Italian Financial Transaction Tax Webinar Guidelines for Payment and Reporting Presenters: Massimo Scordino, - Italy Senior Product Manager, Securities and Fund Services, Citi Emilia Di Giovanni, - Market Specialist, Securities and Fund Services, Citi

13 August 2013

Securities and Fund Services

Classification: Public

Publication of regulation and guidelines by Italian Authorities to date

Italian Stability Law

• Italian Financial Transaction Tax law approved on 24 December 2012 as part of the Stability Law (Law 24 December 2012 n. 228 art. from 491 to 500

• Published in the Italian Official Gazette on 29 December 2012.

• The Law entered into force on 1 January 2013.

Italian Fiscal Decree

• Final Decree published February 21, 2013 by the Ministry of Economy and Finance (MEF), detailing the law applicability, payments and reporting rules.

• Decree, explanatory notes and other information can be found at: http://www.mef.gov.it/primo-piano/article_0099.html.

Guidelines for Payment and Reporting

• Published 18 July 2013 by the Italian Tax Authority published

• Available in English language at the following link: http://www.agenziaentrate.gov.it/wps/file/Nsilib/Nsi/Documentazione/Provvedimenti+circolari+e+risoluzioni/Provvedimenti/2013/Luglio+2013+Provvedimenti/Provvedimento+18+luglio+2013+transazioni+finanziarie+versione+inglese/2013+02+08_Provvedimento+FTT_ING_Total.pdf

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Further documentation to be released

• The Italian Tax Authority is expected to release changes to the Decree and further guidelines for payment, reporting and equity derivatives in coming weeks.

• FAQ to Treasury Decree be published in English

• Italian Financial Transaction Tax (IFTT) is applicable to: – Shares issued by Italian resident companies with a capitalization equal or higher than €500 million regardless the place of

listing and trading (the authority have not provided an official list of the ISIN codes); – Cash equity contracts; – Equity Derivatives contracts (including certificates, warrants, covered warrants); – Instruments incorporating or representing the shares (ADR, GDR) regardless the residency of the issuer; – High Frequency Trading on cash equities and equity derivatives transactions.

• The liable party is the investor (net buyer) for cash equities and both parties of the derivatives contract.

• The tax has to be paid and reported by an intermediary intervening in the contract. In case there are more intermediaries involved in the chain, the tax has to be paid by the one who has received the purchase order or derivative contract subscription request, including non-resident intermediaries.

• The payments are due on the 16th day following the month of the trade. The first payment date for both cash equity trades and equity derivatives contracts is 16 October 2013.

• The persons responsible for the payment of tax have to maintain a monthly register in chronological order available for audit. This is in addition to the annual report.

• The reporting is due annually by 31 March for the previous’ year transactions.

Transaction Services

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Overview - Italian Financial Transaction Tax

Person (Entities) Responsible for Payment of the Tax

Person Responsible Definition Responsible for payment of tax where: Intermediary • Banks, investment companies, other entities

• Authorised in home country to provide investment services on a professional basis to the public

• Includes non-Italian resident intermediaries regardless of denomination

• Dealing for their own account • Executing orders for clients • Receiving and transmitting orders • Excludes activities where putting in contact two or more

investors.

Where no intermediary is involved in executing the transaction?

1) Where an intermediary is involved in executing the transaction, the intermediary is responsible for payment of the tax.

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Person (Entities) Responsible for Payment of the Tax

Person Responsible Definition Responsible for payment of tax where: Asset/Portfolio Manager • Licensed in home country to provide collective

asset management services or portfolio management services (also by fiduciary agreements)

• Includes non-Italian resident entities regardless of denomination

• For the transactions effected in the context of those activities

• Except when avail themselves, for the execution of the trading orders, to another person responsible for the payment of the tax (i.e. intermediaries).

Fiduciary Company • Licensed in home country to carry out activities comprising of management of assets on behalf of third parties

• Includes non-Italian resident entities regardless of denomination

• For transactions effected in the context of the activity of registration of financial instruments in own name and on behalf of the underlying client (fiduciante)

• Except when avail themselves, for the execution of the trading orders, to another person responsible for the payment of the tax or the purchaser states the tax relating to that transaction has already been charged.

Public Notary • Intervenes in the transactions executed • Including those exercising the activity outside

Italy

• For transactions which are executed by means of deeds drawn up or authenticated abroad that are filed with an Italian public notary

• Except when the taxpayer states the tax has already been charged.

