EU transaction tax likely to cause distortion in the financial sector
If the proposals for a financial transaction tax (FTT) are implemented as proposed by the European Commission, the FTT is likely to cause distortion in the financial sector, both within the EU and outside, and will almost certainly change the way we do business. The FTT will apply to securities and derivatives transactions by financial institutions that are established in a participating member state — that is Belgium, Germany, Greece, France, Austria, Portugal, Slovenia, Estonia, Spain, Italy and Slovakia (the FTT zone).
However, the FTT will also apply to financial institutions established outside the zone. This will be the case if they operate within the FTT zone, transact with a counterparty in the zone or (following changes to the Commission’s proposals) transact in securities issued by entities incorporated or registered in the FTT zone. This means that a transaction between a UK and a U.S. entity relating to, for example, German bonds could give rise to an FTT charge.
The FTT will be charged at a minimum rate of 0.1% on buying and selling securities and 0.01% on concluding derivatives. In practice, a transaction could attract a much larger effective rate because the tax applies to both parties (if they are both financial institutions) and there is no wide market-maker exemption. A subsequent charge could apply to a material modification of the transaction (even an existing transaction), which is of particular concern for derivative transactions.
If you are registered and logged in to the site, click on the link below to read the rest of the Allen & Overy briefing. If not, please register or sign in with your details below.
News from Allen & Overy
News from The Lawyer
Briefings from Allen & Overy
Keeping track of the latest European developments, as well as domestic trends and changes, can be difficult — all the more so for multinational businesses.
For most HR practitioners and in-house counsel, keeping abreast of domestic legal developments can be challenging. For those with a multi-national remit, the task is huge.
Analysis from The Lawyer
Why has Herbert Smith Freehills (HSF) decided to walk away from the Singapore qualifying foreign law practice (QFLP) scheme?
The law school war shows no signs of ending. But we have, perhaps, reached the end of the beginning.