Italy: Introduction of an Italian Financial Transaction Tax (IFTT)

22.02.2013

Further to our Marketflash M12070, dated 19 December 2012, we hereby provide additional information as to the main contents of the draft Decree published by the Italian Ministry of Economy and Finance (MEF).

A. Application of the IFTT on some Italian shares

(Regardless of where the transactions are executed and of the country of residence of the counterparties involved):

  • From 1 March 2013, considered as execution and settlement date, as follows:

    • 0.2% tax rate on the countervalue of each transaction where a transfer of ownership of stocks or other financial instruments issued by and representing a participation in companies resident in Italy as well as securities representing the same participation, regardless of where the securities are issued.
    • 0.1% tax rate on transactions dealt on Regulated Markets and on Multilateral Trading Facilities (as per the list published by the European Securities and Markets Authority (ESMA)).

  • From 1 March 2013, considered as the effective date of conversion, a 0.2% tax rate on transactions representing the change of ownership of stocks resulting from the conversion of convertible bonds, exercise of warrants and covered warrants.

If the transferred financial instruments was issued by companies listed in the Regulated Markets and on a Multilateral Trading Facility, the IFTT will be applied only on securities issued by listed companies having an average capitalisation higher than EUR 500 million in the month of November of the previous year of the transfer of ownership.

The list of the Italian issuing companies not falling within the scope of the IFTT is available on the MEF’s official website.

N.B.: For the year 2013 only, for the period from 1 March to 31 December, the applied IFTT rates will be 0.12% instead of 0.1% and 0.22% instead of 0.2%.

Calculation of the tax base amount

For the purposes of tax base calculation, price will be determined according to the different types of transaction, as follows:

  • Transfer against payment: transaction countervalue;
  • Transfer free of payment: contractually agreed transaction countervalue or, if this is missing, the “normal” value fixed in compliance with par. 4, art. 9 of the “Testo Unico delle Imposte sui Redditi” (TUIR);
  • Acquisition of shares or other financial instruments representing participation and securities representing participation resulting from the exercise of financial instruments: exercise value;
  • Conversion, exchange or redemption of convertible bonds: relevant value as per issuing prospectus.

The IFTT will be applied only if the net “end-of-day balance” of the settled transactions for each security in connection with each single liable subject is positive.

In order to fix the net balance, the sum of purchases and the sum of sales executed in the Regulated Markets and those executed outside said Regulated Markets (OTC) must be take into account separately: the two net balances will then be algebraically added.

Note: Exempt transactions are excluded from the calculation of the net balance (see below).

The tax base is calculated by multiplying the net securities balance, as defined above, by the average weighted purchase price.
The tax applied is the average weighted rate multiplied by the number of purchased securities. Example:

Same investor, same security, same execution and settlement date:
Purchase of 10 shares on the Regulated Market at EUR 50 plus 20 shares at EUR 49 (exempt transaction) plus 15 shares at EUR 51 over the counter (OTC)
Sale of 15 shares on the Regulated Market at EUR 51 and 5 shares OTC
Balance of the negotiation on the Regulated Market within the scope of the tax = -5
Balance OTC = 10
Net balance of the two markets = 5
Average weighted purchase price = (10x50+15x51)/25= EUR 50,60
Tax base amount = EUR 5x50,6 = EUR 253

If more than one intermediary is involved, the taxpayer can appoint a single intermediary as liable intermediary for the IFTT payment. The intermediaries are not obliged to accept such appointment. Passive subject for transactions on shares:

  • The tax payment is owed by the beneficiary of the ownership transfer.
  • Intermediaries purchasing securities in their own name but on behalf of third parties will not be liable for payment of tax on said activity.

B. Application of the IFTT on Italian stocks based derivatives

(Regardless of where the transactions are concluded and of the country of residence of the counterparties):

  • As from 1 July 2013, considering the closing date (that is: subscription date, early cancellation - except when made by signing a new contract, or modification of the contract – that is, change in its notional value, parties or maturity) with reference to derivatives based on financial instruments having as their prevailing underlying securities one or more financial instruments representing participation and issued by companies resident in the Italian State territory, including warrants, covered warrants and certificates:

    • Application of the IFTT as a fixed amount based on the kind of Instrument and on the contract notional amount, excluding the underlying portion not represented by stocks and other equivalent financial instruments (refer to Section A. above and Annex to Law 21/12/2012, nr. 228).
    • Application of the IFTT on both the derivative contract and on the possible relevant transfer of resulting shares.

Passive subject for transactions on stocks based derivatives:

  • The tax payment is equally owed by both the counterparties involved.
  • Reduction of the IFTT rate to 1/5 for those transactions concluded in the Regulated Markets and on a Multilateral Trading Facility.

