As an OECD member, Spain played an active role in all of the debates on BEPS Action Plan items. The Spanish government aims to implement most of the BEPS recommendations in domestic law, and representatives of the Spanish tax authorities have taken opportunities to explain the potential impact of the BEPS Action Plan on domestic legislation at many public events in Spain.
Modifications to Spanish tax law have already been enacted, either as part of Spain’s new Corporate Income Tax Law, which took effect on 1 January 2015, or through measures introduced earlier. Some of these new rules may be amended in line with the OECD’s final package of recommendations.
The Spanish tax authorities have been quick to bring anti- BEPS concepts into their increasingly aggressive audit practices. In fact, it is not uncommon for Spanish tax inspectors to raise tax abuse and anti-avoidance rules quite early in the audit process. Cross-border financial expenses of every kind have been particular audit targets in the past few years, even before the BEPS project was finalized.
More recently, this scrutiny has spread to other, more complex payments and transactions. The Spanish tax authorities’ published audit focus includes transactions involving transfer pricing issues, treaty interpretation and cross-border transactions in general. In 2013, Spain strengthened its transfer pricing capacity by creating a new office within the tax administration that is exclusively dedicated to international tax and transfer pricing issues.
Spain has not issued any rules requiring mandatory disclosure of tax planning, although the general antiavoidancerule in the Spanish General Tax Law could be used to that effect. Nevertheless, the current hostility among the media and the public toward aggressive tax planning is causing some companies in Spain to share the details of their tax payments voluntarily to preempt any negative publicity. For the same reason, some Spanish companies have taken steps to unwind some tax planning structures or exit low-tax jurisdictions, even where a supportable business rationale and real substance exist.
Spain was one of the first countries to modify its domestic law to introduce mandatory CbyC reporting for transferpricing documentation, and Spanish companies had to issue their first CbyC reports in 2016. The Spanish law meets all of the OECD’s recommendations in terms of deadlines and implementation.
A number of Spanish anti-avoidance rules target dealings with companies resident in harmful tax regimes, and many of these rules apply specifically to 48 countries included on Spain’s blacklist. Spain has been working to broaden its network of tax information exchange agreements and tax treaties that include exchange of information clauses. Countries having such an agreement with Spain are automatically excluded from the blacklist.
After concluding new tax agreements with 13 countries, Spain removed these countries from the list. Pending agreements with another six countries are expected to reduce the list further.
Spain will probably review this list in the following months, following OECD and EU work in this area.
Spain’s current tax treaty policy is to negotiate the inclusion of anti-abuse clauses. Anti-hybrid provisions are also sought. Spain has also introduced unilateral measures to adjust the tax treatment of hybrid entities and instruments.
Spain has signed the OECD’s Multilateral Instrument developed under Action 15 that allows countries to update all their bilateral tax treaties in line with the OECD proposals. Once the instrument enters into force, companies that rely on Spain’s treaty network will need to determine by country which treaties are affected and the impact of the new treaty provisions.
Spain intends to apply the Multilateral Instrument to almost all of its 94 tax treaties. Determining the impact will be extremely complex, especially if individual countries sign the Multilateral Instrument on different dates.
As of 1 January 2015, Spain’s CFC rules are much more restrictive than previously, requiring (among other things) additional substance in the CFC. The impact of this legislation is still uncertain.
Spain imposed strict rules for interest deductibility before the OECD’s BEPS discussions commenced. Anti-abuse rules have been in place for many years to limit the deductibility of interest and other payments. The Corporate Income Tax Law introduced rules further restricting the tax deductibility of interest payments under profit-participating loans.
Spain has not moved to legislatively amend its concept of PE to date. However, the country’s tax authorities are taking a more economic approach to the PE definition in both theory and practice and adopting stricter positions on the related tax treatment.
Spain agrees with the OECD’s modified PE definition. Even if a treaty in force maintains the former PE definition, the Spanish tax authorities would understand and interpret the concept according to the OECD’s modified version.
Rising audit activity and complex new rules are increasing the volume of tax disputes. International companies in Spain are advised to make full use of the Spanish tax authorities’ dispute resolution procedures. These include tax consultations and APAs that provide certainty over the acceptability of a company’s tax policy. The Spanish tax authorities are adding more resources to improve the APA program.
As of January 2016, Spain shifted responsibility for its MAP regarding transfer pricing issues from the Ministry of Finance to the Spanish Tax Agency.
The OECD peer review on dispute resolution procedures and the new EU directive in this area are expected to help improve dispute resolution procedures in Spain.
The Spanish State General Budget Law for 2016 significantlyamended the Spanish patent box regime, which entered into force as of 1 July 2016. These amendments have adapted the domestic regulation in line with the modified nexus approach as defined by the BEPS Action 5 proposals. New transitional rules also entered into force as of 1 July 2016, in accordance with several legal amendments to the Spanish patent box regime in recent years.