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19/08/2010

NNEX

A: T

AXATION OF FINANCIAL TRANSACTIONS IN THE

Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

EUR 1.7 per thousand euro

worth of securities

(maximum of EUR 500)

0.6%

Stamp or other duty

Tax base

Tax rate

Austria

(12/7/2010)

Tax base

Direct contributions of capital

to an Austrian company

Tax rate

0.15%

Tax base

Stamp duty for documents

concerning bank transactions

Belgium

(16/6/2010)

Bulgaria

(5/7/2010)

Shares, bonds and other securities,

whether traded on the Stock

Exchange or not

Physical delivery of bearer

securities. (Trade in short-term

commercial papers is not taxable.

Tax not applicable to securities

issued upon formation of a company

or an investment fund.)

Transfer of shares of a limited

liability company and the transfer of

an existing business incur a notary

fee

Cyprus

(13/6/2010)

Czech Republic

(12/7/2010)

- EUR 102.52 plus

0.6% on the

nominal value of

the share capital;

- EUR 17.09

allotment fees for

the issue of the

shares.

Capital duties and allotment

fees are payable on the

authorized share capital and

on the issue price of the

0.15%

A notary fee is due on the

transfer of shares of a limited

liability company and the

transfer of an existing

business

Transactions in, or

transactions announced in, the

Cyprus Stock Exchange

Denmark

(16/6/2010)

Administration fees are

payable on certain services

rendered by various

government bodies

Estonia

(16/5/2010)

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

1.6%

Stamp or other duty

Tax base

Tax rate

Tax base

Stamp duty is levied on

certain documents and in

connection with various legal

transactions, such as

promissory notes, bills of

exchange and certain other

certificates, and mortgage

certificates.

Tax rate

Finland

(1/7/2010)

Tax base

France

(15/7/2010)

In general, there is no capital

duty or similar duty on the

formation and expansion of

capital of companies.

3%, with a maximum of

EUR 5,000

On the sales price, but only if the

transfer is not made through the

stock exchange.

No transfer tax is due if shares of a

foreign company are sold or if both

the seller and the purchaser are non-

residents. However, this exemption

does not apply if one of the parties

to the transfer is a Finnish branch of

a foreign bank or a foreign

investment company. The tax is

always payable on transfers between

non-residents if the transferred

shares are shares in a Finnish

housing or real estate company.

For shares; only if the transfer is

made by written deed executed in

France

The transfer of shares in non-quoted

SAs whose assets consist principally

of immovable property and the

transfer of shares in SARLs and

interests or quotas in legal entities

whose capital is not divided into

shares (e.g. partnerships).

The same rate applies to a purchase

of an existing unincorporated

business as a going concern. The

transfer of shares or quotas in a

foreign legal entity is exempt from

registration duty in France, unless

made by a written deed executed in

France.

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Stamp or other duty

Tax base

Tax rate

Germany

(1/7/2010)

Tax base

Tax rate

Tax base

Minor fees are due upon

registration of transactions in

the Commercial Register.

This concerns mainly the

formation of a company, a

change in the capital and

reorganizations.

On the issuance of loans

between businesses or

between individuals and

companies and payment of

interest on such loans. Loans

granted by banks operating in

Greece or abroad and interest

payments on such loans are

exempt

Greece

(10/5/2010)

−

Any kind of contribution to

the share capital on the

formation of a company.

−

The increase in a company's

capital, unless its the result

of the compulsory

revaluation of immovable

property or of the

capitalization of profits,

reserves or provisions other

than the share premium

reserve.

−

The contribution of assets or

working capital by a non-

resident company to its

branch in Greece, if the non-

resident company has its seat

or permanent establishment

outside the EU.

−

Profit-sharing loans and

loans used for a capital

increase are immediately

subject to the capital duty

except when shares are

issued.

0.15%

On the proceeds from the sale of

shares listed on the Athens Stock

Exchange or on any other

recognized stock exchange in the

world.

2.4%

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Stamp or other duty

Tax base

Tax rate

Hungary

(24/6/2010)

Tax base

Ireland

(25/3/2010)

Unless shares and other securities

are acquired at an auction organized

by a public body.