C. Subject liable for the tax application

The intermediary (which is entitled to provide investment services) that executed the transaction (bank, trust, investment company) is liable for the application of the tax as well as for the relevant payment.

If more than one intermediary is involved, the tax will be applied by the intermediary appointed by the investor, that is, the one closest to him.

In the remaining cases, the passive subject will take care of the payment.

The non-resident intermediary having a permanent establishment in Italy will have to comply with the duties connected with the application and payment of the IFTT through its Italian permanent establishment.

The non-resident intermediary without a permanent establishment in Italy will be able to appoint a fiscal representative in Italy for the IFTT payment who will have the same duties and responsibilities as the non-resident subject.

Those subjects resident in countries without an agreement in place with Italy for the adequate exchange of information will be considered as final beneficiaries of the transaction.

The liable subject shall annually comply with the “tax declaration obligations”, including exempt and excluded transactions, according to the terms and arrangements to be set forth by the Director of the Italian Inland Revenue (Agenzia delle Entrate).


The liable intermediary will not be subject to “tax declaration” filing if the tax amount due is lower than EUR 50.00.

In cases of delayed or missing tax payment or breaches concerning the “tax declaration” filing, specific penalties will be applied according to art. 13 and art. 20 of Legislative Decree 471 dated 18 December 1997.

D. Exemptions

The IFTT will not be applied on:

  • The transfer of ownership of shares issued by listed companies having an average capitalisation lower than EUR 500 million in the month of November of the previous year in respect of said transfer;
  • Issuance and cancellation of shares and financial instruments representing participation and issued by companies resident in Italy, as well as securities representing participation, regardless of where they are issued, on conversion into newly issued shares and on transactions involving temporary acquisition (securities lending, repo etc.);
  • Market making activity;
  • Intra-group trading;
  • Pension saving schemes;
  • Transactions concluded with the European Union (EU), the European Central Bank, Central Banks of Member States of the EU and Central Banks and entities managing the official States reserves, as well as supranational entities;
  • Ethical finance;
  • Inheritance and donation;
  • The transfer of ownership of holdings in collective investment undertakings (“OICR” in Italy), including the shares of SICAVs.

E. High Frequency Negotiations

(Introduction of a tax at the rate of 0.02% on the “High Frequency Negotiations” (quick trading on electronic platforms).

The IFTT will be applied provided that, for the same trading day, with reference to a specific financial instrument, the ratio between cancelled and modified orders and the sum of entered and modified orders on the Italian Financial Market (Regulated Markets and Multilateral Trading Facility authorised by Consob as per articles 63 and 77bis of the Testo Unico della Finanza –TUF) exceeds 60%.

The tax will be calculated on the value of the cancelled and modified orders exceeding the 60% threshold and applied on the product of the number of securities exceeding said threshold multiplied by the weighted average price of the purchase and sale orders or related modifications thereof for the specific financial instrument in the trading day.

The tax will be applied:

  • Starting from 1 March 2013 in connection with High Frequency Negotiations on shares and other Financial Instruments representing participation and issued by companies resident in Italian State territory as well as securities representing participation, regardless of where they are issued;
  • Starting from 1 July 2013 in connection with High Frequency Negotiations on Derivatives based on Financial instruments having as their prevailing underlying securities one or more financial instruments representing participation and issued by companies resident in the Italian State territory, including warrants, covered warrants and certificates.

The tax will not be applied:

  • On orders generated by a computer algorithm for the performance of the market making activity;
  • On orders generated by a computer algorithm in order to fulfil the best execution requirements provided by Article 21 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004;
  • On orders occurring at intervals exceeding half a second.

The subject entering the order and relevant amendments and cancellations will be liable for tax payment. When fully operational, the tax will be paid monthly, by the 16th calendar day of the month following the month in which the transfer of ownership is executed.

F. Tax payment

An interim period of three calendar months after the entry into force of the law is fixed: the IFTT will have to be paid in bulk before 16 July 2013.

When fully operational, the IFTT will be paid monthly, by the 16th calendar day of the month following the month in which the transfer of ownership is executed.

For the time being, all intermediaries are now waiting for the final definitive version of the Decree (hopefully to be published by the end of February 2013, that is, before the entry into force of the law) and, additionally, a circular to be issued by the Italian Inland Revenue (Agenzia delle Entrate) that should provide explanations and operational guidelines, specifically with regard to the collection of the data, reporting and tax payments, as well as any further requirements to enable the intermediaries to act according to the law’s regulations.

Further information

For further information, customers may contact Clearstream Banking1 Customer Service or their Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).

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