In anticipation of the enactment of the proposed European directive, the French government is proposing the introduction of a 0.2 % financial transaction tax.
These taxes were approved by the French National Assembly on 15 February 2012 and are to be applied as of 1 August 2012.
The scope of application of the FTT
The 0.2% tax is applied to all financial acquisitions of equity securities provided that the security is accepted for negotiation on the French market (such as the regulated NYSE Euronext market in Paris) or a recognised European market (such as the London Stock Exchange or SIX-SWX).
The regional scope of application of the tax is determined with reference to the company's head office: the tax is payable if the issuer's head office is in France. The acquisition of shares listed in Paris of a company whose head office is outside France will therefore not be subject to the tax. The location in which the acquirer or financial intermediary executing the order is based is irrelevant. The tax is limited to securities in companies whose capitalisation exceeds 1,000 million euros on 1 January of the tax year, a threshold which corresponds to compartment A of the regulated NYSE Euronext market in Paris. A French ministerial order will designate them each year. The list of securities subject to this tax can be obtained here.
In order for the tax to be applied, the acquisition must be made in return for payment (bonus share distributions are therefore not concerned). The tax encompasses purchases in the form of the exercising of an option, a forward purchase, an exchange or attribution in return for contributions. However, it is important for the transaction to result in a transferral of ownership, i.e. the entry of the security in the acquirer's account. This is the event which will constitute the generating event for the tax. Forward financial instruments which are settled exclusively in cash will therefore not be taxable.
Transactions exempt from FTT
The following transactions are exempt from the tax:
Purchases completed in the context of the issuance of securities (primary market); the exemption covers both the initial subscription and the purchases made within the framework of an underwriting agreement or guaranteed investment,
Transactions carried out by a clearing house or a central depositary,
Acquisitions made within the framework of market making activities which will exempt acquisitions made by a market maker if he simultaneously communicates purchasers' and sellers' rates in order to create liquidity, executes orders issued by customers within the framework of his normal activities or covers positions associated with these transactions,
Acquisitions made within the framework of a liquidity contract,
Intra-group transactions,
Temporary transfers (pensions and security lending),
Acquisitions (including the redemption of own securities) made in the context of employee savings products.
Collection of the FTT
The tax is payable on the net daily share of purchases/sales carried out in relation to a security subject to tax.
A customer who purchases and sells the entire position within the same day will therefore not be subject to the tax.
However, it is impossible to know the future intentions of the purchaser at the time of the purchase, which means that Bank has to deduct the tax systematically each time a purchase is made. A calculation is then made at the end of the day in order to reimburse any excess tax received on the following day.
These taxes were approved by the French National Assembly on 15 February 2012 and are to be applied as of 1 August 2012.
The scope of application of the FTT
The 0.2% tax is applied to all financial acquisitions of equity securities provided that the security is accepted for negotiation on the French market (such as the regulated NYSE Euronext market in Paris) or a recognised European market (such as the London Stock Exchange or SIX-SWX).
The regional scope of application of the tax is determined with reference to the company's head office: the tax is payable if the issuer's head office is in France. The acquisition of shares listed in Paris of a company whose head office is outside France will therefore not be subject to the tax. The location in which the acquirer or financial intermediary executing the order is based is irrelevant. The tax is limited to securities in companies whose capitalisation exceeds 1,000 million euros on 1 January of the tax year, a threshold which corresponds to compartment A of the regulated NYSE Euronext market in Paris. A French ministerial order will designate them each year. The list of securities subject to this tax can be obtained here.
In order for the tax to be applied, the acquisition must be made in return for payment (bonus share distributions are therefore not concerned). The tax encompasses purchases in the form of the exercising of an option, a forward purchase, an exchange or attribution in return for contributions. However, it is important for the transaction to result in a transferral of ownership, i.e. the entry of the security in the acquirer's account. This is the event which will constitute the generating event for the tax. Forward financial instruments which are settled exclusively in cash will therefore not be taxable.
Transactions exempt from FTT
The following transactions are exempt from the tax:
Purchases completed in the context of the issuance of securities (primary market); the exemption covers both the initial subscription and the purchases made within the framework of an underwriting agreement or guaranteed investment,
Transactions carried out by a clearing house or a central depositary,
Acquisitions made within the framework of market making activities which will exempt acquisitions made by a market maker if he simultaneously communicates purchasers' and sellers' rates in order to create liquidity, executes orders issued by customers within the framework of his normal activities or covers positions associated with these transactions,
Acquisitions made within the framework of a liquidity contract,
Intra-group transactions,
Temporary transfers (pensions and security lending),
Acquisitions (including the redemption of own securities) made in the context of employee savings products.
Collection of the FTT
The tax is payable on the net daily share of purchases/sales carried out in relation to a security subject to tax.
A customer who purchases and sells the entire position within the same day will therefore not be subject to the tax.
However, it is impossible to know the future intentions of the purchaser at the time of the purchase, which means that Bank has to deduct the tax systematically each time a purchase is made. A calculation is then made at the end of the day in order to reimburse any excess tax received on the following day.