2) Where no intermediary is involved in executing the transaction, the person responsible for payment of the tax is the asset manager, fiduciary company or public notary.

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Person (Entities) Responsible for Payment of the Tax

Person Responsible Definition Responsible for payment of tax where: The taxpayer • Defined by art 5 of the Treasury Decree issued

on 21 February 2013 • Where an intermediary is not involved in the execution

of the transaction and: • Where there is not an asset manager, public notary or

fiduciary company effecting the transaction.

3) Where none of the other persons responsible for payment of the tax is involved in the transaction, the tax is to be paid by the taxpayer itself.

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• The person responsible for the payment of tax: – does not have to pay the tax if the taxpayer states in written format that the transaction is excluded or exempt but must apply

ordinary due diligence to ascertain the declaration is true and reliable. – The declaration is not required if it can be assessed by the technical nature of the transaction, publicly available information, or

by information available to the person in compliance with anti-money laundering and counter-terrorism financing obligations

• Where multiple intermediaries are involved in executing the transaction, the tax is paid by the intermediary directly receiving the purchase order from the purchaser or final counterpart.

• Where the purchaser or final counterparty is an intermediary located in a country with an agreement with Italy for the exchange of information and collection tax credit assistance (white-listed), the tax is paid directly by the intermediary.

• Where the purchaser or final counterparty is an intermediary not located in a country with an agreement with Italy for the exchange of information and collection tax credit assistance (black-listed), the intermediary is considered as the purchaser or final counterparty.

• Netting and the resulting tax amount has to be calculated at final investor level

• Foreign entities in white-listed countries with a permanent establishment in Italy must use the permanent establishment to pay and report the tax.

• Non-Italian resident entities in black-listed countries, with a permanent establishment in Italy or a white-listed country have to appoint the permanent establishment entity for payment, accounting and reporting entity. In this case the provisions for black listed countries would apply.

• Reference is made to the Guidelines for Payment and reporting published by the Italian Tax Authority.

Transaction Services General Rules – Persons Responsible for Payment

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Duties and Compliance

1) Foreign entities resident in a White-Listed country and with an Italian Permanent Establishment (PE) – Not optional

DUTIES ACTION

Registration with the ITA The PE’s fiscal code must be used.

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date and made available with the PE from the day following the payment date

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment Method Through F24 (by the PE) Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance

2) Foreign entities resident in a White-Listed country without an Italian establishment, if assisted by a Tax Representative (TR)

DUTIES ACTION

Registration with the ITA The TR requires the Italian Fiscal Code for the foreign entity if not available

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date and made available with the TR from the day following the payment date

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment Through F24 (by the TR) Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance 3) Foreign entities resident in a White-Listed country if does not have an Italian Permanent

Establishment (PE) nor if assisted by a Tax Representative (TR)

DUTIES ACTION

Registration with the ITA Require the Italian Fiscal Code if not available

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment – if the entity holds a cash account in its name in Italy

Through F24 Or By appointing Monte Titoli (CSD)

Payment – if the entity does not hold a cash account in Italy

By international wire transfer Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance 4) Foreign entities resident in a Black-Listed country if has an Italian Permanent Establishment

(PE) – Not optional

DUTIES ACTION

Registration with the ITA The PE’s fiscal code must be used The PE files the details of the foreign entity represented with the ITA (sample provided in attachment 2 of the Guidelines)

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date and made available with the PE from the day following the payment date

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment Through F24 (by the PE) Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance 5) Foreign entities resident in a Black-Listed country, that have appointed a Permanent

Establishment (PE) resident in a White-Listed country

DUTIES ACTION

Registration with the ITA The PE must request an Italian Fiscal Code if not already held by the foreign entity The PE must file a letter of undertaking assuming the payment and reporting obligation with the ITA (sample provided in attachment 1 of the Guidelines)

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date and made available with the PE from the day following the payment date

Payment Date 16th of each month. (First payment date 16th October (for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment – if the PE holds a cash account in its name in Italy

Through F24 Or By appointing Monte Titoli (CSD)

Payment – if the PE does not hold a cash account in Italy

By international wire transfer Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance 6) Foreign entities resident in a Black-Listed country, that have appointed an Intermediary or a

Fiduciary company resident in Italy, acting as Tax Representative (TR)

DUTIES ACTION

Registration with the ITA The TR notifies the appointment to the ITA (sample provided in attachment 3 of the Guidelines) The TR must request an Italian Fiscal Code if not already held by the foreign entity.

