The Spanish Tax on Financial Transactions ("TFT") is a new indirect tax, which will be payable as from 16 January 2021 (3 months as from the date of publication of the corresponding law in the Spanish Official Gazette). The preamble to the law states that the features of the Spanish TFT are consistent with those of similar taxes enacted in other States within our economic environment, such as Italy or France. A brief summary of the most important aspects of this tax follows.
In general terms, the tax is directed at:
1. the acquisition, for consideration, of shares in Spanish companies, regardless of the place of residence of the parties intervening in the transaction and provided the following conditions are met: (i) the shares must be listed in a regulated market in Spain, the European Union or an equivalent regulated market of a third country, and (ii) the market capitalization value of the company must exceed 1,000 million euros, as of 1 December of the year preceding the acquisition. The list of all companies whose market capitalization value as of 1 December each year exceeds 1,000 million euros will be published in the Spanish Tax Authorities web-page before 31 December of the preceding year.
2. the acquisition, for consideration, of deposit certificates (such as ADRs or GDRs) representing shares, which fulfill the conditions set out in the preceding paragraph, regardless of where the entity issuing such certificates is established.
3. the acquisition for consideration of the above securities, as a result of the conversion or liquidations of convertible bonds or derivative financial instruments or any other financial instrument or contract.
The Law provides for a wide range of exemptions, mainly to leave outside the scope of the TFT certain transactions relating to the primary market or necessary to ensure the adequate functioning of the markets. The exemption also covers transactions arising as a result of business restructurings, or carried out between companies belonging to the same group or relating to repos.
The tax will accrue with the recording of the securities for the acquirer's benefit in the corresponding securities account or registry.
The taxable base will be the amount of the consideration, excluding transactions costs deriving from the market infrastructures, intermediary fees or any other associated transaction expense.
Should the amount of the consideration not be explicit, the taxable base will amount to the value at closing of the regulated market deemed most relevant in terms of the liquidity of the corresponding security. Such value will be referred to the last trading day prior to the transaction date.
The Law also include a series of special rules to allow for the calculation of the taxable base in specific circumstances (such as acquisitions deriving from the exchange of convertible bonds, etc.).
The taxable rate will be 0.2%.
Although the acquirer of the securities will bear the burden of the tax, the company supplying the investment services or the financial entity carrying out the acquisition in their own name will be legally considered as taxpayers. Should the acquisitions be carried out in the name of third parties, the party which will be considered as taxpayer will depend on the exact transaction; for instance, in cases of acquisitions carried out in a trading venue, the taxpayer will be the intermediary who executed the transaction.
Joint and several liability
The law also provides that the acquirers will be jointly and severally liable for the TFT, together with the taxpayers, in the following circumstances: (i) should the acquirers inform the taxpayers incorrectly or inaccurately with regard to the application of exemptions or the calculation of the tax base, or (ii) should the acquirers not fulfill their information obligations in the case of transactions carried out outside of the stock negotiation systems, or fulfill such obligations inaccurately or incorrectly.
The idea of a tax on financial transactions is not new. The European Commission presented a project in 2011 and both Italy and France enacted their own taxes in 2012. Whether the tax can achieve its objectives is an issue which remains to be seen, since this tax is considered controversial. Aside from the issues which its legal justification raises, the experience appears to show that the collection figures initially forecast are not achieved