On 14 February 2013, the European Commission (the “Commission”) published its detailed proposal for a council directive implementing enhanced cooperation in the area of financial transaction tax (the “FTT Directive”). This proposal is based upon, and broadly replicates, the Commission’s 2011 FTT proposal, which will now be withdrawn; however, certain changes have been made. The two main differences between the present FTT Directive and the 2011 proposal are that the territorial scope of the FTT has been both (a) narrowed, as participation in the FTT is now limited to eleven participating Member States, and (b) widened, as the tax will also now apply to transactions involving shares, securities and other financial instruments issued by companies in those participating States (the so-called “issuance principle” to complement the existing “establishment principle”).

If enacted, the FTT could therefore apply to many transactions carried out by financial institutions regardless of the place in which they are resident and so will be relevant to institutions in the UK, the US and elsewhere, where either the counterparty or the subject securities are of a participating Member State.

The following key questions are addressed in this alert:

1. Which jurisdictions are involved?
2. When does it come into force?
3. Which financial transactions are caught by the FTT?
4. Which financial transactions are not caught by the FTT?
5. What is the territorial scope of the FTT?
6. When is the FTT charged?
7. Which party is liable to account for it?
8. What is the rate?
9. Are there anti-avoidance provisions?
10. Will the rules be the same across each FTT State?
11. What will happen to local taxes in the FTT States that overlap with the FTT?
12. Will the FTT be challenged?

To read the full alert, please click here.