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Timing of registration The monthly register has to be completed by the payment date and made available with the TR from the day following the payment date

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Payment Through F24 Or By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Duties and Compliance 7) Foreign entities resident in a Black-Listed country, if not assisted by an Italian or White

Listed Permanent Establishment (PE) or a tax representative

DUTIES ACTION

Registration with the ITA Must request an Italian Fiscal Code if not available. Files a letter of undertaking with the ITA (sample provided in attachment 4 of the Guidelines) committing to provide the ITA with responses to the request for documentation, information and register within 30 days from request; And appoint Monte Titoli (CSD) to pay and transmit the required information to the ITA

Proof of exemptions and exclusions

The foreign entity collects and keeps on file the declarations from the taxpayer

Register The foreign entity creates the register of transactions in chronological order

Payment Date 16th of each month. (First payment date 16th October for equity transactions from 1 mar-30 Sept 2013 and equity derivative transactions from 1 -30 Sept 2013.)

Timing of registration The register has to be completed by the payment date and delivered to Monte Titoli

Payment By appointing Monte Titoli (CSD)

Reporting Annual report by 31 March of the following year

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Excluded Transactions • Inheritance

• Donations

• Share issuance or cancellation

• Bonds converted into new shares

• New shares subscribed out of a rights issue

• Delivery of new shares as part of a derivative contract

• ADR/GDR issued on newly issued shares

• Lending and Borrowing

• REPO contract defined as “buy-sell back” or “sell-buy back”

• Securities pledged as collateral even in the case of full title transfer except cases where the guarantee is enforced

• Transfer of ownership following a restructuring transaction

• Intra-group transactions

• Transactions executed by financial intermediaries acting as “riskless principal” in the interest of the investor provided the both transactions have the same quantity, price and settlement date

• Financial institutions acting as placement agents or distributors provided that the resale occurs within 30 days from the initial acquisition

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Register of Transactions • The person responsible for tax payment is required to maintain a dedicated electronic register of the transactions for cash

equities, equities derivatives and HFT

• Records have to be kept in chronological

• Must be made available for inspection to the ITA and maintained until expiration of the terms defined by the Decree n. 633/1972 Art. 39 (presently set to five years).

• Transactions have to be recorded prior to the monthly payment. Where an Italian permanent establishment or a tax representative is appointed, records have to be made available to and held by them effective from the day after the payment deadline.

• The register format provided in the guidelines suggests the following exempt or excluded transactions have to be included: – Repo and securities lending – Intercompany transactions – Transactions for which the intermediary acts as riskless principal – Transactions involving sovereign entities – Transactions involving ethical funds – Transactions executed by market makers (specific law provision apply) – Transactions executed in the course of liquidity assistance activities – Transactions pertaining to pension funds.

• Asset Managers, Portfolio Managers, Fiduciary and Trust companies and Public Notaries where they are responsible for the payment of the tax must file and make available the documentation related to the transaction and will create a daily register in chronological order. Alternatively they may maintain the Register as per the specifications of the Provision.

• Private individual taxpayers shall keep evidence of the transaction (e.g. banking statements).

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Other information

Reporting • The provision has not clarified the reporting requirements for corporate actions resulting in transfer of shares and the free of

payment transfer of shares.

• The report has to be transmitted electronically and due 31 March each year for preceding year’s transactions.

• Foreign entities with no PE in Italy and not tax representative in Italy, may transmit reporting on paper via registered mail or courier.

Appointment of Monte Titoli Spa • The entities responsible for payment appointing Monte Titoli must provide Monte Titoli with the register containing the transaction details.

• Monte Titoli is yet to release information on the registration and procedures for reporting and payment.

Refunds • Request for refunds is possible through the annual reporting procedure.

Information to be issued by the Italian Tax Authority • Regulation on the IFTT return model and official technical instructions

• Tax codes for the relevant IFTT payments (for F24 tax payment remittance)

• Refund procedure for non-Italian residents

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Sanctions and Reimbursements

• In case of missing or late payment, a penalty of 30 per cent of the missed or late payments amount is applied to the intermediary responsible for the tax payment. Ref is made to Article 13 of Legislative Decree No 471 of 18 December 1997.

• In case of insufficient or omitted payment of the tax, the Tax Administration has the authority to recover the tax and the relevant interests also against the taxpayer concerned.

• Penalties are also applied in case of incorrect or missing reporting. Ref is made to the Legislative Decree No 471 of 18 December 1997.

• Tax reimbursement will be possible through a procedure to be defined by the Tax Authority.

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Q&A

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efficiency, renewable energy and mitigation

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