Code of Best Tax Practices
Drawn up and approved by the Large Enterprises Forum to foster a mutually co-operative relationship between the Tax Agency and the companies subscribing it.
Proposal to reinforce good corporate tax transparency practices of companies adhering to the Code of Good Tax Practices, approved in the plenary session of December 20, 2016 (October 28, 2016)
Introduction: Fiscal transparency and cooperative relationship
In recent years, multiple initiatives have emerged regarding transparency (from the “Extractive Industries Transparency Initiative” of 2003 – EITI - to the recent actions of the
Transparency in tax matters or fiscal transparency is the way in which companies communicate their attitude towards taxes and the amount of taxes paid, as well as the way in which they contribute, to their shareholders and other stakeholders in their business. activity, clarity about their taxation and assurance that they offer responsible tax compliance in the countries in which they operate.
Tax transparency involves the delivery of information beyond legal requirements, in such a way that an adequate level of transparency seeks to improve the reputation and image of the company as a responsible taxpayer, thereby increasing the value of the companies and the interest of investors.
Also in the relationship between a company and the tax administration, fiscal transparency involves openness and communication of information to a greater degree than anticipated and required by tax regulations.
The OECD in its Study on the role of fiscal intermediaries of 2008 defined the cooperative relationship as “… a relationship between the taxpayer and the tax administration based on cooperation and mutual trust between both parties that implies a will to go beyond the mere fulfillment of its legal obligations” .
The essence of this relationship and what explains why the conduct of the parties goes beyond the limits of what is strictly required by law is the existence of an exchange of transparency for early certainty and/or legal security. Given an attitude of transparency, openness and communication of information on the part of the company, the conduct of the tax administration must be predictable and provide certainty and legal security to the company in making its business decisions, hence both parties the relationship show interest in transparency in tax matters.
Tax authorities that are interested in this line of further development of tax transparency hope to obtain general transparency regarding cross-border operations and transactions to better understand the complete value chain of the company and the taxes paid in each country, as well as the agreements reached with other tax jurisdictions. But they also aspire to obtain transparency in the specific case to be able to establish a cooperative relationship with the company and achieve a correct determination of the tax risk profile of each particular company.
For their part, companies interested in deepening fiscal transparency with the tax administration seek, in addition to the reputational improvement already mentioned, to obtain a constructive and productive dialogue with the one that allows them to have greater certainty and legal security for their business decisions, as well as as a reduction in the compliance costs they bear, especially by adapting control actions and verification procedures to this new cooperative compliance framework and the different level of risk they may present.
Therefore, tax transparency provides the company and/or the tax administration with advantages in the three aforementioned areas:
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that of reputational improvement,
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that of building a useful cooperative relationship, and
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that of a correct analysis of taxpayers' fiscal risks
Taking these premises into consideration, on November 2, 2015, the Plenary Session of the Large Companies Forum agreed to introduce an Annex to the Code of Good Tax Practices (hereinafter, CBPT) to strengthen the cooperative relationship between the Tax Agency and companies. adhered to this instrument of good tax governance through a series of actions that seek to promote transparency and legal certainty in compliance with tax obligations (1).
Under the heading “Strengthening good corporate tax transparency practices”, section 2 of the aforementioned Annex establishes that companies may make information available to the Tax Agency (hereinafter, AEAT ) on a series of actions and decisions in tax matters.
In summary, it is about the delivery of information on certain aspects of the economic activity of companies that range from the explanation of the presence in tax havens, the financing structure of business groups, as well as the degree of congruence with the principles of the shares of the so-called 'Package
The stated objective is to promote “early knowledge of the tax policy and tax risk management” of companies which, ultimately, will result in an improvement in legal security and better lower compliance costs and will contribute to a reduction in conflict.
Regarding the submission of this information, it is noted that it is preferably provided prior to the submission of the Corporate Tax return and that each company and the AEAT, by mutual agreement, will establish the content and scope of this information, as well as as the format in which it must be made available to the AEAT.
