Income Taxation

This proposal aims to establish a common system of financial transaction tax * (FTT).

It applies to all financial transactions, namely the purchase and sale of financial instruments such as stocks, bonds, money market instruments, units of undertakings for collective investment, structured products and derivatives, and conclusion or modification of derivative contracts in provided that at least one party to the transaction is established in a Member State and that the transaction is a financial institution (such as investment firms, organized markets, credit institutions, insurance or reinsurance undertakings, collective investment undertakings and their managers, pension funds and their governors, some other enterprises, most of the activities of which include transactions) established in a Member State, acting on its own account or on behalf of another person or acting on behalf of the transaction.

In principle, a financial institution is deemed to be established in a Member State if it is authorized to act as such, but it should be noted that under certain conditions a financial institution which is not established in a Member State – for example when it is a party a financial transaction and the counterparty is established in a Member State – is also considered to be established in a Member State (in this last case).

The following entities are excluded from the scope of the Directive:

The European Financial Stability Facility;
any international financial institution established by two or more Member States, whose purpose is to mobilize resources and provide financial assistance to the benefit of its members that are experiencing or threatened by serious problems related to financing;
central counterparties, namely entities that mediate between counterparties in financial transactions;
national central securities depositories or international central securities depositories.
The following transactions are excluded from the scope of the Directive:

primary market transactions in respect of the issue of shares or bonds;
under certain conditions, deals with the European Union, the European Atomic Energy Community, the European Central Bank, European Investment Bank, the bodies set up by the European Union or the European Atomic Energy Community, and other international organizations or bodies;
transactions with the central banks of the Member States.
Chargeability, taxable amount and rates of FTT

FTT becomes chargeable at the time when the financial transaction. Subsequent cancellation or rectification of a financial transaction shall have no effect on chargeability, except in case of error.

For transactions other than those related to derivatives agreements, the taxable amount of the FTT in principle include everything which constitutes consideration paid or payable for the transfer of the counterparty or a third party.

For transactions related to derivatives agreements, the taxable amount of the FTT is equal to the notional amount (ie a nominal amount, which is used for calculating payments made under an agreement for derivatives) of the derivatives agreement at the time of the financial transaction.

Where appropriate, the applicable exchange rate is the final selling rate recorded at the time the FTT becomes chargeable, on the most representative exchange market of the Member State or the exchange rate determined by reference to that market.

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