Spanish draft proposal on mandatory disclosure rules Baker Tilly Spain
On 20 June 2019 the Spanish Government has published the draft legislation addressing the implementation of the EU Directive on the mandatory disclosure and exchange of cross-border tax arrangements. Under DAC6 taxpayers and intermediaries are required to report cross-border arrangements from 1 July 2020. However, reports must retrospectively cover also the arrangements between 25 June 2018 (date of entry into force of DAC 6) and 1 July 2020 (date of effective application) which should be reported on July and August 2020.
The key points of the Spanish draft legislation are:
- The obligation to report an arrangement does not mean that it is always fraudulent but only that certain indicative tax-planning circumstances apply which make reporting advisable. Furthermore, the fact that the Spanish tax administration does not react to an arrangement already reported shall not imply that is not a tax fraudulent scheme.
- On the same line as the Directive, the obligation to report arrangements only applies to those of a cross-border type and it does not include domestic arrangements.
- The scope of taxes covered is not broader than the Directive. The obligations apply to all taxes except for indirect taxes (VAT and excise duties).
- Reportable arrangements are those cross-border tax-planning containing at least one of the characteristics listed in the Directive. But in addition to hallmarks as included in DAC6, the Spanish draft includes additional information on its interpretation and application:
- There is a “main benefit” when the main effect or one of the main effects expected from the arrangement is the procurement of tax savings.
- “Tax savings” include any reduction in the tax base, tax liability or tax rates, but also the generation of rebates or any other relief that may be offset in the future as well as tax deferments.
- The existence of tax savings must be confirmed considering all associate companies, regardless of the tax jurisdiction, and not only the Spanish entities.
- The Spanish regulation refers to the value of the “tax effect” but not to the transaction value for the value of the arrangement.
- The information to be provided is not only regarding to the national provisions, but it also includes those laws from other countries which are the basis of the cross-border arrangement.
- Arrangements which prevent compliance with domestic or international obligations to provide information on financial accounts would be also reportable.
- An arrangement must be reported by the intermediary regardless of the fee is wholly or partly linked to a tax advantage.
- Cross-border payments will include all the cross-border charges without regard to where the payment was made.
- If there are no EU intermediaries which can report the arrangement, the obligation will shift to the taxpayer.
The definition of intermediaries is not broader than the definition in DAC6. Intermediaries are exempt from the obligation to report where the reporting obligation would breach legal professional privilege. That privilege would also apply to persons acting in unregulated professions in Spain and not only to lawyers (i.e. tax consultants). The scope of legal professional privilege will be in accordance with the confidentiality rules generally applicable for tax reporting in Spain, the draft does not include more details about this concept.
The reporting will not mean a breach of contractual or statutory obligations for the intermediaries.
There is a possibility for the intermediary to be released from the duty of professional secrecy with an authorization issued by the taxpayer and, in this case, the reporting obligations will remain with the intermediary. However, there is no choice for the intermediary renouncing to the reporting obligation in favour of the taxpayer.
- The statement shall be filled in Spain when the taxpayer:
- Who benefits from the cross-border arrangement is a Spanish tax resident or has a permanent establishment in Spain,
- Derives income in Spain coming from the referred arrangement,
- Carries out an activity in Spain which is included in the cross-border arrangement
- The reporting obligation arises in different moments depending on the type and characteristics of the arrangements:
- Standard: the day after the arrangement is made available for implementation.
- Arrangements with standard structure but needing to be substantially customised for final implementation: the day after the arrangement becomes implementable.
- Remaining arrangements: when the first step in the implementation of the arrangement is taken.
Intermediaries must inform the taxpayer within five days from the day on which the arrangement becomes reportable.
- The Spanish draft includes an annual reporting obligation, not compulsory under the Directive, to details how the reportable cross-border arrangements already reported before any tax authority have been used.
- The late filing of information returns but also the filing with incomplete, inaccurate or false information, are considered as very serious breaches. The penalty will be 1,000 euros for each item or set of data with a minimum of 3,000 euros and may not exceed the fees earned or to be earned (for intermediaries) or the value of the tax effect derived from the cross-border (for taxpayers).
In the absence of fees, the limit shall refer to the market value of the activity carried out by the intermediary.
The amount of all the abovementioned penalties may be reduced by 50% when the statement is filed after the official deadline but without a prior request received from the Spanish tax offices.
- The Spanish Tax Agency will publish the most important cross-border arrangements to be reported and information on the tax classification applicable via website. However, that is not already available.
This draft is still open for public comments and could therefore change. The final draft including possible amendments should be approved by the Spanish Parliament but the regulatory changes ultimately arising after this phase must enter into force, as prescribed in the Directive, on 1 July 2020.
Finally, the specific data to be reported is still unknow and it should be developed by a Ministerial Order regulating the informative statement.
Author: María Ángeles Mariñas, Tax Director.