Financial Transaction Tax: European Commission Publishes Revised Draft Directive on Financial Transaction Tax

Sullivan & Cromwell LLP - 22 February 2013
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Following a European Council decision to allow eleven member states of the eurozone (including France, Germany, Spain and Italy) to introduce a financial transaction tax or “FTT” using the “enhanced cooperation” mechanism, the European Commission published a revised draft FTT directive last week.

The tax would be paid

  • by financial institutions
  • on transactions in financial instruments
  • if either:
    • at least one of the parties were located in the FTT zone; or 
    • the financial instrument were issued by an entity established in the FTT zone (except for non-traded derivatives) – the “issuance principle”.

The draft contains few changes from the Commission’s original draft directive of 2011, the addition of the issuance principle described above being one of the most significant.

Sales and purchases of shares and bonds would be taxed at 0.1%, derivative contracts at 0.01%. The tax would be introduced from the start of 2014.