French Bank Levy: Draft Legislation to Impose a 0.25% Tax on Minimum Regulatory CapitalSullivan & Cromwell LLP - October 1, 2010
Following recent announcements made in the UK and Germany, the French government announced on September 29, 2010 proposed legislation that would, if enacted, introduce a new levy on both French and non-French banks with operations in France (the “Bank Levy”). The Bank Levy would be due by banks and financial institutions that are subject to bank capital requirements in France, i.e., those that are under the supervision of the French Regulatory Control Authority (Autorité du Contrôle Prudentiel). The Bank Levy would amount to 0.25% of the minimum capital required under French regulatory rules, as computed based on risk-weighted assets. Double taxation would be dealt with through (i) the exemption of French branches of European banks and (ii) a tax credit granted to taxable branches and subsidiaries of non-French banks that are subject to an equivalent levy in their jurisdiction, but only if the relevant jurisdiction grants a similar tax credit to French banks operating in such country (condition of reciprocity). The French government indicated that the Bank Levy is expected to generate approximately €500 million in 2011.