Spain: Update on financial transaction tax on transfers of shares in large companies

Spain: Update on financial transaction tax

The upper house of the Spanish parliament on 7 October 2020 approved, without changes, legislation for a tax on certain financial transactions. The legislation generally would impose a tax at a rate of 0.2% on the purchase of shares of Spanish companies with a market capitalization of more than €1 billion.

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The measure had been pending for more than seven months, after the Council of Ministers approved the financial transaction tax in February 2020. Based on current expectations, the legislation for the financial transaction tax would be effective in January 2021 (which would be three months after its anticipated date of publication in the official bulletin).

Overview

The model for Spain’s tax is the financial transaction tax (commonly known as the “Tobin tax”) would specifically impose tax 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.

Rather, 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, but provided that the companies are listed on regulated markets and have a market capitalisation value of over €1 billion. 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 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.

There would be exemptions from the financial transactions tax, in particular regarding:

  • 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

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. Read more about the financial transaction tax as initially proposed in February 2020: TaxNewsFlash


Read an October 2020 report (Spanish) [PDF 211 KB] (English) [PDF 188 KB]) prepared by the KPMG member firm in Spain

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