Global

Details

  • Service: Tax
  • Type: Business and industry issue
  • Date: 8/26/2013

Chapter II: Scope of the common system of FTT 

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.

Article 3: Scope

  1. This Directive shall apply to all financial transactions, on the condition that at least one party to the transaction is established in the territory of a participating Member State and that a financial institution established in the territory of a participating Member State is party to the transaction, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction.
  2. This Directive, with the exception of paragraphs 3 and 4 of Article 10 and paragraphs 1 to 4 of Article 11, shall not apply to the following entities:
      (a) Central Counter Parties (CCPs) where exercising the function of a CCP;
    (b) Central Securities Depositories (CSDs) and International Central Securities Depositories (ICSDs) where exercising the function of a CSD or ICSD;
    (c) Member States, including public bodies entrusted with the function of managing the public debt, when exercising that function.
  3. Where an entity is not taxable pursuant to paragraph 2, this shall not preclude the taxability of its counterparty.
  4. This Directive shall not apply to the following transactions:
      (a) primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006, including the activity of underwriting and subsequent allocation of financial instruments in the framework of their issue;
    (b) transactions with the central banks of Member States;
    (c) transactions with the European Central Bank;
    (d) transactions with the European Financial Stability Facility and the European Stability Mechanism, transactions with the European Union related to financial assistance made available under Article 143 of the TFEU and to financial assistance made available under Article 122(2) of the TFEU, as well as transactions with the European Union and the European Atomic Energy Community related to the management of their assets;
    (e) without prejudice to point (c) and (d), transactions with the European Union, the European Atomic Energy Community, the European Investment Bank and with bodies set up by the European Union or the European Atomic Energy Community to which the Protocol on the privileges and immunities of the European Union applies, within the limits and under the conditions of that Protocol, the headquarter agreements or any other agreements concluded for the implementation of the Protocol;
    (f) transactions with international organisations or bodies, other than those referred to in points (c), (d) and (e), recognised as such by the public authorities of the host State, within the limits and under the conditions laid down by the international conventions establishing the bodies or by headquarters agreements;
    (g) transactions carried out as part of restructuring operations referred to in Article 4 of Council Directive 2008/7/EC.

Article 4: Establishment

  1. For the purposes of this Directive, a financial institution shall be deemed to be established in the territory of a participating Member State where any of the following conditions is fulfilled:
      (a) it has been authorised by the authorities of that Member State to act as such, in respect of transactions covered by that authorisation;
    (b) it is authorised or otherwise entitled to operate, from abroad, as financial institution in regard to the territory of that Member State, in respect of transactions covered by such authorisation or entitlement;
    (c) it has its registered seat within that Member State;
    (d) its permanent address or, if no permanent address can be ascertained, its usual residence is located in that Member State;
    (e) it has a branch within that Member State, in respect of transactions carried out by that branch;
    (f) it is party, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction, to a financial transaction with another financial institution established in that Member State pursuant to points (a), (b), (c), (d) or (e), or with a party established in the territory of that Member State and which is not a financial institution;
    (g) it is party, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction, to a financial transaction in a structured product or one of the financial instruments referred to in Section C of Annex I of Directive 2004/39/EC issued within the territory of that Member State, with the exception of instruments referred to in points (4) to (10) of that Section which are not traded on an organised platform.
  2. A person which is not a financial institution shall be deemed to be established within a participating Member State where any of the following conditions is fulfilled:
      (a) its registered seat or, in case of a natural person, its permanent address or, if no permanent address can be ascertained, its usual residence is located in that State;
    (b) it has a branch in that State, in respect of financial transactions carried out by that branch;
    (c) it is party to a financial transaction in a structured product or one of the financial instruments referred to Section C of Annex I to Directive 2004/39/EC issued within the territory of that Member State, with the exception of instruments referred to in points (4) to (10) of that Section which are not traded on an organised platform.
  3. Notwithstanding paragraphs 1 and 2, a financial institution or a person which is not a financial institution shall not be deemed to be established within the meaning of those paragraphs, where the person liable for payment of FTT proves that there is no link between the economic substance of the transaction and the territory of any participating Member State.
  4. Where more than one of the conditions in the lists set out in paragraphs 1 and 2 respectively is fulfilled, the first condition fulfilled from the start of the list in descending order shall be relevant for determining the participating Member State of establishment.



