1. INTRODUCTION
Today, 16 October 2020, Law 5/2020 of 15 October 2020 on the Spanish Financial Transactions Tax (hereinafter, the "FTT") has been published in the Spanish Official Gazette.
The FTT is a new indirect tax that has been configured at the national level following the line adopted by neighbouring countries, such as France and Italy, and whose purpose is to tax transactions that are not effectively subject to any tax in the area of indirect taxation.
2. TAXABLE EVENT
The FTT is levied on onerous acquisitions of shares of companies of Spanish citizenship (which are those companies that have their domicile in Spanish territory, wherever they have been incorporated), regardless of the residence or place of establishment of the individuals or entities involved in the transaction or the place where the acquisition is made.
In order to minimize the risk of relocation of financial intermediaries, the so-called principle of issue is established as a principle of taxation, as opposed to the principle of residence. As a result of the application of this principle, the scope of the FTT is, therefore, wide, since it applies to any acquisition of shares in Spanish companies, regardless of the tax residence of the purchaser.
2.1 Delimitation of share acquisitions subject to the FTT:
The FTT does not apply to all onerous acquisitions of shares in Spanish companies, but only to those that meet the following conditions:
- the shares are listed on a regulated market in Spain or another European Union State, or on a market considered to be equivalent in a third country; and
- the stock market capitalization value of the company at 1 December of the year prior to the acquisition is greater than 1,000 million euros.
For these purposes, the list of Spanish companies with a stock market capitalization value at 1 December of each year in excess of 1,000 million euros will be published before 31 December of the same year on the website of the Spanish Tax Administration Agency.
Acquisitions of shares that meet the aforementioned conditions will be subject to the FTT regardless of whether they are executed in a trading center; in any other market or trading system; by a systematic internaliser; or through direct agreements between the contracting parties.
2.2 Assimilated acquisitions subject to the FTT:
The FTT also taxes the following acquisitions assimilated to onerous share acquisitions:
- onerous acquisitions of certificates of deposit representing taxable shares (e.g. ADRs); and
- acquisitions of shares or deposit certificates resulting from the execution or settlement of convertible or exchangeable bonds or debentures, of derivatives, as well as of any financial instrument, or of certain financial contracts.
2.3 Exemptions:
The following acquisitions, among others, are exempted from the FTT Law:
- acquisitions carried out in the primary market (e.g. acquisitions derived from the issuance of shares);
- acquisitions necessary for the proper functioning of the market;
- acquisitions resulting from corporate restructuring operations;
- acquisitions made between companies of the same corporate group; and
- acquisitions of treasury stock covered by a repurchase program.
The exemptions may be amended by the Spanish General State Budget Law.
3. TAXABLE BASE
3.1 General Rule:
The taxable base will be constituted by the amount of the consideration for the transaction subject to the FTT, without including the costs and expenses associated with such transaction (e.g. brokerage fees).
3.2 Special rules:
The FTT Law provides for certain special rules to determine the taxable base in those cases in which the acquisition of the securities derives from the execution or settlement of convertible or exchangeable debentures or bonds, of derivative financial instruments, or of any financial instrument or contract, as well as in the case of same-day acquisitions and transfers.
4. TAXPAYER AND CASE OF JOINT AND SEVERAL LIABILITY
4.1 Taxpayer:
The investment firm or the financial entity which carries out the acquisition on its own behalf will be the taxpayer of the FTT, regardless of the place where it is established.
However, in the event that the acquisition is not carried out by an investment firm or financial entity acting on its own behalf, the FTT Law clarifies who will be the taxpayer (regardless of the place where it is established) in four cases:
- In the event that the acquisition is made in a trading center, the taxpayer will be the member of the market that executes it. However, when one or more financial intermediaries intervene in the transmission of the order to the market member on behalf of the acquirer, the taxpayer will be the financial intermediary that receives the order directly from the acquirer.
- If the acquisition is executed outside a trading venue, within the scope of the activity of a systematic internaliser, the taxable person shall be the systematic internaliser itself. However, when the acquisition involves one or more financial intermediaries on behalf of the acquirer, the taxable person shall be the financial intermediary that receives the order directly from the acquirer.
- If the acquisition is made outside a trading venue and outside the activity of a systematic internaliser, the taxable person shall be the financial intermediary that receives the order from the purchaser of the securities, or delivers them to the latter by virtue of the execution or settlement of a financial instrument or contract.
- In the event that the acquisition is executed outside a trading venue and without the intervention of any of the persons or entities referred to in the preceding paragraphs, the taxpayer shall be the entity that provides the service of depositing the securities on behalf of the acquirer.
Furthermore, as a novelty, it is established that the acquirer must notify the depositary the obligation to pay the tax as well as its quantification.
4.2 Case of joint and several liability:
The purchaser of the securities who has communicated to the taxpayer erroneous or inaccurate information determining the improper application of the exemptions, or a lower taxable base due to the incorrect application of the special rules, shall be jointly and severally liable.
5. ACCRUAL
The accrual of the FTT is established at the moment the registration of the securities is carried out in favour of the acquirer, whether such registration is made in an account or securities registry of a financial institution that provides the deposit or custody service, or in the records of a central securities depository.
6. TAX RATE
The FTT will be required at a tax rate of 0.2 percent.
The tax rate may be subject to amendment by means of the Spanish General State Budget Law.
7. MANAGEMENT OF THE TAX
7.1 Tax period:
The FTT period is monthly and will coincide with the calendar month.
7.2 Deferral or payment in instalments of the tax debt:
The tax debt corresponding to the FTT may not be deferred or paid in instalments.
7.3 Payment system:
A system of self-assessment and payment of the resulting tax debt by the taxpayer is generally established.
Under the terms and conditions established by the regulations, taxpayers will submit a self-assessment and pay the resulting tax debt through a central securities depository established in Spain.
This system for filing and paying the self-assessment tax may be extended to other central securities depositories established in other European Union States, or in third States that are recognized to provide services in the European Union, by means of collaboration agreements signed with a central securities depository established in Spanish territory.
8. SYSTEM OF INFRINGEMENTS AND PENALTIES
The tax infringements provided for in the FTT Law will be qualified and sanctioned in accordance with the provisions of the Spanish General Tax Law.
9. ENTRY INTO FORCE
The entry into force of the FTT Law will take place on 16 January 2021, three months after its publication in the Spanish Official Gazette.
10. TRANSITIONAL REGIME
The FTT Law provides for a transitional regime applicable to acquisitions of shares of Spanish companies that take place during the first year of application of the FTT.
Under this regime, during the period between the date of entry into force of this Law (i.e. 16 January 2021) and 31 December 2021, the stock market capitalization value requirement will be deemed to have been met when, one month prior to the date of entry into force of this Law, such value exceeds 1,000 million Euros.
