Legal provisions of COM(2013)71 - Implementation of enhanced cooperation in the area of financial transaction tax

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dossier COM(2013)71 - Implementation of enhanced cooperation in the area of financial transaction tax.
document COM(2013)71 EN
date February 14, 2013

Contents

Chapter I - Subject matter and definitions

Article 1 - Subject matter

1. This Directive implements the enhanced cooperation authorised by Decision 2013/52/EU by laying down provisions for a harmonised financial transaction tax (FTT).

2. Participating Member States shall charge FTT in accordance with this Directive.

Article 2 - Definitions

1. For the purposes of this Directive, the following definitions shall apply:

(1) Participating Member State means a Member State which participates, at the time when FTT becomes chargeable pursuant to this Directive, in enhanced cooperation in the area of FTT by virtue of Decision 2013/52/EU, or by virtue of a decision adopted in accordance with the second or third subparagraph of Article 331(1) of the TFEU;

(2) Financial transaction means any of the following:

(a) the purchase and sale of a financial instrument before netting or settlement;

(b) the transfer between entities of a group of the right to dispose of a financial instrument as owner and any equivalent operation implying the transfer of the risk associated with the financial instrument, in cases not subject to point (a);

(c) the conclusion of derivatives contracts before netting or settlement;

(d) an exchange of financial instruments;

(e) a repurchase agreement, a reverse repurchase agreement, a securities lending and borrowing agreement;

(3) Financial instruments means financial instruments as defined Section C of Annex I to Directive 2004/39/EC of the European Parliament and of the Council, and structured products;

(4) Derivatives contract means a financial instrument as defined in points (4) to (10) of Section C of Annex I to Directive 2004/39/EC, as implemented by Articles 38 and 39 of Commission Regulation (EC) No 1287/2006;

(5) Repurchase agreement and reverse repurchase agreement means an agreement as defined in Article 3(1)(m) of Directive 2006/49/EC of the European Parliament and of the Council;

(6) Securities lending agreement and securities borrowing agreement mean an agreement referred to in Article 3 of Directive 2006/49/EC;

(7) Structured product means tradable securities or other financial instruments offered by way of a securitisation within the meaning of Article 4(36) of Directive 2006/48/EC of the European Parliament and of the Council or by way of equivalent transactions involving the transfer of risks other than credit risk;

(8) Financial institution means any of the following:

(a) an investment firm as defined in Article 4(1)(1) of Directive 2004/39/EC;

(b) a regulated market as defined in Article 4(1)(14) of Directive 2004/39/EC and any other organised trade venue or platform;

(c) a credit institution as defined in Article 4(1) of Directive 2006/48/EC;

(d) an insurance and reinsurance undertaking as defined in Article 13 of Directive 2009/138/EC of the European Parliament and the Council;

(e) an undertaking for collective investments in transferable securities (UCITS) as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council and a management company as defined in Article 2(1)(b) of Directive 2009/65/EC;

(f) a pension fund or an institution for occupational retirement provision as defined in Article 6(a) of Directive 2003/41/EC of the European Parliament and of the Council, an investment manager of such fund or institution;

(g) an alternative investment fund (AIF) and an alternative investment fund manager (AIFM) as defined in Article 4 of Directive 2011/61/EU of the European Parliament and of the Council;

(h) a securitisation special purpose entity as defined in Article 4(44) of Directive 2006/48/EC;

(i) a special purpose vehicle as defined in Article 13(26) of Directive 2009/138/EC;

(j) any other undertaking, institution, body or person carrying out one or more of the following activities, in case the average annual value of its financial transactions constitutes more than fifty per cent of its overall average net annual turnover, as referred to in Article 28 of Council Directive 78/660/EEC:

(i)      activities referred to in points 1, 2, 3 and 6 of Annex I to Directive 2006/48/EC;

ii) trading for own account or for account or in the name of customers with respect to any financial instrument;

(iii)     acquisition of holdings in undertakings;

(iv)    participation in or issuance of financial instruments;

(v)     the provision of services related to activities referred to in point (iv);

(9) Central Counter Party (CCP) means a CCP as defined in Article 2(1) of Regulation (EU) No 648/2012 of the European Parliament and of the Council;

(10) Netting means netting as defined in Article 2(k) of Directive 98/26/EC of the European Parliament and of the Council;

(11) A financial instrument referred to in Section C of Annex I to Directive 2004/39/EC and structured products issued within the territory of a participating Member State means such a financial instrument that is issued by a person who has its registered seat or, in case of a natural person, its permanent address or, if no permanent address can be ascertained, its usual residence in that State;

(12) Notional amount means the underlying nominal or face amount that is used to calculate payments made on a given derivative contract.

2. Each of the operations referred to in points (a), (b), (c) and (e) of paragraph 1(2) shall be considered to give rise to a single financial transaction. Each exchange as referred to in point (d) thereof shall be considered to give rise to two financial transactions. Each material modification of an operation as referred to in points (a) to (e) of paragraph 1(2) shall be considered to be a new operation of the same type as the original operation. A modification is considered to be material in particular where it involves a substitution of at least one party, in case the object or scope of the operation, including its temporal scope, or the consideration agreed upon is altered, or where the original operation would have attracted a higher tax had it been concluded as modified.

