Following the recommendations of the Organisation for Economic Co-operation and Development (OECD), Spain included in the recent Corporate Tax Law (27/2014), developed by the Regulation on Corporate Tax Law (Royal Decree 634/2015), the obligation on behalf of companies to provide the Spanish Tax Authorities with a report on the taxes that they are paying “country-by-country”, along with further economic information.
According to both provisions, from the 1st of January 2016 onwards, the following companies have the obligation of providing such reports:
a) Multinational enterprises resident in Spain that fulfil the following conditions:
-Having a turnover of 750 million Euros in the previous fiscal year.
-Having the condition of a dominant undertaking.
b) Subsidiaries which reside in a territory with which there is no automatic information exchange agreement.
Related to this obligation, in January 2016, Spain signed the Multilateral Agreement between Competent Authorities on the Exchange of Country-by-Country reports implementing the BEPS Action Plan that fights against base erosion, aggressive tax planning and artificial corporate profit transfer. With the signature of this agreement, the authorities of the signatory countries commit to exchange, as soon as possible, the country-by-country reports that they receive, with the authorities from the countries with which the agreement is in force and with all the authorities of the countries where the multinational enterprise is present.
The agreement stipulated that the exchange of reports would be automatic between countries, through an intergovernmental information sharing system to be effective as from September 2017, so the information exchange between authorities should have already began.
The agreement regulates the following:
- Time and manner of exchange of information. The authorities have to exchange the reports within the 15 months following the last day of the fiscal year of each group of multinational enterprises to which said reports refer (for the first year there will be an exceptional period of 18 months)
- The procedure of communication of errors in the reports written by the authorities of another country and the form of remedial action to be taken.
- The confidentiality obligation, data protection and proper use of the information.
- The procedure of consultation between the competent authorities from the different countries.
As of 6 of July 2017, 65 countries have signed the agreement, among which we find the main countries of the European Union, China, Russia or Japan, and more countries are expected to sign it. For the proper operation of the agreement, each country will send a communication with the following information:
- If the country wants to be considered either as a non-reciprocal jurisdiction (that is to say the authorities from one country will exchange the information that they receive from domestic multinational enterprises but will not receive any report from other countries), or as a reciprocal jurisdiction (the authorities from one country will exchange the reports that they receive and receive reports from other countries).
- If the country wants the agreement to be effective regarding all the signatory states or if it prefers to specify the countries with whom it will exchange information.
In short, the international community is increasingly aware of the need to avoid business practices entailing aggressive tax planning, based on tax fraud and taking advantage of the international tax diversity.
The application of this agreement implies a step forward in the fight against tax evasion by multinational enterprises, for by simplifying the exchange of tax information between countries, fraud detection shall also be facilitated. From now on, multinational enterprises will have to be extremely careful in fulfilling their tax obligations.
Pedro Blanco Guardado
Vilá Abogados
For more information, please contact:
6th of October 2017
