• Update of the French Financial Transactions Tax (FFTT) Guidelines
  • February 14, 2014
  • Law Firm: Jones Day - Cleveland Office
  • The French tax authorities have issued on 15 January 2014 an updated version of their guidelines in respect of the FFTT (Updated Guidelines).

    Amendments to the scope of the FFTT. The Updated Guidelines now provide that:

    • preemptive subscription rights (droits préférentiels de souscription) do not constitute equity securities falling within the ambit of the FFTT;
    • the acquisition of either (i) the usufruct or (ii) the bare ownership of an equity security falling within the ambit of the FFTT may be subject to the FFTT (i.e., in case of a stripping of the ownership of an equity security); and
    • the exercise of a pledge does not constitute an acquisition for FFTT purposes (the Updated Guidelines thereby apply the same rationale as in the case where equity securities falling within the ambit of the FFTT are posted as collateral and definitively appropriated as a result of a counterparty default).

    Specifics on the computation of the net position. The principles governing the net positions computation are not actually modified. However the Updated Guidelines now specify that the net position is computed (i) on the (actual or deemed) settlement date (with the consequence that a broker which has not elected for the deemed settlement date option would not be able to obtain the netting of transactions having different settlement dates), and (ii) individually at the level of each broker (with the consequence that a given investor using multiple brokers would not be able to obtain the netting of its overall position).

    Other specific amendments. With respect to foreign exchange, the Updated Guidelines provide that the conversion rate should be the closing rate of the day preceding the settlement date (although an option for the closing rate of the day preceding the trade rate is available, provided such option is made for all transactions realized within the same month).

    With respect to the UCITS industry, the Updated Guidelines also provide certain precisions with respect to (i) UCITS reorganizations which may benefit from the intragroup reorganizations exemption, and (ii) certain UCITS internal reorganizations.