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October 12, 2021
Spain deposits its instrument of ratification of the MLI
This Alert has been revised from its original release on 5 October 2021.
On 28 September 2021, Spain deposited its instrument of ratification of the Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting (the MLI or the Convention) with the Organisation for Economic Co-operation and Development (OECD).
The provisions included in the MLI will have a significant impact on the vast majority of the treaties in the Spanish tax treaty network, as detailed in EY Global Tax Alert, Spain signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, dated 15 June 2017.
On 7 June 2017, Spain signed the MLI as one of the 68 early adopters of the Convention. Since then, over four years have elapsed, and two congress attempts were undertaken to obtain the relevant ratification authorization to pass the MLI into Spanish domestic law. During the legislative process, Spain changed some of its original positions to the Convention as detailed below.
On 28 September 2021, following congressional approval, Spain deposited its instrument of ratification for the Convention with the OECD. The instrument will enter into force on 1 January 2022 for Spain.
With the Spanish acceptance, approximately two-thirds (67 out of 96) of the signing jurisdictions have already ratified the Convention, paving the road for a shift in the international tax standards towards base erosion and profit shifting (BEPS) avoidance.
Spanish final positions on the MLI
At the time of deposit of the instrument of ratification, Spain confirmed its final MLI positions. The main changes with respect to the original positions, detailed in the Alert referenced above, are the following:
Additions and removals to the specific provisions applicable to the Covered Tax Agreements (CTAs)
Amendment of the reservations on the scope of arbitration
Entry into force
The MLI will enter into force in Spain on the first day of the month following the expiration of a period of three months beginning on the date of the deposit by Spain of its instrument of approval.
To the extent that the Spanish deposit took place on 28 September 2021, the MLI will come into force on 1 January 2022.
Since Spain made a reservation pursuant to Article 35(7)(a), Spain shall notify the confirmation of the completion of its internal procedures simultaneously to the Depositary and the other Contracting Jurisdiction(s) to which the notification relates. As of the date of issuance of this Alert, this event has not been made publicly available. The date of effects will need to factor in such date of notification of confirmation of completion of Spanish internal approval procedures.
In any event, the provisions of this Convention will have effect in each Contracting Jurisdiction with respect to a CTA:
The provisions included in the MLI may have a significant impact for multinational groups with a Spanish presence. International groups should review their structures to anticipate the impact that these provisions could have on their current and backlog transactions.
In particular, a number of CTAs will be amended to include anti-abuse provisions, so existing structures and arrangements should be carefully reviewed.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Abogados, Madrid
Ernst & Young LLP (United States), Spanish Tax Desk, New York