All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

EU: Update on EU FTT


Bob van der Made, PwC

Immediately after the EU Council's Working Party on Tax Questions – Indirect Taxes (EU FTT) was held on September 9 2013, a confidential opinion of the EU Council Legal Service on the legality of one important aspect of the European Commission's proposed directive for implementation under enhanced cooperation of an EU FTT, was leaked to the press. The opinion calls into question the territorial scope of the tax and, in particular, its application to financial institutions based outside of one of the eleven participating EU member states (ECP-11) where they transact with counterparties which are located within one of the ECP-11 countries. The legal opinion was prepared by the EU Council's Legal Service in response to a request from member states. The role of the EU Council's Legal Service is to provide advice to the Council and to represent the Council in all litigation. The opinion focuses on the compatibility of Article 4(1)(f) of the proposed directive with EU law. Article 4(1)(f) contains one of the establishment tests which is used to determine whether a financial institution is subject to the EU FTT in an ECP-11 country. It applies where a financial institution is physically located outside the ECP-11 zone but transacts with a counterparty located within the FTT-zone. The opinion concludes that Article 4(1)(f) exceeds member states' jurisdiction for taxation under international law, infringes on the taxing competences of non-participating member states and is discriminatory against them. The opinion does not comment on the legality of any other aspects of the proposed directive.

The opinion has been prepared at the request of the ECP-11 following concerns raised at the April 16 2013 meeting of the Working Party on Tax Questions – Indirect Taxes (EU FTT). The pressure on the ECP-11 to request the Council's Legal Service for a legal assessment became simply too big when the UK launched a legal challenge to the European Court of Justice at around the same time on the use of the enhanced cooperation procedure. Other non-ECP-11 also voiced concerns over the extra-territorial scope of the proposal.

While the opinion is non-binding, the views of the EU Council's Legal Service are influential and the ECP-11 is likely to take the content of the opinion into account as negotiations under the enhanced cooperation procedure move forward. Importantly, the EU Council's Legal Service on this EU law point contradicts the European Commisson's Legal Service's official views.

The legal opinion follows a general slowdown in the negotiations in recent months as it has become apparent that the 11 member states who have signed up to the enhanced cooperation procedure are struggling to reach a consensus on what form the tax should take.

While the legal opinion is not binding on member states, it is likely to provide the ECP-11 with a welcome piece of advice on the red line not to be crossed ahead of the next round of technical negotiations, and to get out of the current impasse. Indeed, the road toward a scaling back of the scope of the tax now seems to be cleared.

Financial institutions need to continue to closely monitor developments in the coming weeks and months. The overall direction of travel should become clearer once the plans of an incoming German federal government are presented. It is expected that if the EU FTT is expressly mentioned by a new German government which includes the Social Democratic Party (or perhaps the Greens), the EU FTT project may be up for a re-start. If not, the Commission's proposal may be shelved.

Bob van der Made (


Tel: +31 88 792 3696


more across site & bottom lb ros

More from across our site

The Biden administration is about to give $80 billion to the Internal Revenue Service to enhance the tax authority’s enforcement processes and IT systems.
Audi, Porsche, and Kia say their US clients will face higher prices under the Inflation Reduction Act after the legislation axes an important tax credit for electric vehicle production.
This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree