree on the scope of the tax.

As it became increasingly likely that this revised proposal would not be accepted, 10 of the 11 ECP member states announced that they had reached an agreement that the EU FTT should apply to equities and “some” derivatives and be implemented in by 1 January 2016.

There has been vigorous lobbying both for and against an EU FTT and the UK launched a legal challenge against the use of ECP to bring in the FTT on 18 April 2013. This challenge was dismissed on 30 April 2014 on procedural grounds, although it remains possible that the UK will launch a subsequent legal challenge.

Unilateral FTTs

In advance of the EU FTT two Member States (France and Italy) have unilaterally introduced their own domestic FTT legislation applying to transactions of certain equities, and in the case of Italy to equity derivatives. Other territories have taxes or duties applied to broadly similar transactions, such as the UK’s stamp duty reserve tax. Double taxation arising on the same transaction (i.e. under unilateral taxes and the EU FTT) has not yet been addressed.

Non-Resident Capital Gains Taxes

In addition to financial transaction taxes, certain territories impose capital gains taxes on non-residents selling financial instruments. Such capital gains taxes are often overlooked and in some cases can be significant. Investors should ensure that they have an awareness of where such taxes arise and how to comply with them.

Impact for the UK

Although the UK is not among the participating Member States, it may be directly impacted by the EU FTT due to its broad scope. It is therefore crucial that all UK groups and entities likely to be affected stay abreast of the latest EU FTT developments and understand the details of the new proposal and how they could be impacted.

Entities impacted include asset managers, banks, brokers, insurers and treasury companies.

How Deloitte can help

Deloitte has developed a network of EU FTT specialists across European member firms to share their technical and industry experience and knowledge. We are experienced in providing advice about the technical and practical implementation of the French and Italian FTTs.

The team is composed of both tax and consulting specialists who will seek to assist you in assessing the impact of the tax on your business and transaction flows, in understanding the systems and process changes which may be required to identify impacted transactions and fulfil all reporting and payment requirements.