3. For the purposes of point (8)(j) of paragraph 1:

(a) the average annual value referred to in that point shall be calculated either over the three preceding calendar years or, in the case of a shorter period of previous activity, over that shorter period;

(b) the value of each transaction referred to in Article 6 shall be the taxable amount as defined in that Article;

(c) the value of each transaction referred to in Article 7 shall be ten per cent of the taxable amount as defined in that Article;

(d) where the average annual value of financial transactions in two consecutive calendar years does not exceed fifty per cent of the overall average net annual turnover, as defined in Article 28 of Directive 78/660/EEC, the undertaking, institution, body or person concerned shall be entitled, upon request, to be considered as not being or no longer being a financial institution.

Chapter II - Scope of the common system of FTT

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.

Chapter III - Chargeability, taxable amount and rates of the common FTT

Article 5 - Chargeability of FTT

1. The FTT shall become chargeable for each financial transaction at the moment it occurs.

2. Subsequent cancellation or rectification of a financial transaction shall have no effect on chargeability, except for cases of errors.

Article 6 - Taxable amount of the FTT in the case of financial transactions other than those related to derivatives contracts

1. In the case of financial transactions other than those referred to in point 2(c) of Article 2(1) and, in respect of derivative contracts, in points 2(a), 2(b) and 2(d) of Article 2(1), the taxable amount shall be everything which constitutes consideration paid or owed, in return for the transfer, from the counterparty or a third party.

2. Notwithstanding paragraph 1, in the cases referred to in that paragraph the taxable amount shall be the market price determined at the time the FTT becomes chargeable:

(a)     where the consideration is lower than the market price;

(b)     in the cases referred to in point 2(b) of Article 2(1).

3. For the purposes of paragraph 2, the market price shall be the full amount that would have been paid as consideration for the financial instrument concerned in a transaction at arm's length.

Article 7 - Taxable amount in the case of financial transactions related to derivatives contracts

In the case of financial transactions referred to in point 2(c) of Article 2(1) and, in respect of derivative contracts, in points 2(a), 2(b) and 2(d) of Article 2(1), the taxable amount of the FTT shall be the notional amount referred to in the derivatives contract at the time of the financial transaction.

Where more than one notional amount is identified, the highest amount shall be used for the purpose of determining the taxable amount.

Article 8 - Common provisions on taxable amount

For the purposes of Articles 6 and 7, where the value relevant for the determination of the taxable amount is expressed, in whole or in part, in a currency other than that of the taxing participating Member State, the applicable exchange rate shall be the latest selling rate recorded, at the time the FTT becomes chargeable, on the most representative exchange market of the participating Member State concerned, or at an exchange rate determined by reference to that market, in accordance with the rules laid down by that Member State.

Article 9 - Application, structure and level of rates

1. The participating Member States shall apply the rates of FTT in force at the time when the tax becomes chargeable.

2. The rates shall be fixed by each participating Member State as a percentage of the taxable amount.

Those rates shall not be lower than:

(a) 0.1% in respect of the financial transactions referred to in Article 6;

(b) 0.01% in respect of financial transactions referred to in Article 7.

3. The participating Member States shall apply the same rate to all financial transactions that fall under the same category pursuant to points (a) and (b) of paragraph 2.

Chapter IV - Payment of the common FTT, related obligations and prevention of evasion, avoidance and abuse

Article 10 - Person liable for payment of FTT to the tax authorities

1. In respect of each financial transaction, FTT shall be payable by each financial institution which fulfils any of the following conditions:

(a) it is party to the transaction, acting either for its own account or for the account of another person;

(b) it is acting in the name of a party to the transaction;

(c) the transaction has been carried out on its account.

The FTT shall be payable to the tax authorities of the participating Member State in the territory of which the financial institution is deemed to be established.

2. Where a financial institution acts in the name or for the account of another financial institution only that other financial institution shall be liable to pay FTT.

3. Where the tax due has not been paid within the time limit set out in Article 11(5), each party to a transaction, including persons other than financial institutions shall be jointly and severally liable for the payment of the tax due by a financial institution on account of that transaction.

4. The participating Member States may provide that a person other than the persons liable for payment of FTT referred to in paragraphs 1, 2 and 3 is to be held jointly and severally liable for the payment of the tax.

Article 11 - Provisions relating to time limits for the payment of FTT, to obligations intended to ensure payment, to the verification of payment

1. The participating Member States shall lay down registration, accounting, reporting obligations and other obligations intended to ensure that FTT due is effectively paid to the tax authorities.

2. The Commission may, in accordance with Article 16 adopt delegated acts specifying the measures to be taken pursuant to paragraph 1 by the participating Member States.

3. The participating Member States shall adopt measures to ensure that every person liable for payment of FTT submits to the tax authorities a return setting out all the information needed to calculate the FTT that has become chargeable during a period of one month including the total value of the transactions taxed at each rate. The FTT return shall be submitted by the tenth day of the month following the month during which the FTT became chargeable.

