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  • Service: Tax
  • Type: Video
  • Date: 8/21/2013
  • Length: 03:07 Minutes

An overview of the EU financial transaction tax 

An overview of the EU financial transaction tax:

KPMG

cutting through complexity

EU Financial Transaction Tax Proposal

An overview
June, 2013

EU Financial Transaction Tax Proposal

What is the EU FTT?


A proposed tax based on EU law

To be levied by (currently) 11 ‘FTT zone’ EU Member States

On ‘financial transactions’

Involving one FTT-zone party

And one FTT-zone ‘financial institution’


Note: (a) Due to the “Issuance principle” and “residence principle” non-FTT zone parties/financial institutions may also be covered.

EU Financial Transaction Tax Proposal

The FTT Zone


The EU jurisdictions that are participating in the enhanced cooperation process are:


  • Austria
  • Belgium
  • Estonia
  • France
  • Germany
  • Greece
  • Italy
  • Portugal
  • Slovakia
  • Slovenia
  • Spain

Other countries may join

EU Financial Transaction Tax Proposal

Key features (1)


Rates


  • 0.1% for standard transactions.
  • 0.01% for transactions in derivatives.

Base


  • Consideration paid for standard transactions.
  • Notional amount for transactions in derivatives.
  • Market value if not at arm’s length.

Taxpayer


  • Tax payable by each ‘financial institution’
  • Exemption for CCPs, brokers (not buy-sell intermediaries), etc.

EU Financial Transaction Tax Proposal

Key features (2)


Transactions


  • Structured products, stocks, bonds, UCITS, derivatives
  • Sale/purchase, UCITS redemption, repos, stock lending, derivatives
  • NOT primary market transactions, restructuring, ECB, CCPs, etc.

Jurisdictional


  • Residence principle: transaction in scope if one FTT-zone established party and ‘financial institution’
  • Financial institution deemed established in FTT-zone if FTT zone established counterparty/financial institution
  • ‘Issuance principle’: financial institution deemed established in FTT zone if FTT zone product

Compliance


  • All parties jointly and severally liable for FTT on the transaction
  • Registration, accounting and reporting obligations left to Member States
  • Due immediately (electronic transactions) or within three days (all other)
  • FTT monthly return and five year record keeping
  • Specific and general anti-avoidance rule

EU Financial Transaction Tax Proposal

Status


Draft FTT directive issued (28 Sept 11)


EU Council authorizes FTT for 11 EU Member States (23 Oct 12) under ‘enhanced cooperation’


Revised draft directive issued for 11 EU Member States (14 Feb 13)


Today


EU Commission reviews comment and issues final draft directive


EU Council (11 Member States) to approve final directive


EU Commission reviews comment and issues final draft directive


Planned entry into force (1 Jan 14)


Note: (a) there is a general feeling that this timetable is too tight to enable the 11 FTT zone Member States to implement the Directive into their national legislation by 1 January 2014, so there is the possibility that the start will be postponed.

EU Financial Transaction Tax Proposal

Why is FTT important for the FS sector?


Profitability

FTT will either have to be absorbed, mitigated or passed on


Business model

Product substitution, relocation, etc.


Systems and processes

Will require new or adjusted information, tax collection, payment and reporting systems and processes


Risk

FTT exposure (including secondary liability) needs to be identified, mitigated where possible, and residual risk managed

EU Financial Transaction Tax Proposal

Why is FTT important for the FS sector? (2)


Creates multiple charges

FTT affects every step in chain with only limited exemptions


Unlevel playing field

E.g. FTT zone bank’s non-FTT zone branch at competitive disadvantage with local (non-FTT zone) bank


Will affect non-FTT zone FS businesses

Issuance principle means even non-FTT zone parties will be liable for FTT


Impact not limited to FS

Wide scope means even corporate entities can be liable to FTT (e.g. corporate hedging)

EU Financial Transaction Tax Proposal

Which businesses may be affected by FTT


  • Banks
  • Insurance
  • Brokers
  • Corporates (e.g. treasury)
  • Asset Managers

EU Financial Transaction Tax Proposal

KPMG’s approach


  • FTT impact
  • Implementation
  • Business Response

KPMG’s service offering

  • Impact analysis for relevant transactions
  • Estimation of expected decline in profitability
  • Identification of strategic options
  • Support in scheduling and implementation

Financial Transaction Tax

KPMGs EU FTT Core Team


KPMG’s FTT resources


  • KPMG’s FTT Service
  • FTT page
  • EU Member State Comparative FTT Survey
  • KPMG FTT contacts
  • Available at www.kpmg.com/ftt

EU Core FTT Team


Barry Larking

Director, KPMG’s EU Tax Centre

Tel +31 20-656 1485

Mobile +31651197170

larking.barry@kpmg.nl


Hans-Jürgen A. Feyerabend

Partner, Tax FS KPMG In Germany

Tel +49 69 9587 2348

Mobile +49 173 5764050

hfeyerabend@kpmg.com


Bertrand Delaigue

Senior Manager, Tax FS, Fidal in France

Tel + 33 1 55 68 14 61

bdelaigue@fidalinternational.com


Sarah Lane

Partner, Tax FS, KPMG in the UK

Tel +44 (0) 20 7311 2483

Mobile +44 (0) 7786747242

sarah.lane@kpmg.co.uk


Michele Rinaldi

Partner, Tax FS KStudio Associato in Italy

Tel +39 0267644708

Mobile +39 3483081087

mrinaldi@kstudioassociato.it


Victor Mendoza

Partner, Tax FS, KPMG in Spain

Tel +34914563488

Mobile +34619717346

vmendoza@kpmg.es


KPMG

cutting through complexity


[disclaimer]

Automated presentation on the proposed EU financial transaction tax.
 

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EU Financial Transaction Tax draft directive

Text from the original EU financial transaction tax draft directive that has been adapted to include related referenced content.

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.