From 1 January 2010; on the

acquisition of shares in real estate

holding companies, provided that as

a result of the acquisition the

ownership of the transferee reaches

or exceeds 75% of all outstanding

shares.

0%-9%

Italy

(2/3/2010)

EUR 168

Stamp duty on certain

documents evidencing

transfers of other forms of

property than real estate

A registration tax is due on

contributions of cash and

assets (other than immovable

property) in exchange of

shares.

This registration tax is also

due:

- on transfer of shares, bonds

and similar securities based

on contracts executed in Italy

before a public notary

- on contracts executed

abroad or with different

formalities when presented to

an Italian registration office

or an Italian court.

If on contributions of

immovable property, the tax

is proportional; the rate is

usually 7% (15% for

agricultural land) of the value

of the property as indicated in

the transfer deed.

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Stamp or other duty

Tax base

Tax rate

Latvia

(21/6/2010)

Tax base

abolished 01/01/2009

Tax rate

Tax base

Stamp duty on transfer of

marketable securities (except

when listed on the Malta

Stock Exchange and inter

vivos transfers of foreign

marketable securities to

persons resident in Malta

effected through a local bank

or a person holding an

investment services licence.

A nominal registration fee is

payable upon registration of a

company, depending on the

amount of the authorized

share capital.

Lithuania

(28/6/2010)

Luxembourg

(12/7/2010)

Malta

(8/7/2010)

EUR 210 to

2,250

Netherlands

(1/7/2010)

Poland

(7/7/2010)

0.5%

Initial capital contribution to a

newly registered company

and on the transfer of an

effective place of

management or registered

office from a non-EU country

to Poland

The acquisition of shares in a real

estate company (if the acquisition

gives the acquirer at least one third

of the subscribed share capital)

Shares, bonds and other securities if

the underlying rights are exercised

in Poland

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Stamp or other duty

Tax base

Tax rate

Portugal

(12/7/2010)

Tax base

Tax rate

0.4%

Tax base

A capital duty (in the form of

stamp duty) is imposed on

capital contributions to capital

companies upon incorporation

or any subsequent capital or

equity increase. The duty is

also levied on the transfer

from a non-EU state to

Portugal of the place of

effective management and/or

legal seat of a capital

company with its legal seat

and/or place of effective

management in that third

state.

(Exemptions, for example, in

respect of:

- capital contributions, upon

incorporation or capital

increases, through the

contribution of all the assets

and liabilities of the

contributor or of one or more

branches of activity;

- incorporation and capital

increases of venture capital

companies and holding

companies (SGPS);

- the change of the corporate

purpose of a capital company;

- capital increases paid in

cash (following the ECJ

decision in Optimus, C-

366/05)).

See Stamp duties

Slovak Republic

(24/6/2010)

Slovenia

(18/6/2010)

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Tax base

Normally not, except when transfer

of unquoted shares of SAs and pre-

emptive rights to subscription of

such shares by the intervention of a

notary or a stockbroker if the

transfer leads to the acquisition of

control over a non-listed company in

which 50% or more of its assets

consist of Spanish-situs immovable

property.

Stamp or other duty

Tax rate

Spain

(1/6/2010)

Tax base

On the contribution of capital

to a company or a branch

upon the formation or a

subsequent increase of the

subscribed capital, and on the

liquidation and immigration

of companies to Spain.

Tax base

Sweden

(25/5/2010)

0.5%

A stamp duty reserve tax

(SDRT) is levied on certain

transfers of shares and

securities.

United Kingdom

(14/6/2010)

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Tax base

Stamp or other duty

Tax rate

Tax base

Tax rate

Tax base

Non-EU countries

Switzerland

(1/6/2010)

A 1% federal stamp duty

(Emissionsabgabe) is payable

by resident companies (AGs,

GmbHs, KAGs and

cooperatives) upon the

issuance of shares or other

participation rights and the

increase in their nominal

value to the extent that the

share capital exceeds CHF 1

million. The taxable amount

is equal to the total amount

contributed to the company or

the value of the shares issued,

whichever is higher.

Qualifying venture capital

companies are exempt from

the duty. In addition, certain

types of transactions are

exempt, including:

- participations taken or

increased in connection with

mergers, changes of legal

structure, spin-offs or

transfers of corporate seats

from abroad to Switzerland;

- participations in

cooperatives to the extent

they do not exceed CHF 1

million in total; and

- participations formed by the

use of share premium reserves

of AGs if the company can

0.15% (Domestic

securities), 0.3%(Foreign

securities)

A transfer tax (Umsatzabgabe) is

levied on the transfer of domestic or

foreign securities where one of the

parties is a Swiss security broker.

Swiss brokers include banks and

bank-linked financial institutions as

defined by Swiss banking law. In

addition, companies that own

taxable securities of a book value in

excess of CHF 10 million qualify as

security brokers.

A broker who acts as a party to the

transaction must pay one half of the

transfer tax for himself and another

half on behalf of each party who is

not a broker. If the broker merely

acts as an intermediary, he is only

required to pay one half of the

transfer tax on behalf of each party

who is not a broker. If a Swiss

security broker deals at a foreign

stock exchange in securities that are

subject to Swiss transfer tax, the part

of the tax allocated to the other party

to the transaction is not levied.

The taxable base is equal to the

consideration paid; if there is no

consideration, the taxable base is the

fair market value of the security.

The duty is levied at a rate of 0.15%

for domestic securities and 0.3% for

foreign securities.

Eurobonds, other bonds

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

Tax base

denominated in a foreign currency

and the trading stock of professional

security brokers are exempt. Certain

types of transactions are exempt:

- initial purchase of shares in

resident companies, including those

purchased through a bank or a

holding company (subject to stamp

duty upon the issuance);

- the transfer of an option to acquire

shares;

- the redemption of securities for

cancellation;

- the initial purchase of bonds issued

by foreign debtors and shares in

foreign companies not denominated

in Swiss currency;

- the transfer of foreign money

market papers; and

- the transfer through security

brokers of foreign bonds whether in

Swiss or foreign currency between

two foreign parties.

Stamp or other duty

Tax rate

Tax base

Tax rate

Tax base

prove a previous payment of

the duty for these

contributions.

If at a later moment the

requirements for an

exemption no longer exist,

stamp duty becomes due on

the remaining part of the

existing participation right.

No stamp duty is due upon

formation and expansion of

capital by partnerships,

associations and foundations.

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Country

(date of last

update)

Capital duty

(on the creation of, or increase in, share capital)

Transfer tax

Tax rate

0.3% of the transaction

price for a transaction in

shares issued by a company;

and 0.1% of the transaction

price for a transaction in

corporate bonds and other

government approved

marketable securities such

as certificates issued by

securities investment trusts.

Since 1998, a stock index

futures transaction tax is

imposed on both parties to

the transaction based on the

contracted amount. The

current transaction tax is

levied per transaction at a

rate of not less than 0.01%

and not more than 0.06%,

based on the value of the

futures contract.

Stamp or other duty

Tax base

Tax rate

Tax base

Tax rate

Taiwan

(1/4/2010)

Tax base

Securities transactions tax is levied

on all securities on the stock

exchange, except government

bonds. Securities transaction tax on

bank debentures and corporate

bonds is not imposed from 1 January

2010 to 31 December 2016.

Source: IBFD "European tax survey" database. Date: 22/07/2010

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NNEX

B: C

OUNTRY

XPERIENCE

B.1 T

RANSFER TAXES AND

TAMP

UTIES

United Kingdom

The UK stamp duty on transfers of securities consists of two instruments: (1)

Stamp duty

(charged on instruments of transfer) and (2)

Stamp Duty Reserve Tax

(SDRT) (charged on

underlying agreements to transfer securities where an instrument is not executed).

The two go hand in hand when considering transaction taxes on shares.

Stamp Duties

in the

UK are collected on documents used to effect the sale and transfer of ownership in shares and

other securities of UK-based companies. In order to collect duties on transactions carried out

through electronic share dealing systems, the

Stamp Duty Reserve Tax (SDRT)

was

introduced in 1986. Stamp duties are levied on the underlying value of the transferred good.

The standard rate is currently 0.5%.

Revenue from duties on the transfer stocks and shares also augmented over the last decade.

After the economic downturn in 2001-02 revenue declined for two years in a row. From 2004-

05 onwards revenue steadily increased despite the fact that the tax rate remained unchanged at

0.5% in this period. There are three main reasons for this development. Firstly, share prices

increased significantly in recent years as a consequence of the economic boom. Secondly,

volume of traded shares also increased since the number of incorporated companies increased.

Lastly, turnover also augmented since shares have become important products for medium-

and short-term investments. However, revenue declined also for this category in 2008-09. The

reasons are the reduction in transactions volumes as well as significantly lower stock prices

due to the financial crisis. This observation suggests that revenue from stamp duties is pro-

cyclical with economic activity. In fact, revenue from stamp duties on transfers of financial

assets was more than 30% lower in 2008-09 compared to 2007-08.

The SDRT taxes transactions in shares where no instrument of transfer is executed and which

are therefore outside the scope of the "standard" Stamp Duty. In this sense, it is a transaction

tax, levied on agreements to transfer chargeable securities while the "standard" Stamp Duty is

charged upon documents. SDRT accounts for the majority of revenue collected on share

transactions effected through the UK's Exchanges. On average almost 90% of revenues

actually stem from the SDRT. Table (B.1) shows the revenue data for both types in the second

and third column.

The fourth column shows the total revenue from the two sources. The

peak is in 2000-01 just before the end of the Internet bubble. Columns 5 and 6 show the tax

revenue in relation to total tax revenue and GDP. The Stamp Duty was on average about 0.7%

of total tax revenue. In terms of GDP and total tax revenue the highest values have been

reached during the boom years at the end of the last century, notably in 2000-01. For 2008-09

the value is back to the level of the mid 1990ies which is around 0.2% of GDP.

Both, SDRT and standard Stamp Duty are levied on share transactions in UK incorporated

companies currently taxed at 0.5% of the purchase price of shares. It is charged whether the

transaction takes place in the UK or overseas, and whether either party is resident of the UK

The split between the two levies is only available from 2001 onwards. Note that small differences between

values single and sums occur due to rounding when converting revenues in Sterling Pound to Euro.

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19/08/2010

or not. Securities issued by companies overseas are not taxed. This means that the tax is paid

by foreign and UK-based investors who invest in UK incorporated companies. To put it

differently, the tax is connected to the location of headquarters.

Table (B.1): Revenue from stamp duties on stocks and shares

and other liable securities in the UK

Year

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

SDRT

n.a.

4,218

3,669

3,280

3,454

4,105

4,767

5,372

3,673

Standard

Stamp duty

n.a.

367

455

418

548

961

745

716

349

Stamp Duties

Total Revenue

over Total

Tax Revenue

0.59

0.60

0.73

0.79

1.10

1.26

0.77

0.69

0.65

0.64

0.77

0.82

n.a.

in %

over GDP

0.20

0.25

0.28

0.40

0.46

0.28

0.24

0.22

0.23

0.28

0.30

0.22

in %

1,810

1,966

3,033

3,696

5,617

7,383

4,586

4,124

3,698

4,001

5,067

5,511

6,091

4,022

in m Euro

Source: HM Revenue and Customs and own calculations

Given the existence of the tax, one should observe that investors discount higher future

transaction costs when trading shares. These costs should be capitalized in lower share prices.

In fact, empirical studies show that the stamp duty influences the share prices negatively.

More frequently traded shares are stronger affected than low-turnover shares. Therefore the

tax revenue capitalizes at least to some extent in lower current share prices. For firms which

rely on equity as marginal source of finance this may increase capital costs since the issue

price of new shares would be lower than without the tax. Currently, there are no estimates on

the effects on trading volumes and price volatility of the stamp duties in the UK. Given results

from empirical studies on the effect of transaction costs on trade volumes it is likely that

Stamp Duties reduce trade volumes significantly. Whether or not this increases price volatility

is disputed, however, more recent studies tend to find a positive correlation between trade

volumes and price volatility.

