French Financial Transaction Tax
Are You Prepared?
23 May 2012
Fabrice Novel
France Securities Country Manager
Citi Transaction Services
Material in this communication is for informational purposes only.
This information was believed to be accurate at the time of publication, but Citibank, N.A. makes no representation or
warranty to any person as to the accuracy or completeness of the material contained herein.
The material contained herein does not constitute a recommendation by Citibank, N.A. to invest in any country, or in the
securities traded or listed on any named exchange, nor shall this material be construed in any way as investment, tax or
legal advice or a recommendation, reference or endorsement by Citibank, N.A. or any person or entity named herein.
Introduction
1. Regulatory context
3
2. Scope and determination of taxable transactions: transfer of ownership’s and acquisition rules
4
3. Exemptions provisions
5
4. Accountable and liable parties
6
5. Mandatory tax declaration and payment obligations
7
6. Calculation of tax amount
8
7. Penalty regime
9
8. Get prepared: reporting development and messaging information upgrade
10
9. Q/A s
11
Regulatory context – French Tax code 235 ter ZD
 Approved by French Parliament and enacted on 14 March 2012
 Effective from 1 August 2012
 First deferred declarations and tax payments in November 2012
3 tax:
1.
2.
3.
Tax on acquisition of certain French shares = Equity FTT *
Tax on French "High Frequency Traders“
Tax on "naked" on credit default swap trading
Important papers still to be issued:
– Decree of application
– Fiscal instruction
– Order provides list of companies
– Euroclear Blue Print documentation (v.1 Published)
– ADRs?
* only Equity FTT will be discussed in this presentation
3
– European/French
political
Environment
– Intention for
French Tresor to
raise €1bn
Scope and determination of taxable transactions
Transfer of ownership’s and acquisition rules
Main features of the tax code article 235 ter ZD:

Only acquisitions

Valuable consideration

Shares or assimilated

Issued by companies whose:

headquarters are located in France and

capitalisation exceeds one billion euro on the 1st of January of the fiscal year.

Listed for trading on a French, European or foreign regulated market

Transfer of ownership : Recording to the securities account of the purchaser
Important:
*
*
*
4
Tax levied regardless of where the trade takes place
Financial intermediaries required to collect the tax
Taxation rate: 0.1%
Exemptions provisions
1.
Purchases linked to an issue of securities (primary market)
Provisions:
2.
Purchases made by a clearing house or a central securities
depository
3.
Purchases linked to market making activities
4.
Purchases linked to a liquidity contract
5.
Intra-group transactions
6.
Securities lending and repos
1)
Providing liquidity to the
market
or
2)
Executes orders given by
clients or in response to
clients buy and sell
requests
or
7.
5
Acquisitions by employee mutual funds, employee open-ended
investment funds or by employees directly
8.
Acquisitions (including purchase of company shares) for employee
saving schemes
9.
Acquisitions of convertible bonds/bonds convertible into shares (tbc)
3)
Hedge positions related to
the execution of
transactions cited in 1) and
2)
Accountable and liable parties
The tax is assessed to the buyer and is collected by the financial intermediary or by the custodian
when there is no financial intermediary (OTC transactions). Article 235 ter ZD VI
It is up to the buyer to provide the necessary information
Client
Tresor
6
Model 1 ISP/broker
On exchange transactions
Model 2: no ISP/broker
OTC transactions
Brokers/ISP provide reporting to
Euroclear France members
Investors provide relevant
taxation information to
Euroclear France members
Take away:
Take away:
Prepare any relevant
reporting development
Prepare any messaging
information upgrade
Mandatory tax declaration and payment obligations
Euroclear France has been mandated with the following functions in respect of the new tax:
–
Collect the tax declarations
–
Collect the tax from Euroclear France member
Additional
market costs
–
Pay the tax to the fiscal authorities
–
Implement some controls
Brokers/ISP and intermediaries
reports to Euroclear France
members
Euroclear France members
report and pay to Euroclear
France by 4th calendar day of
the following month
Euroclear France reports and pays
to the Tresor by 24th calendar
day of the following month
The format of the declaration – v1 published. It will contain the following information on transactions in the scope
•
•
•
•
•
•
•
•
7
Type of declaration
ESES institution code of the Euroclear France member
BIC of the Accountable Party
Identification of the Accountable Party
Trade date
Settlement date
ISIN
Quantity
•
•
•
•
•
Taxable amount
Tax amount
Exemption flag
Exemption reason
Transaction reference allocated by Accountable
Party
• Narrative
Calculation of tax amount
 The Equity FTT is based on the acquisition value of the securities as expressed in the contract resulting in the
transfer of ownership to the buyer. The tax base is determined by:
– The execution price of the transaction for trades on a market or with a counterparty;
– The exercise price of a derivative that gives rise to a delivery of securities;
– The price agreed in the issue contract for the conversion or exchange of a bond.
 Transfer ownership to the buyer > Concept of Net buy position at the end of each accounting day
 Tax rate set at 0.1%
 Value of the security is the average price of purchases of the trading day
8
Penalty regime
 In the event the central depositary fails, through its action, to meet the payment obligations stipulated in point IX,
it shall pay the late penalty stipulated by Article 1736 of this code.
 If the taxpayer fails to meet the payment obligations stipulated in point VII of this article, the taxpayer shall pay
the late penalty stipulated in said Article 1736.
 If the taxpayer or member fails to perform the declaration obligations stipulated in point VII of this article, the
member shall pay the fine stipulated in Article 1788 C” (FTC, Art. 235 ter ZD, XI).
 1. If it fails to perform its declaration obligations stipulated in point IX of Article 235 ter ZD, the central depositary
shall pay a fine of €20,000 for failure to file the declaration and €150 per omission or inaccuracy in the
declaration, up to a maximum of €20,000 per declaration.
 2. If it fails to meet its obligation to provide to the administration the information stipulated in point X of said
Article 235 ter ZD, the central depositary shall pay a fine of €20,000 (FTC, Art. 1736, VII).
 I. Failure to transmit the information stipulated in point VII of Article 235 ter ZD shall result in the application of an
increase of 40% of the amount of the tax owed, which may not be less than €1,000 or, when no tax is due, a fine
of €1,000.
 II. Late transmission of the information stipulated in point VII of Article 235 ter ZD shall result in the application of
an increase of 20% of the amount of the tax due, which may not be less than €500 or, when no tax is owed, a
fine of €500.
 III. Inaccuracies or omissions found in the information stipulated in point VII of Article 235 ter ZD shall result in
the application of a fine of €150 per omission or inaccuracy found in the declaration, which may not exceed 40%
of the tax omitted” (FTC, Art. 1788 C).
9
Getting prepared
Reporting development and messaging information upgrade
Blue Print
– Decree of application
– Fiscal instruction
– List of companies
– Additional law to extend to
other instruments like ADRs?
Clients
Reporting development and/or
messaging information upgrade
10
Questions and Answers
11