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Spain: Tax on financial transactions in draft legislation pending parliamentary consideration

Spain: Tax on financial transactions

A draft of financial transactions tax legislation was published in the official gazette on 28 February 2020—thus, beginning the parliamentary process for the bill to be considered by the Spanish Parliament.

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The publication in the official gazette triggers a 15 business-day period for amendments. Therefore, changes could be made to the pending legislation before its final approval and publication. Read text of the legislative proposal (Spanish) [PDF 170 KB] 

Draft legislation for financial transactions tax

The structure of the draft legislation is substantially unchanged with respect to the text submitted to the Spanish Parliament in January 2019 (when the relevant parliamentary process was put on hold because of the call for an early general election and then the dissolution of parliament). There is one change concerning a transitional regime—the sole transitional provision—applicable to companies whose shares would be taxed for the first time with regard to the initial date for implementing the tax (that is, a new timeframe).

The model for Spain’s tax is the financial transactions tax (FTT), commonly known as the “Tobin tax,” and specifically for taxation on transfers of shares in large listed Spanish companies. It would not be a "bank levy" on banking business and bank deposits, or a tax levied on the gross margins, profits or remuneration of banking activity.


New indirect tax

The financial transaction tax would, very generally, be a new indirect tax imposed at a rate of 0.2% on transactions for the acquisition for consideration of shares in Spanish companies, irrespective of the place of residence of the parties to the transactions, provided that the companies in question are listed on regulated markets and have a market capitalisation value of over €1,000 million. In this situation, the taxable person (sujeto pasivo) would not be the transferor or the acquirer of the shares, but the financial intermediary conveying or executing the acquisition order (i.e., investment services companies or credit institutions performing acquisitions for their own accounts).

The proposed tax would not affect the primary market and thus would not have implications for companies that are listed on the stock exchange for the first time.


Exemptions

The proposal includes exemptions from the financial transactions tax, in particular:

  • Acquisitions on the primary market
  • Transactions performed by entities forming part of the same group of companies within the terms of Article 42 of the Spanish Commercial Code
  • Acquisitions qualifying for the special regime available for mergers, spinoffs, contributions of assets or exchanges of securities, as well as acquisitions arising as a result of mergers or spinoffs of collective investment undertakings or compartments or sub-funds thereof
  • Other acquisitions specifically included in the draft legislation, and viewed as necessary for proper functioning of the markets


Tax base

The tax base would be the amount of the consideration (not including costs, commissions or expenses), but with special rules available for certain transactions such as acquisitions derived from the initial contracting of derivative financial instruments, the settlement of certain financial contracts or the conversion or exchange of other securities.

In situations of so-called intra-day trading (i.e., acquisitions and transfers of the same value conducted on the same day, ordered or executed by the same taxable person with respect to the same purchaser and that are also settled on same date), the tax base would be calculated by “netting”—that is, the tax base would be the positive difference between the number of securities purchased and the number of securities sold and then by applying the average acquisition price.

The taxpayer (contribuyente) would be the acquirer of the shares. However, it would be the taxable person (in the place of the taxpayer) that would have to settle and pay the tax to the Treasury. In other words, it is the taxpayer as acquirer who causes the taxable event for financial transaction tax purposes and thus bears the financial burden of the tax passed on to it by the taxable person (sujeto pasivo), even though it will not fall on the taxpayer to settle and remit the tax to the Treasury. Depending on the various situations under the draft law, the taxable person could be an investment service company or credit institution performing acquisitions on its own account; the member of the market performing the acquisition on account of another; the intermediary closest to the acquirer; a systematic internaliser or, lastly, the depository.
 

Formal requirements

The tax liability would be calculated and settled by means of a monthly self-assessment. Moreover, the taxable person would have to file an annual financial transactions tax return that would also report exempt transactions. The draft legislation also includes measures for an optional mechanism for filing returns and paying the tax debt via a central securities depository located in Spain or in other countries (including non-EU Member States) pursuant to collaboration agreements.  

As regards the infringements and penalties regime, the draft legislation would also be read in conjunction with Spain’s general tax law.


Proposed effective date

The new tax would be expected to raise about €850 million annually (accrued). The legislation would be expected to be effective three months after passage and final publication in the official gazette. The tax rate and exemptions could be amended by the general state budget law.


KPMG observation

Spain’s proposed tax is structured along the same lines as those introduced in certain neighbouring countries—particularly France and Italy where it was introduced in 2012. Thereby, Spain’s legislation (if enacted) would effectively contribute to the de facto coordination of these taxes at a European level. However, the Spanish tax would not be identical to the French or Italian models, which themselves differ with respect to each other.


Read more details about the proposed tax in a March 2020 report [PDF 262 KB] prepared by the KPMG member firm in Spain.
 

For more information, contact a KPMG tax professional in Spain:

Victor Mendoza | +34 91 456 34 60 | vmendoza@kpmg.es

Juan Daniel Londoño | +34 91 456 34 00 | juandaniellondoro@kpmg.es

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