While it is possible to avoid stamp duty by executing and retaining the instrument outside the

UK, in practice the need to get the company's share register changed to show the name of the

new owner, combined with the restriction on unstamped instruments being given in evidence

or used for any purpose whatever, means that most instruments of transfer are presented for

stamping.

Stamp duty reserve tax is difficult to avoid because the vast majority of UK company shares

are held in the CREST settlement system which automatically debits SDRT when they are

transferred. Nevertheless, there are two mechanisms to avoid SDRT legally:

American depositary receipts (ADRs)

Many UK companies have ADR programmes which enable them to market

themselves in the US. Shares are issued to a US depositary bank which issues

"American depositary receipts" (ADRs) in respect of them. It is the receipts rather

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19/08/2010

than the underlying shares that are traded on the US markets. Such trading is currently

free from standard 0.5% SDRT transfer charges, but, to compensate, there is a charge

instead (only paid once at the higher rate of 1.5%) when the shares are issued to the

depositary bank. Placing shares into an ADR system is not regarded as avoidance.

Exchange Traded Fund (ETF)

An overseas collective investment scheme that lists on a UK exchange (ETF) currently

qualifies for exemption from SDRT provided that it is not centrally managed and

controlled in the UK or has a UK share register. The exemption was introduced in

2007 to encourage overseas ETFs to list in the UK and use of these schemes is thus

legitimate. However, owners of an ETF share do not legally own the shares in the

fund. If investors want to have voting rights the ETF cannot be used to avoid stamp

duty.

Sweden

In the 1980s Sweden experienced strong growth of the financial sector.

This was

accompanied by significant increases in the salaries of professionals in this sector. It was

argued that the financial sector's contribution to the economy and the society was small

compared to the resources it used. Furthermore, excessive financial transactions were seen as

destabilizing the economy and as promoting disproportionate wage differentials between

sectors. The latter point was politically of great importance. Despite the resistance of the

Ministry of Finance, Sweden introduced a 50 basis points tax on the purchase or sale of equity

securities in January 1984. A round trip transaction (purchase and sale) resulted therefore in a

100 basis points tax. The tax applied to all equity security trades in Sweden using local

brokerage services as well as to stock options. The fact that only local brokerage services

were taxed is in the literature seen as the main design problem of the Swedish system.

Avoiding the tax only required using foreign broker services. In July 1986, the tax rate was

increased to 100 basis points. In 1987, the tax base was extended and half the normal rate was

also applied to transactions between dealers.

In January 1989, the tax base was widened again and a tax on fixed-income securities was

introduced. The tax rate was considerably lower than on equities, as low as 0.2 basis points

for a security with a maturity of 90 days or less. On a bond with a maturity of five years or

more, the tax was three basis points. Only 15 months later, on 15 April 1990, the tax on fixed-

income securities was abolished. In January 1991 the rates on the remaining taxes were cut by

half and by the end of the year, they were also abolished completely.

There are different reasons for the abolishment of the tax. First of all, the revenues from the

taxes were disappointing. The revenues from the tax on fixed-income securities were expected

to amount to 1,500 million Swedish kroner per year, but the average was only around 50

million a year. Furthermore, since trading volumes fell, the capital gains tax became less and

less applicable and revenue declined. The increase in revenue from equity transaction taxes

was almost entirely offset by this reduction in capital gains taxes. The net budget effect was

accordingly close to zero. An additional reason for the decline in revenue from capital gains

taxes was the decline in share prices that accompanied the introduction of the transaction tax.

The day the tax was announced, share prices fell by 2.2%. Taking into account possible

trading based on insider information in the weeks before the official announcement, the price

The description of the Swedish experience is based on Umlauf (1993) and Campbell and Froot (1993).

Sweden levied transaction taxes on stock exchange and stock options, fixed interest securities and the connected

derivatives.

