Tobin Tax

Applications of the “Tobin Tax” (L. 228/2012, paragraphs 491-500) in relation to the tools offered by ActivTrades

NOTE: FOREX IS EXCLUDED FROM THE TOBIN TAX

This legislative provision, the so-called “Tobin Tax”, includes three different application cases, but we wish to point out that ActivTrades’ customers will only find a synthetic reconstruction of the single hypothesis that will concern them in the following text.

Therefore ignoring what does not concern the operations offered by ActivTrades, we see that the new tax levy covers operations, with effect from 01/09/2013, concerning derivative financial instruments and, in particular, contracts for difference (CFD) which have Italian underlying assets, Italian indices or with a prevalence (above 50%) of Italian shares; specifically all CFDs on Italian stocks and 40 CFDs ITA with underlying FTSE / MIB index are affected by the new tax levy.

ActivTrades carry out, according to this provision, the role of withholding agent, dealing with the calculation and payment of the same. It should be noted that the Tobin Tax is not deductible, and cannot be compensated under the managed asset tax regime either. The tax must be paid both in contract purchase and sales cases.

The amount is determined as a fixed amount, as there are several bands (see Table 3 attached to the law in the epigraph) associated with the notional value of the transaction (defined as the value of the index or of the shares on which contract profits or losses depend, either directly or indirectly).

Please remember, finally, that the Tobin Tax is debited both for purchase and sales transactions, both intraday and multiday.

How do you calculate the notional value?

For CFD equities: share price * number of lots (for example, suppose the price of a FIAT share is € 5 and you buy 100 lots, the notional value is equal to 5 * 100 = 500 €)

For CFDs on indices: index price * value of a point * number of lots (for example: Suppose the value of the FTSE Mib is 16,000 and we buy 1 lot of CFDs Ita40, the notional value is equal 16,000 * 5 (the value of one point of CFD Ita40) * 1 = € 80,000)

Table 3 – Financial transaction tax on differential financial contracts related to shares and relative yields, indices or measures

Notional value of the transaction in thousands of Euro

0~2,5 2,5~5 5~10 10~50 50~100 100~500 500~1000 >1000
TAX IN EURO 0,25 0,5 1 5 10 50 100 200

 

Example of application of the Tobin Tax:

  1. On 23.10.2013 at 10:00 I buy 100 lots of CFDs on Tod`s shares
    Tod`s share price = 90 € Notional value = 90 * 100 = € 9000, the TOBIN TAX therefore
    is equal to 1 € as the band to be considered is that between 5,000 and 10,000€ of notional value.Let’s assume that on the same day I close my position on Tod`s shares which rose to 95 €
    Notional value = 95 * 100 = € 9500, the TOBIN TAX is therefore equal to 1 € as the band to be considered is still between 5,000 and 10,000€ of notional value.
    So overall, the Tobin Tax to be paid for having opened and closed the position will equal 2.00 €.
  2. On 24/10/2013 at 10:00 I buy 0.03 lots of CFDs on the FTSE Mib
    FTSE Mib value = 16,000
    Point value = 5 euro
    Notional amount = 16000 * 5 * 0.03 = € 2400, the TOBIN TAX therefore amounts to €0.25 as the band to be considered is that between 0 and 2,500€ of notional value.Let’s assume that the value of the FTSE Mib index rises to 17,000 points and I decide to close my position on the same day at 16:00 Notional amount = 17,000 * 5 * 0.03 = € 2550, the TOBIN TAX therefore amounts to € 0.5 because the band to be considered is that between € 2,500 and € 5,000 of notional value.
    So overall, the Tobin Tax to be paid for having opened and closed the position on the FTSE Mib will be 0.75€
  3. On 25.10.2013 at 10:00 I buy 500 lots of CFDs on Fiat shares
    Fiat share price = 4,5 €
    Notional value = 4.5 * 500 = € 2250, the TOBIN TAX therefore amounts to € 0.25 as
    the band to be considered is between 0 and 2,500€ of notional value.Let’s assume that the price of Fiat shares rises to € 5.5 and I decide to close my position the same day at 16:00 Notional value = 5.5 * 500 = € 2750, the TOBIN TAX therefore amounts to € 0.5 because the band to be considered is between € 2,500 and € 5,000 of notional value.So overall, the Tobin Tax to pay for having opened and closed my position is 0.75 €.

 

NOTE: All Forex transactions and operations on foreign markets are excluded from the Tobin Tax, only CFDs on Italian stocks andCFDs ITA 40 with underlying FTSE/MIB index are affected by the new tax levy.

For any further information please contact the Italian desk of ActivTrades via email, live chat or by phone at +44 (0) 207 680 7303.