Global FS Tax Newsflash: The Italian FTT – deferral of key dates

Given the focus of press coverage in recent weeks on the negotiations among the 11 EU Member States involved in the Enhanced Cooperation Procedure for the EU Financial Transaction Tax (FTT), it is perhaps easy to forget that financial institutions are already grappling with the domestic FTT regimes implemented by France in August 2012 and in Italy earlier this year. For both of these regimes there remain a number of practical issues. In light of this it was announced in Italy yesterday that key dates for payment of the tax and the start of the derivatives regime would be deferred.

In particular, there has been significant concern across the FS industry in recent months in connection with the Italian regime as a result of the continued delay in the release of the payment and reporting procedures for the Italian Financial Transaction Tax (“IFTT”) on equities and further guidance in relation to the derivatives regime.

Yesterday’s announcement that the first tax payment date has now been deferred from 16 July 2013 to 16 October 2013 and that the start date for the IFTT on derivatives has been postponed until 1 September 2013 is therefore very welcome. However, as a result of the lack of clarity in the relevant rules, key questions remain on the scope and operation of the regime. This problem is particularly acute for the tax on equities which, notwithstanding the deferral of the first payment date, has been in force since 1 March 2013.

Affected institutions therefore still need to continue to identify in-scope equities transactions and calculate and collect the tax accordingly.

Following the publication of the Decree implementing the IFTT on 28 February 2013, no further substantive guidance has been released by the Italian authorities. This is despite there being a number of gaps in the original Decree. Notably, as mentioned in our Global FS Newsflash of 8 April 2013, the Decree contains significant gaps regarding:

  1. The application of the accountable party provisions where chains of intermediaries include institutions based in “black list” countries;
  2. Details of the arrangements for paying and reporting the amounts of IFTT to the Italian authorities;
  3. Guidance on the scope of the regime, both for the equities tax and the derivatives tax.

With the IFTT on derivatives scheduled to come into force on 1 July 2013 and the first payment date for the IFTT on equities due on 16 July 2013, there has been increasing concern in the industry as to the approach to adopt.