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19/08/2010

decline is estimated to have amounted to 5.35%. These declines were in line with the net

present value of tax payments on future trades. Investors discounted the future payments and

prices for equity decreased driving up capital costs accordingly.

Next to the low revenue generated from the tax, relocation became a serious problem in

Sweden. 60% of the trading volume of the eleven most actively traded Swedish share classes

moved to the UK after the announcement in 1986 that the tax rate would double. 30% of all

Swedish equity trading moved offshore. By 1990, more than 50% of all Swedish trading had

moved to London. Foreign investors reacted to the tax by moving their trading offshore while

domestic investors reacted by reducing the number of their equity trades.

Even though the tax on fixed-income securities was much lower than that on equities, the

impact on the traded volume was much more dramatic. During the first week after the

introduction of the tax, the volume of bond trading fell by 85%, even though the tax rate on

five-year bonds was only three basis points. The volume of futures trading fell by 98% and

the options trading market disappeared. Trading in money market securities, which faced a

tax as low as 0.2 basis points, fell by 20%. This reaction was due in large part to the existence

of a wide variety of non-taxed substitutes. Once the taxes were eliminated, trading volumes

returned and grew substantially in the 1990s.

Switzerland

A prominent example of a transfer tax outside the EU is Switzerland. A transfer tax

(Umsatzabgabe) is levied on the transfer of domestic or foreign securities where one of the

parties is a Swiss security broker. Swiss brokers include banks and bank-linked financial

institutions as defined by Swiss banking law. In addition, companies that own taxable

securities of a book value in excess of CHF 10 million qualify as security brokers.

A broker who acts as a party to the transaction must pay one half of the transfer tax for

himself and another half on behalf of each party who is not a broker. If the broker merely acts

as an intermediary, he is only required to pay one half of the transfer tax on behalf of each

party who is not a broker. If a Swiss security broker deals at a foreign stock exchange in

securities that are subject to Swiss transfer tax, the part of the tax allocated to the other party

to the transaction is not levied.

The taxable base is equal to the consideration paid; if there is no consideration, the taxable

base is the fair market value of the security. The duty is levied at a rate of 0.15% for domestic

securities and 0.3% for foreign securities.

Eurobonds, other bonds denominated in a foreign currency and the trading stock of

professional security brokers are exempt. Certain types of transactions are exempt:

initial purchase of shares in resident companies, including those purchased through a

bank or a holding company (subject to stamp duty upon the issuance);

the transfer of an option to acquire shares;

the redemption of securities for cancellation;

the initial purchase of bonds issued by foreign debtors and shares in foreign

companies not denominated in Swiss currency;

the transfer of foreign money market papers; and

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the transfer through security brokers of foreign bonds whether in Swiss or foreign

currency between two foreign parties.

The revenue of the Swiss transfer tax was CHF 1.9 billion CHF in 2007. This corresponds to

0.37% of GDP.

Taiwan

An example for a country with transactions taxes outside Europe is Taiwan. The securities

transaction tax is imposed upon gross sales price of securities transferred and the tax rates are

0.3% for share certificates issued by companies and 0.1% for corporate bonds or any

securities offered to the public which have been duly approved by the government. However,

trading of corporate bonds and financial bonds issued by Taiwanese issuers or companies are

temporarily exempt from STT beginning 1

January 2010. The Taiwanese government argued

this "would enliven the bond market and enhance the international competitiveness of

Taiwan’s enterprises."

The legal taxpayer is the seller of the securities and tax is collected

by the broker or sales agent or the transferee in cases of direct transactions.

Since 1998, Taiwan also levies a stock index futures transaction tax is imposed on both

parties to the transaction based on the contracted amount. The current transaction tax is levied

per transaction at a rate of not less than 0.01% and not more than 0.06%, based on the value

of the futures contract. Revenue from the securities transaction tax and the futures transaction

tax was about EUR 2.4 billion in 2009. The major part of this revenue came from the taxation

of bonds and stocks (96.5%). The taxation of stock index future shares was 3.5%. In total, this

corresponds to 0.8% in terms of GDP.

See

http://www.ey.gov.tw/ct.asp?xItem=65822&ctNode=1334&mp=11

for the press release.

