On Friday the 13th, the Council of Ministers approved a draft bill of law establishing a new single annual bank tax replacing four different existing taxes, with a view to a better distribution of the tax burden between small and large banks. Overall, it leads to a tax increase of EUR 55 million.
As a recall, in the 10 October 2014 Coalition Agreement (pp. 103-104), the Government announced that it would work on a reform of the annual taxes on credit institutions, collective investment undertakings and insurance companies, in particular to reflect the different business models of the organisations to which those annual taxes apply.
At that time, it was also decided that banks and insurance companies should bear an additional contribution to the State revenue by way of an amendment to the notional interest deduction regime (NID), taking into account Basel III and Solvency II agreements. That decision was at the origin of the so-called Financial Sector Contribution that was enacted by the Act of 10 August 2015 and which was already increased once last December by the Act of 26 December 2015 (see our newsflashes of 3 July and 1 December in that respect).
The Finance Minister also said (p.85) that, with this additional contribution and the expected increase during the following year, the total of the financial sector taxes approximated EUR 1.4 billion annually. He added that there was hardly more room for tax increases in this sector, given the profitability challenges and international regulations to come.
Now, on a Friday the 13th (!), the Council of Ministers approved a draft bill of law establishing a new single annual bank tax leading to an additional tax increase of EUR 55 million… On the positive side, this tax replaces four different existing taxes (including the freshly introduced Financial Sector Contribution), with a view to a better distribution of the tax burden between small and large banks.
In practice, the tax will be inserted in the Code on Various Duties and Taxes, it will be based on the debt to customers of a given year, and it will have to be paid by 1 July of the following year. For 2016, the tax will be calculated based on the debt to customers as at 31 December 2015. As from 2017, to avoid “data manipulation by year-end”, the tax will be computed based on the annual average of the debt to customers.
At this stage, the contemplated change does not concern insurance companies or other types of institutional investors such as collective investment undertakings.