Global Tax Alert | 19 October 2018

Spanish Council of Ministers approves anti-tax evasion Bill proposal which includes implementation of ATAD and creation of Digital Services Tax and Financial Transactions Tax

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Executive summary

On 19 October 2018, the Spanish Council of Ministers announced a draft Bill which, aimed at preventing tax fraud, includes the refinement of the Spanish tax rules to align them with the European Union Anti-Tax Avoidance Directive (EU ATAD or Directive), as well as other related measures.

Moreover, the Council of Ministers also announced a proposal to create a Digital Services Tax (already announced in the State Budget for 2018), and a Financial Transactions Tax. The parliamentary process which will be followed to approve these two new taxes has not been disclosed yet.

This is in line with the announcement of the draft Budget plan for 2019, approved by the Council of Ministers on 15 October 2018, in which a number of tax measures are included. This document has been sent to the EU Authorities for their review for budgetary purposes.

Detailed discussion


The Spanish Government is currently in the process of negotiating the State Budget for 2019. As part of this process, an agreement with the largest political party supporting the current Government has been reached.

The Budget plan, following the above agreement, was released on 15 October 2018; this document includes a number of tax measures aimed at increasing the State’s tax revenue for 2019. In particular, this plan includes relevant amendments to the Spanish Corporate Income Tax (CIT) rules, and the creation of a Financial Transactions Tax and of a Digital Services Tax (a commitment to create this tax was already announced in the 2018 Budget Law).

In addition to the above tax measures, Spain is required to comply with the deadline to implement certain ATAD measures by 31 December 2018. Although the Spanish tax rules already include most of the ATAD measures, the Government plans on introducing amendments to the current Controlled Foreign Companies (CFC) and exit tax rules to align them with the Directive.

It is uncertain whether the Government has sufficient parliamentary support to pass these proposals.

Draft Bill on measures to prevent tax evasion, including ATAD implementation

The draft Bill announced on 19 October includes the amendments needed to align the Spanish CIT Law with the EU ATAD, in particular with respect to CFC and exit tax rules (which are the measures which need to be implemented by 31 December 2018).

Given the current Spanish CFC rules, and the discrepancies with the EU ATAD, a number of changes can be expected; in particular, it is expected that new categories of passive activities will be added to the current list (potentially including insurance activities, or activities on sales or services where the CFC adds little or no economic value, in line with the wording of the EU ATAD). Moreover, an amendment to the treatment provided to foreign holding companies obtaining dividend income and/or capital gain cannot be discarded, given that the Directive, unlike the Spanish rules, does not provide a specific safe-harbor for this category of income.

As for the exit tax, it is expected that the Spanish rules will be amended to include all exit tax scenarios covered in the EU ATAD (in particular, the transfer of the business carried on by a permanent establishment (PE) in the Spanish territory to another territory has not been included in the Spanish rules to date). Moreover, given that the Spanish rules currently allow for an indefinite deferral, it is expected that a maximum five-year deferral, in line with the Directive, will be introduced.

The Government also aims at expanding the Spanish tax haven list, to include not only States or territories, but also tax regimes which facilitate tax evasion. Additionally, new reasons for a State or territory to be included in this list will be established, such as allowing for low taxation or lack of transparency.

Further, the Government announced that the possibility of enacting rules allowing for tax amnesty will be banned by law, and the threshold to be included in the public list detailing taxpayers with outstanding tax debts will be reduced to €600,000.

Finally, the draft Bill is said to include other measures aimed at avoiding tax evasion, which target not only certain activities (such as cryptocurrencies or payments of large sums in cash), but also the resources which may assist taxpayers in achieving the tax evasion (for instance, “dual-use” software is banned, and penalties for software developers are established).

While no information on the date on which these amendments will enter into force is currently available, it is expected that they will be applicable for fiscal years beginning on, or after, 1 January 2019.

Financial Transactions Tax

The Government announced the creation of a Financial Transactions Tax (FTT); as anticipated, the parliamentary proceeding for its approval (Bill proposal, or Royal-Decree Law) has not been disclosed.

This FTT is said to be in line with the measures already adopted by France and Italy, and backed by the EU.

The tax, as announced by the Government, will be triggered on acquisitions of shares in Spanish listed companies with a market capitalization of, at least, €1,000 million. The applicable rate is 0.2%.

No information on the date on which this FTT would enter into force has been made public.

Digital Services Tax

The proposal for a Digital Services Tax (DST) foresees a 3% tax over gross revenues derived from the following digital activities:

  • Selling online advertising space
  • Digital intermediary activities, which include those services which allow users to interact with other users and which can facilitate the sale of goods and services among them
  • The sale of data generated from user-provided information

The sale of goods or services between users in the context of online intermediary services and the sale of goods or services through the website of a service provider that is not acting as an intermediary seem to be excluded from the DST.

The DST would only apply to companies with total annual worldwide revenues of at least €750 million and €3 million in revenue for its activities subject to the DST made in Spain. For this tax to apply, the user of the services has to be located in Spain.

No information on the date on which this DST would enter into force is available.

Other tax measures

The Budget plan published by the Government on 15 October 2018 includes a number of other tax measures which, if approved, would significantly impact the current Spanish CIT rules.

In particular, the document published containing the Budget plan indicates that the exemption under the participation exemption regime will be limited to a 95% of the dividends and capital gains derived from foreign subsidiaries; this measure is said to be in line with the rules currently in force in other EU Member States. Whether this will also apply to domestic exemptions and capital gains, and to income from foreign PEs remains to be seen.

Moreover, the document expresses the Government’s intention to include a Minimum Tax on the Spanish companies’ taxable base, at a rate of 15% (for companies subject to a CIT rate of 25%).

Finally, a reduction in the CIT rate for small companies, down to 23%, was also announced.

It is likely that these measures will be included in the Budget Bill, which has not been approved by the Council of Ministers yet.


As mentioned, there is a high degree of uncertainty on whether the Spanish Government will be successful in passing all or some of the measures being proposed.

EY will closely monitor the parliamentary activity related to the processing of these developments with respect to these measures, as well as to the Budget Bill when this is approved by the Council of Ministers.

Once the wording proposed for these measures is published, a more detailed tax alert will be published.

These new measures, when considered jointly, would have a significant impact on Spanish groups as well as on multinational groups with Spanish operations. In particular, the practical implications of the new CFC rules, together with the 5% limitation on the participation exemption regime on dividends and capital gains, have to be closely monitored.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid
  • Laura Ezquerra
Ernst & Young LLP, Spanish Tax Desk, New York
  • José A. (Jano) Bustos
  • Isabel Hidalgo

EYG no. 011504-18Gbl