France: new taxation on financial transactions

Starting from 1 August 2012, most French equity securities will be subject to the new Financial Transaction Tax. Such a tax, provided for by the French project in the "Chapitre 3, Section 1, Art. 11", is currently being revised by the French Parliament, and retroactively will affect the value of transactions of purchase of shares at a 0.2% rate.

The parties responsible for the payment of the tax are financial institutions that provide investment services, brokers who have executed transactions for their own account or on behalf of their customers and the holders of securities (if the transaction is not made by a broker). These subjects will be responsible in terms of transmission of the periodic statement of transactions on securities and the amount of monthly due payments.

The tax applies to transactions regarding French stocks, which meet the following requirements:

  • They are equity instruments ("titres de capital") and other similar securities;

  • They are listed on a French or foreign regulated market;

  • They securities are issued by companies with more than one billion euro market capitalization;

  • They are issued by companies established in France at least from January 1, 2012.

The French Ministry of Finance published a list of companies subject to the law, which will be updated annually.

The tax also applies to securities purchases under consideration, regardless of the place of negotiation and of the adjustment of the transaction. They must be declared, even if exempt, and the latter will be provided with an code identifying the reasons for not applying the tax.

Currently, the calculation criteria are not entirely clear, since no specification in this respect is contained in the bill to be approved.

The main transactions exempt from the payment of tax include:

  • purchases related to securities issues;

  • purchases made by a clearing house;

  • purchases related to marketing making;

  • purchases related to a liquidity contracts;

  • intra-group transactions;

  • securities lending and repurchase agreements;

  • the acquisition by investment funds for employees, investment funds open to employees and employees directly;

  • acquisitions (including the acquisition of treasury shares) savings plans for employees;

  • purchases of bonds that can be exchanged or converted into shares.

In order to facilitate the implementation of the new tax, the French tax authorities have considered an approach consisting of two phases. In a transitional period, the transactions relating to the period between 1 August and 31 October will have to be declared all together at the end of the period. From 1 November 2012 the normal operating period will start and the operations must be declared on a monthly basis on the first business day after the end of the reference month according to the format required by the tax authorities. The tax will be paid (always on a monthly basis) the second business day.

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