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25 October 2018 Spain issues draft bill on Financial Transaction Tax On 23 October 2018, the draft Bill proposal (the Draft) establishing the Financial Transaction Tax (FTT) was published. As reported in EY Global Tax Alert, Spanish Council of Ministers approves anti-tax evasion Bill proposal which includes implementation of ATAD and creation of Digital Services Tax and Financial Transactions Tax, dated 19 October 2018, the Spanish Ministry of Taxation announced the creation of an FTT whose general terms were previously included in the document describing the General State Budget Agreement for 2019. Stakeholders can provide comments during the public consultation phase until 15 November 2018; after that deadline, the Ministry of Taxation will publish the final Bill proposal to be submitted to the Spanish Parliament for approval. With the introduction of the FTT, the Spanish Government plans to collect increased revenue of approximately €850 million. Since 2013, Spain is one of the members of the European Union (EU) countries – together with Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia and Slovenia – involved in the enhanced cooperation procedure regarding the adoption of a Directive for the implementation of an FTT. Such Directive was adopted by the Commission on 14 February 2013,1 and since then it is still being prepared and discussed in the Economic and Financial Affairs Council (ECOFIN), as there are still several key points on which there is no agreement. Under this context, the Spanish Government has unilaterally decided to publish a draft Bill proposal for the potential implementation of the FTT, without waiting for the outcome of the enhanced cooperation procedure. Notwithstanding this approach, the Spanish tax will have to be adapted, where appropriate, to the FTT when it is finally approved under the Directive. The taxable event is the acquisition of Spanish shares with a market capitalization of more than €1,000 million admitted to trading on the Spanish market, or on that of another Member State of the European Union (EU) considered as a regulated market in accordance with the provisions of the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014, on markets in financial instruments, or on an equivalent third country market according to the provisions of the Directive. The Ministry of Taxes will publish before 31 December of each year the list of Spanish companies with a capitalization value exceeding €1,000 million on 1 December of the current year. Furthermore, acquisitions for valuable consideration of depositary receipts representing the shares referred to in the first paragraph (e.g., ADRs, ADS) fall within the scope of the FTT, regardless of the place of establishment of the issuer of such securities. Finally, acquisitions of securities referred to in the previous paragraphs which result from the execution or settlement of obligations or of convertible/ exchangeable bonds or obligations, or from derivative financial instruments, as well as from any other instrument or financial agreement will also be subject to the FTT. (i) Derived from the issuance of shares and public offerings of sale (IPOs and IPs), as well as the instrumental acquisitions prior to said operations made by placers and insurers (ii) Carried out by financial intermediaries in the framework of a price stabilization in IPO/IP assignments, acting as liquidity suppliers or conducting market making activities (as defined in the legislation applicable to such functions) as well as those made by the by clearing houses and central depositories (ii) Of securities during restructuring transactions that are entitled to apply the tax neutrality regime foreseen in the Corporate Income Tax Act (iv) Derived from the application of resolution measures adopted by the Single Resolution Board or by the competent national resolution authorities Evidence of the eligibility for the exemption must be provided in all cases. The Draft sets forth the obligation to keep certain documentation readily available in case the Spanish tax authorities request it. The chargeability of the proposed Spanish FTT depends on the place where the acquisition takes place:
Tax baseThe tax base is determined by the consideration in return for the transaction, without the transaction fees derived from the prices of the market infrastructures, nor the intermediation commissions, nor any other expense linked to the transaction. Where the consideration amount is not expressed, the tax base will correspond to the closing value that the security had in the most relevant market in terms of liquidity of the relevant security on the day preceding the transaction. However, certain special rules are established in those cases in which the acquisition of the securities derives from the execution or settlement of convertible/ exchangeable bonds or obligations, of derivative financial instruments, or of any instrument or financial agreement, where the conditions that are set forth in said instruments or agreements in relation to the delivery of the securities should be taken into account. Finally, a specific calculation method is established for intraday transactions. The tax shall be assessed by the market member executing the purchase order, irrespective of whether it is acting for its own account or on behalf third parties. If several financial intermediaries are involved in executing a security purchase order, the tax shall be assessed and paid by the firm that received the purchase order directly from the end buyer. Special rules are also established to identify the taxpayer in cases where the acquisition takes place outside a trading center. The tax debt will have to be assessed and paid by the taxpayers in the place, form and terms established by the Ministry of Taxes. However, in accordance with the terms that will be established by the corresponding regulations, taxpayers will be able to pay the tax through the central depository of securities located in the Spanish territory in charge of keeping the accounting record of the acquired securities who, acting in the name and on behalf of the taxpayer, will file and pay the tax debt. Such procedure could be extended to other central depositaries of securities located in other EU Member States, or in third States which are authorized to provide services in the EU through collaborative agreements for such purpose. Taxpayers will also have to submit an annual statement of the tax in the place, form and terms established by the Ministry of Taxes, which will have to include the exempt transactions carried out. The Managing Company of the Registration Systems, Compensation and Liquidation of Securities, as well as its participating entities will have to hold at the disposal of the Tax Administration the documentation or the files related to the transactions subject to the tax in order to facilitate the control and management of the tax collection. The tax infractions resulting from the breach of the provisions of the Act or from its development regulations shall be judged and sanctioned in accordance with the provisions of the General Tax Act (Act 58/2003, of 17 December). If finally approved, the entry into force is foreseen as three months following the publication of the Law in the Spanish Official Gazette. The Draft must follow the appropriate parliamentary procedure for its approval, thus being subject to modifications during the process or even without being approved in the end. In this sense, the current Government will have to analyze the international acceptance of this Draft and estimate the impact that this legislation could have on the level of international investment in the listed companies that fall under the scope of the tax. Also, due to the impact that this new tax will have on the current information systems of financial institutions, it may be necessary that the entry into force deadline be extended to provide enough time for the necessary updates to be carried out. In order to assess the effects that the new tax could have on the different financial intermediaries, the impact on their business and operational model should be analyzed, identifying the areas or business lines, processes, systems and applications that might be affected should they be adapted to the new FTT. 1. See EY Global Tax Alert, European Commission issues new Financial Transaction Tax proposal, dated 8 March 2013. Ernst & Young Abogados, Barcelona
Ernst & Young Abogados, Madrid
Ernst & Young LLP, Spanish Tax Desk, New York
Document ID: 2018-6249 |