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19/08/2010

B.2 M

EMBER

TATES

EXPERIENCES WITH

FAT

ELEMENTS

Denmark

Denmark introduced in 1990 a duty on wage and salary costs (Lønsumsafgift

) for businesses

engaged in certain activities that are exempted from VAT. The tax base is generally the sum

of labour costs and taxable profit

. For several sectors, including financial activities, the tax

base is defined as labour costs plus a supplement of 90%.

The general tax rate is 3.08%. Specific rates apply to various sectors. For financial services,

the rate is 5.08% of labour costs plus an additional 4.5% of 90% of labour costs (i.e. an

effective rate of 9.13% (5.08+ 90%*4.5%). This rate will be increased to 10.5% but this

measure will not be effective before 2013.

In 2008, the annual revenues amounted to DKK 4,668.7 million (i.e. about EUR 650 million)

or 0.26% of GDP. About 70% of this amount would be raised from the financial sector (IMF,

2010).

France

France introduced in 1968 a payroll tax (taxe

sur les salaires

) which is levied on employers

who are not liable for VAT or who have not been liable for VAT on at least 90% of their

turnover during the previous year. Those include bank and insurance companies. The tax base

is defined as gross remunerations, prior to the deduction of employee's national insurance

contribution, including benefits in kind. The measure is therefore not a FAT

per se

but the

underlying concept is the same.

For employers who are partly liable to VAT, the payroll tax is due in proportion of the

exemption. Remunerations paid by public administrations are exempted as long as this does

not create distortions in competition. Remunerations paid to apprentices are fully or partially

exempted, depending on the number of employees. A limited number of remunerations are

also exempted. Those are mainly paid in the context of training of workers and incentives to

hire unemployed. Businesses with a turnover that does not exceed a defined threshold (EUR

80,000 for sales of goods and EUR 32,000 for services) are also exempted.

The tax rate is 4.25%. It is increased to 8.50% for individual annual pay between EUR 7,491

and EUR 14,960 and to 13.60% for individual annual pay above EUR 14,960. There is a

reduced rate of 2.95% for overseas territories. The tax is not due if its annual total amount is

under EUR 840. If the tax due is between EUR 840 and EUR 1,680, the tax is reduced by an

amount representing ¾ of the difference between EUR 1,680 and the tax originally due. Non-

profit associations are eligible to a tax credit of EUR 5,890 per year.

The payroll tax is deductible from the corporate income tax or the personal income tax.

The information in this section is retrieved from the Taxes in Europe database.

Covered by the Law on tax o labour costs (lov om afgift af lønsum mv.).

In case of losses, these are deducted from the labour costs. The system is therefore symmetric.

Covered by articles 231 to 231 bis R and 1679, 1679A and 1679 Bis of the General Tax Code.

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19/08/2010

In 2008, the annual tax revenues amounted to EUR 11.3 billion. This is about 0.55% of GDP.

About 85% of this amount would be levied from financial institutions (IMF, 2010).

Italy

Italy introduced in 1997 a regional tax on productive activities (Imposta

Regionale sulle

Attività Produttive – IRAP).

This regional tax is applied to taxpayers engaged in commercial

business. The tax base is the value of the net production, which is accounting profit plus most

remuneration. Several exemptions apply for unit trusts, pension funds, European Economic

Interest Groupings, and some small taxpayers. Deductions are allowed for contributions for

labour insurances, expenses related to junior clerks, disable persons and R&D. In addition,

there is a EUR 1,850 deduction for each employee (with a maximum of five) to enterprises

with income below EUR 400,000 and certain regions apply a EUR 9,200 deduction for each

employee. The base is allocated across regions based on the number of workers in each

region.

The basic rate is 3.90% and it can be increased by regions up to 1 percentage point. However,

since 2008, the rates increased by regions must be multiplied by a coefficient of 0.9176. In

2008, the annual tax revenues amounted to EUR 36 billion or 2.3% of GDP.

Covered by D. Lg. N446 of 15 December 1997 and L n° 244/2007.