Fiscal exemption from the Italian financial transaction tax for market makers

Entities carrying out market making activities in Italian shares and/or related financial instruments ("market maker") may benefit from the exemption from the Italian financial transaction tax, as provided for in Article 16, paragraph 3, letter a) of the Decree of the Minister of the Economy and Finance of the 21 February 2013.

According to the Decree, market makers which benefit from the regulatory exemption pursuant to Article 17 of regulation (EU) no. 236/2012 and comply with the requirements set in with ESMA Guidelines of 1st February 2013, benefit from the fiscal exemption from the tax without the need of further communications towards Consob.

The regulatory exemption provided for in Article 17 of regulation (EU) no. 236/2012 is granted by the competent authority of the market maker. To this end, the market maker should submit to the competent authority the form provided for in the ESMA Guidelines (download form) duly filled-in.

The following entities may benefit from the above-mentioned regulatory exemption:

a. Market makers located in European Union ("EU") or European Economic Area ("EEA") countries, for which the competent authority is the home authority;
b. Market makers located in a third country which are members of a European trading venue; in such situation, the competent authority is determined according to Article 17(8) of regulation (EU) no. 236/2012 and paragraphs 39-41 of the ESMA Guidelines of 1st February 2013;
c. Market makers located in a third country which are member of an extra-EU market which has been recognized as equivalent by the European Commission pursuant to Article 17(2) of regulation (EU) no. 236/2012; currently, no declaration of equivalence has been issued by the European Commission.

Market makers not included in the categories above-mentioned may submit to Consob their requests for a fiscal exemption, pursuant to Consob Resolution no. 18663 of 2 October 2013. In such situation, a market maker must fulfill the following requirements:

1) be a member of a third country market on which of the market making activities in Italian shares and/or related financial instruments is carried out, at least in part; and
2) comply with the other requirements set in ESMA Guidelines of 1st February 2013; and
3) submit a request to Consob according to Consob Resolution no. 18663 of 2 October 2013.

A similar fiscal exemption is provided, pursuant to Article 16, paragraph 3, letter b) of the Decree of the Minister of the Economy and Finance of the 21 February 2013, for liquidity providers in Italian shares located in third countries. In order to benefit from this fiscal exemption, a liquidity provider must fulfill the following requirements:

1) have subscribed an agreement with an Italian issuer; and
2) meet the requirements set in the admitted market practice "Liquidity Enhancement Agreements" approved with Consob Resolution no. 16839 of 19 March 2009; and
3) carry out the liquidity provider activity on a third country market; and
4) submit a request to Consob according to Consob Resolution no. 18663 of 2 October 2013.

Additionally, for both fiscal exemptions related to Consob Resolution no. 18663 of 2 October 2013, it is required that the third country trading venue is supervised by a public authority with which Consob has entered into a cooperation agreement.

It is worth highlighting that the two exemptions have fiscal effects only.

Thus, when carrying out the activity on a third country trading venue fiscal-exempted market makers have to fully comply with Regulation (EU) no. 236/2012 (e.g. by reporting to Consob their net short positions in Italian shares when a relevant threshold is reached) and fiscal-exempted liquidity providers do not benefit from any protections and safeguards foreseen in Regulation (EU) no. 596/2014 with respect to the accepted market practice.

Please note that, from 1st January 2021, following the so-called Brexit, market makers located in UK, being a third country, can no longer benefit from the regulatory exemption granted by the UK authority FCA, unless the European Commission issues a declaration of equivalence pursuant to Article 17(2) of regulation (EU) no. 236/2012

UK market makers may request the regulatory exemption to the corresponding European authority if they are member of a European trading venue, pursuant to Article 17(8), or, in the absence of such membership, to Consob pursuant to Resolution no. 18663.

Finally, exempted market makers/liquidity providers may be required to report to the Italian Revenue Agency (Agenzia delle Entrate) some data on the exempted activities. Please consult the Italian Revenue Agency webpage: https://www.agenziaentrate.gov.it/wps/content/Nsilib/Nsi/Schede/Pagamenti/Imposta+sulle+transazioni+finanziarie/?page=schedepagamenti

Please contact shortselling-service@consob.it for additional information on this matter