4. The participating Member States shall ensure that financial institutions keep at the disposal of the tax authorities, for at least five years, the relevant data relating to all financial transactions which they have carried out, whether in their own name or in the name of another person, for their own account or for the account of another person. In specifying that obligation they shall take account, where applicable, of obligations they have already imposed on financial institutions in view of Article 25(2) of Directive 2004/39/EC.

5. The participating Member States shall ensure that any FTT due is paid to the accounts determined by the participating Member States at the following points in time:

(a) at the moment when the tax becomes chargeable in case the transaction is carried out electronically;

(b) within three working days from the moment the tax becomes chargeable in all other cases.

The Commission may adopt implementing acts providing for uniform methods of collection of the FTT due. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 18(2).

6. The participating Member States shall ensure that the tax authorities verify whether the tax has been correctly paid.

Article 12 - Prevention of fraud and evasion

The participating Member States shall adopt measures to prevent tax fraud and evasion.

Article 13 - General anti-abuse rule

1. An artificial arrangement or an artificial series of arrangements which has been put into place for the essential purpose of avoiding taxation and leads to a tax benefit shall be ignored. Participating Member States shall treat these arrangements for tax purposes by reference to their economic substance.

2. For the purposes of paragraph 1 an arrangement means any transaction, scheme, action, operation, agreement, grant, understanding, promise, undertaking or event. An arrangement may comprise more than one step or part.

3. For the purposes of paragraph 1 an arrangement or a series of arrangements is artificial where it lacks commercial substance. In determining whether the arrangement or series of arrangements is artificial, participating Member States shall consider, in particular, whether they involve one or more of the following situations:

(a) the legal characterisation of the individual steps which an arrangement consists of is inconsistent with the legal substance of the arrangement as a whole;

(b) the arrangement or series of arrangements is carried out in a manner which would not ordinarily be employed in what is expected to be a reasonable business conduct;

(c) the arrangement or series of arrangements includes elements which have the effect of offsetting or cancelling each other;

(d) transactions concluded are circular in nature;

(e) the arrangement or series of arrangements results in a significant tax benefit but this is not reflected in the business risks undertaken by the taxpayer or its cash flows.

4. For the purposes of paragraph 1, the purpose of an arrangement or series of arrangements consists in avoiding taxation where, regardless of any subjective intentions of the taxpayer, it defeats the object, spirit and purpose of the tax provisions that would otherwise apply.

5. For the purposes of paragraph 1, a given purpose is to be considered essential where any other purpose that is or could be attributed to the arrangement or series of arrangements appears at most negligible, in view of all the circumstances of the case.

6. In determining whether an arrangement or series of arrangements has led to a tax benefit as referred to in paragraph 1, participating Member States shall compare the amount of tax due by a taxpayer, having regard to those arrangement(s), with the amount that the same taxpayer would owe under the same circumstances in the absence of the arrangement(s).

Article 14 - Abuse in the case of depositary receipts and similar securities

1. Without prejudice to Article 13, a depositary receipt or similar security issued with the essential purpose of avoiding tax on transactions in the underlying security issued in a participating Member State shall be considered issued in that participating Member State, in case a tax benefit would otherwise arise.

2. For the purposes of paragraph 1, paragraphs 4, 5 and 6 of Article 13 shall apply.

3. In applying paragraph 1, regard shall be had to the extent to which trade in the depositary receipt or similar security has replaced trade in the underlying security. Where such replacement has occurred to a significant extent, it shall be for the person liable for payment of FTT to demonstrate that the depositary receipt or similar security was not issued with the essential purpose of avoiding tax on transactions in the underlying security.

Chapter V - Final provisions

Article 15 - Other taxes on financial transactions

The participating Member States shall not maintain or introduce taxes on financial transactions other than the FTT object of this Directive or value-added tax as provided for in Council Directive 2006/112/EC.

Article 16 - Exercise of the delegation

1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2. The delegation of powers referred to in Article 11(2) shall be conferred for an indeterminate period of time from the date referred to in Article 19.

3. The delegation of power referred to in Article 11(2) may be revoked at any time by the Council. A decision of revocation shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated acts already in force.

4. As soon as it adopts a delegated act, the Commission shall notify it to the Council.

5. A delegated act adopted pursuant to Article 11(2) shall enter into force only if no objection has been expressed by the Council within a period of 2 months of notification of that act to the Council or if, before the expiry of that period, the Council has informed the Commission that it will not object. That period shall be extended by 2 months at the initiative of the Council.

Article 17 - Information of the European Parliament

The European Parliament shall be informed of the adoption of delegated acts by the Commission, of any objection formulated to them, or of the revocation of the delegation of powers by the Council.

Article 18 - Committee procedure

1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article19 Review clause

Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive, and, where appropriate, a proposal.

In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context.

Article20 Transposition

1. The participating Member States shall adopt and publish, by 30 September 2013 at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from 1 January 2014.

When the participating Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The participating Member States shall determine how such reference is to be made.

2. The participating Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 21 - Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 22 - Addressees

This Directive is addressed to the participating Member States.