Article 5 (c) of Regulation (EC) No 1287/2006 of the European Parliament and the Council


Primary market transactions (such as issuance, allotment or subscription) in financial instruments falling within Article 4(1)(18)(a) and (b) of Directive 2004/39/EC.


back to text


Article 143 of the Treaty of the Functioning of the European Union (TFEU):


  1. Where a Member State with a derogation is in difficulties or is seriously threatened with difficulties as regards its balance of payments either as a result of an overall disequilibrium in its balance of payments, or as a result of the type of currency at its disposal, and where such difficulties are liable in particular to jeopardise the functioning of the internal market or the implementation of the common commercial policy, the Commission shall immediately investigate the position of the State in question and the action which, making use of all the means at its disposal, that State has taken or may take in accordance with the provisions of the Treaties. The Commission shall state what measures it recommends the State concerned to take.

    If the action taken by a Member State with derogation and the measures suggested by the Commission do not prove sufficient to overcome the difficulties which have arisen or which threaten, the Commission shall, after consulting the Economic and Financial Committee, recommend to the Council the granting of mutual assistance and appropriate methods therefore.

    The Commission shall keep the Council regularly informed of the situation and of how it is developing.
  2. The Council shall grant such mutual assistance; it shall adopt directives or decisions laying down the conditions and details of such assistance, which may take such forms as:
      a. A concerted approach to or within any other international organisations to which Member States with a derogation may have recourse;
    b. Measures needed to avoid deflection of trade where the Member State with a derogation which is in difficulties maintains or reintroduces quantitative restrictions against third countries;
    c. The granting of limited credits by other Member States, subject to their agreement.
  3. If the mutual assistance recommended by the Commission is not granted by the Council or if the mutual assistance granted and the measures taken are insufficient, the Commission shall authorise the Member State with a derogation which is in difficulties to take protective measures, the conditions and details of which the Commission shall determine.

    Such authorisation may be revoked and such conditions and details may be changed by the Council.

  4. back to text


    Article 122(2) of the Treaty of the Functioning of the European Union (TFEU):


    Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken.


    back to text


    Article 4 of Council Directive 2008/7/EC of the European Parliament and the Council:


      a. The transfer by one or more capital companies of all their assets and liabilities, or one or more branches of activity to one or more capital companies which are in the process of being formed or which are already in existence, provided that the consideration for the transfer consists at least in part of securities representing the capital of the acquiring company;
    b. The acquisition, by a capital company which is in the process of being formed or which is already in existence, of shares representing a majority of the voting rights of another capital company, provided that the consideration for the shares acquired consists at least in part of securities representing the capital of the former company.
    c. Where the majority of the voting rights is reached by means of two or more transactions, only the transaction whereby the majority of voting rights is reached and any subsequent transactions shall be regarded as restructuring operations.
  5. Restructuring operations shall also include the transfer to a capital company of all assets and liabilities of another capital company which is wholly owned by the former company.

back to text


Section C of Annex I of Directive 2004/39/EC of the European Parliament and the Council:


  1. Transferable securities;
  2. Money-market instruments;
  3. Units in collective investment undertakings;
  4. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash;
  5. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);
  6. Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF;
  7. Options, futures, swaps, forwards and any other derivative contracts relating to commodities that can be physically settled not otherwise mentioned in C.6 and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls;
  8. Derivative instruments for the transfer of credit risk;
  9. Financial contracts for differences;
  10. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.

back to text


Source: adapted from the original documents (PDF 186 KB) © European Union, 1995-2013. Responsibility for the adaptation lies entirely with KPMG International.

 

Share this

Share this

Follow us

follow us on Twitter
follow us on Linkedin
An overview of nine EU Member States understood to be currently applying a national form of FTT and of the EU proposal for an eleven Member State FTT.

KPMG EU Tax Centre

EU direct tax practice
KPMG member firms have set up an EU Tax Centre to help you understand the implications of EU tax law and how it can help your business.