The Spanish tax authorities open the public comment phase of the transposition of the EU Directive on administrative cooperation in the field of taxation (DAC 6)
Tax Alert Spain
On Thursday, June 20, 2019, the State Tax Agency published the regulatory texts, proposed by the Directorate-General of Taxes, transposing into Spanish law Council Directive (EU) 2018/822 of 25 May 2018 as regards mandatory automatic exchange of information in the field of taxation in relation to reportable 'cross-border arrangements' (“DAC 6” or the “Directive”) (a priori, limited to cross-border arrangements, i.e., without affecting internal arrangements within Spain).
The Directive, one of the latest European Union initiatives on tax transparency, aims (i) for the tax authorities of the member states to obtain complete information on so-called “potentially aggressive tax arrangements” and (ii) for this information to be exchanged among those states.
In particular, the recently released regulatory texts, which are open for public comment until July 12, 2019, include the following:
- Preliminary bill amending General Taxation Law 58/2003, of December 17, 2003 (LGT).
- Draft Royal Decree amending the General Regulations on tax management and audit work and procedures and implementing the common rules on procedures to manage, collect and audit taxes (Royal Decree 1065/2017 of July 27, 2007 (RGAT).
As established in the preambles to both texts, this transposition into Spain law would apply to all tax authorities, including those operating under provincial regulations.
The EU Directive is transposed into Spain law through two new additional provisions introduced in the LGT. By way of a brief summary:
i. The first of these new additional provisions establishes the basic reporting requirement guidelines in compliance with DAC 6 and the general rules for reporting obligations in place under Spanish tax law.
Furthermore, following the principles underlying the Directive, the subjective scope of the legal professional privilege for the purposes of the subject reporting obligations is regulated through reference to the legal limits established in article 93.5 LGT. In particular, this duty is extended to all parties considered intermediaries under the Directive.
ii. Secondly, another new additional provision regulates reporting obligations between parties participating in reportable cross-border tax planning arrangements.
In logical correlation to these reporting obligations, the proposed texts establish the sanctioning regime for non-compliance, as this was not specified in the Directive, with member states being free to establish their own penalties, provided they are “effective, proportionate and dissuasive”.
The regulations define, implement and clarify, on the basis of the minimum content required in the Directive, the subjective, objective and timing aspects of the reporting obligation.
Although the texts are open for public comment and could therefore change before they are definitely approved, it is possible to highlight, after this preliminary reading, some of the answers the proposed regulations provide to the main questions left open by the Directive:
- The term “arrangement” is defined rather broadly.
- The reporting obligation will only apply in respect of the taxes referred to in article 2 of Council Directive 2011/16/EU.
- The concept of “tax savings”, which is necessary for satisfying the “main benefit test” required in several of the Directive’s hallmarks, includes: (i) any decrease in the tax charge or tax base, in terms of tax debt, including deferred accrual thereof, as well as (ii) the generation of tax bases, charges, tax credits or any other tax relief that can be offset or used as a credit in the future.
- With respect to when the reporting obligation arises, a distinction is made between the following main cases:
Standard arrangements: the day after the arrangement is made available for implementation
Arrangements with substantially standard documentation or structure but that require relevant changes for implementation: the day after the arrangement becomes implementable
All other cases: when the first step in the implementation of the arrangement has been made.
- With respect to the specific arrangement content to be reported, the regulations refer, as regards the value, to the value of the “tax effect” (i.e., to the result produced in Spain, in terms of tax charge, of the reported arrangement, which must include, where appropriate, the tax savings as defined in the regulation itself), but not to the transaction value.
The regulatory changes ultimately arising after the public comment phase will enter into force, as stipulated in the Directive, on July 1, 2020.
Lastly, the texts clarify that cross-border arrangements that become reportable, in the terms stipulated by regulations, between June 25, 2018 (date of entry into force of DAC 6) and June 30, 2020 (date of effective application) must be reported in July and August 2020.