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Brussels, 15 October 1999

Financial services: infringement proceedings against France and Italy in the field of stock exchanges

The European Commission has decided to send reasoned opinions to France and Italy on national tax measures which have the effect of favouring their domestic stock markets to the detriment of the other stock exchanges in the European Union. In France, the problem relates to the tax advantages granted to life assurance contracts solely of the "DSK" type, while in Italy it is a question of the tax advantages available to issuers whose securities are quoted for the first time on the Italian regulated markets. A reasoned opinion is the second stage in infringement proceedings under Article 226 of the EC Treaty. If a Member State which receives a reasoned opinion does not produce a satisfactory reply within two months, the Commission can refer the matter to the Court of Justice.

In these two cases the Commission considers that the measures concerned violate the provisions of the EC Treaty on freedom to provide services and the free movement of capital (Articles 49 and 56). They are thus incompatible with the single market in financial services, the crucial importance of which was stressed by the Cologne European Council in June 1999.

France life assurance contracts

The 1998 Finance Act of 30 December 1997 (1269/1997) changed the rules applying to life assurance contracts with regard to income tax. Previously, the yield from all life assurance contracts with a duration of eight years or more marketed in France was exempt from income tax. In future the exemption will apply only to a new type of contract which the Act calls contrats investis en actions (share-investment contracts) but which are more commonly known, after the Minister for Economic Affairs, Finance and Industry, Dominique Strauss-Kahn, as "DSK contracts".

These "DSK contracts" have to meet certain conditions regarding their duration (minimum of eight years) and the assets in which they are invested: contracts have to be expressed in units of collective investment funds which invest at least 50% of their assets in French shares and equivalent securities, at least 5% being in shares of unlisted companies or those listed on the "nouveau marché".

Italy tax advantages for issuers of securities on the Italian markets

A legislative decree (466/1997) of 18 December 1997 introduced reduced tax rates (in particular of corporation tax), during the first three years following their admission to a listing, for issuers whose securities are listed for the first time on the regulated markets in Italy. The Commission considers that this measure is likely to discourage issuers from having their securities listed on the stock markets in other Member States and moreover constitutes discrimination on the basis of nationality.

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