Italy: The Italian tax on financial transactions
Giovanni d’Ayala Valva
Anticipating the decision of the Council of the European Union of January 22 2013 as to the implementation in the EU, under enhanced cooperation, of a harmonised financial transaction tax, the 2013 Financial Law (Law No 228 of December 24 2013) introduced into the Italian system a new indirect tax on certain financial transactions (also known as a Tobin tax). On February 1 2013, the Italian Ministry of Economics and Finance posted on its website for public consultation a draft of Ministerial Decree which provides specific and detailed rules aimed at implementing the Tobin tax (the English version of the draft decree is available at http://www.tesoro.it/primo-piano/documenti/draftdecreto__1_2_2013_EN_FINAL_REV.pdf). The final version of the Decree is expected to be enacted by the end of February.
According to the 2013 Financial Law, the Tobin tax shall apply to the following financial transactions:
(i) Equity transactions such as (a) transfer of the ownership of shares (including the acquisition of shares following the conversion of convertible bonds) and equity-like financial securities issued by companies resident in Italy (shares); (b) transfer of the ownership of financial instruments representing shares irrespective of the issuer's residence (for instance American depository receipts);
(ii) Derivatives rransactions such as (a) transactions on financial derivatives having as their main underlying asset shares; (b) transactions on financial derivatives the value of which depends primarily on one or more shares; (c) financial transactions on securities allowing mainly the purchase or the sale of shares or financial transactions that give rise to a cash settlement determined on the basis of shares (for example equity settled derivatives or cash settled derivatives, including warrants, covered warrants and certificates);
(iii) High frequency trading (HFT) of securities under (i) and (ii).
The Tobin tax shall be due irrespective of whether or not the relevant transaction is executed in Italy and regardless of where the parties reside.
The tax rates and the taxable basis shall vary depending on the type of transaction and on the relevant market.
The Tobin tax on equity transactions shall be applicable starting from March 1 2013 at the rate of 0.22% (reduced to 0.2% from 2014). For transactions occurring in regulated markets or multilateral trading facilities established in an EU member state or in a qualified EEA State, the ordinary rate is reduced to 0.12% (reduced to 0.1% from 2014).
The taxable basis for equity transactions is the "value of the transaction" which is defined as (i) the net daily balance of the transactions executed and settled on the same day by the same entity with respect to the same financial instrument; or (ii) the paid price.
The Tobin tax on derivatives transactions shall be applicable starting from July 2 2013 and consists of flat amounts (from €0.01875 to €200) varying on the value of the contract and on the type of financial derivative. The Tobin tax on derivatives is reduced by 20% for transactions executed in regulated markets and in multilateral exchange facilities.
The Tobin tax on HFT shall be applicable from March 1 2013 to transactions occurring in the Italian financial market relating to the securities mentioned above. The tax shall be applied at a 0.02% rate on the counter-value of orders automatically generated by a computerised mathematical algorithm within a certain time frame.
Certain exclusions apply to qualified transactions (such as gifts, inheritances, transactions occurring into the primary market) and qualified counterparties (for example EU central banks, and qualified international organisations).
The taxable person is the transferee for the equity transaction, each counterparty for the derivatives transactions and the person on whose behalf the transactions are executed for the HFT.
Under certain conditions, also non-resident tax intermediaries qualify as withholding agent and as such are responsible for levying and paying Tobin Tax.
Vitali Romagnoli Piccardi e Associati
Tel: +39 06 3218022 (Rome); +39 02 58 31 37 07 (Milan)