Along with the above, it is essential to highlight that the Resolution of February 22, 2016, of the General Directorate of the AEAT, which approves the general guidelines of the 2016 Annual Tax and Customs Control Plan ( BOE of February 23), has expressly included the possibility for companies adhering to the CBPT to provide the AEAT with information on tax matters, in the following terms:
“Likewise, the reinforcement of good practices aimed at increasing corporate tax transparency will lead to an improvement in the cooperative relationship between the Tax Agency and the companies adhering to the Code of Good Tax Practices. This will generate a more adequate and earlier knowledge and mutual evaluation of the tax policy and tax risk management, by promoting actions aimed at companies adhering to the Code providing the Tax Administration with certain information directly related to their actions and decisions in tax matters, in the terms included in the Conclusions relating to the development and monitoring of the application of the Code of Good Tax Practices within the framework of the cooperative relationship between the Tax Agency and companies, approved in the plenary session of the Large Companies Forum of November 2, 2015. (…)”
II.- Object of the proposal
Based on the considerations that have been presented, the purpose of this document is to develop a proposal to reinforce the good practices of corporate tax transparency referred to in the Annex to the CBPT. Specifically, it involves articulating the content and use of a report that could be called “Annual Fiscal Transparency Report for companies adhering to the CBPT” (hereinafter, Transparency Report).
To this end, first of all, the scope of the information, its nature, use and form and deadline for presentation are described.
Secondly, it is proposed what type of actions the AEAT may carry out after receiving the transparency reports, that is, how it will exploit the information and what consequences it may have for companies.
Thirdly, we analyze what could be the usefulness or advantage that companies adhering to the CBPT will obtain if they provide the AEAT with reference information.
Finally, this document is accompanied by a set of guidelines on the content of the Transparency Report itself that is intended to serve as a reference to delimit the information that each of the companies adhering to the CBPT are ultimately willing to provide to the AEAT, with full respect. In any case, the aforementioned principle according to which the content, scope and format of the report will be established for each specific case by mutual agreement between the company and AEAT.
III.- Scope of information: character, use and form and term of presentation
The reinforcement of good tax transparency practices of companies adhering to the CBPT must respect, in any case, the right to the protection of data with tax significance.
It should be taken into account that the information obtained by the Tax Administration acquires tax significance when it is aimed at the effective application of taxes, although its usefulness may be potential, indirect or hypothetical.
Therefore, it is understood that the information provided by companies following the provisions of the Annex to the CBPT enjoys the reserved nature that is enshrined in article 95 of Law 58/2003, of December 17, General Tax, in the following terms:
“Article 95. Reserved nature of data with tax significance.
1. The data, reports or background obtained by the Tax Administration in the performance of its functions are reserved and may only be used for the effective application of the taxes or resources whose management it is entrusted with and for the imposition of the appropriate sanctions, without may be transferred or communicated to third parties unless the purpose of the transfer is: (…)”.
In short, although it is the companies affiliated to the CBPT who agree to provide the information contained in the Transparency Report referred to in this document, in any case, given the nature of the information and given that it is obtained by the AEAT in the exercise of its functions, it must guarantee its confidential nature.
Regarding the use and destination of the information contained in the Transparency Report by the AEAT, it is estimated that in order for it to be adequate for its purpose, that is, early knowledge of the fiscal policy and fiscal risk management. Of the companies adhering to the CBPT, its use cannot be other than for the risk analysis activity of the Tax Inspection bodies, so it seems appropriate that the Report be sent to this body.
Regarding the scope of the information sent, taking into account the purpose indicated in the previous section and the principle of determining said scope by mutual agreement between the company and AEAT, it may be limited to that which has or may have fiscal significance in Spain or have a broader scope.
From a purely practical point of view, it is considered that, at least during the first moments of implementation of this reinforcement of good corporate tax transparency practices, it is preferable that the Tax Transparency Report be sent, in all cases, to the Head of the Tax and Customs Control Unit of the Central Delegation of Large Taxpayers and not only when the company issuing the Report is attached to this Delegation. All this without prejudice to the powers that correspond to the Tax Inspection bodies of the Special Delegations of the AEAT with respect to companies not attached to the Central Delegation.
To this end, companies may present the transparency report:
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either on paper in the Registry of this Central Delegation of Large Taxpayers, directing the letter to the Tax and Customs Control Unit;
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either in electronic format to an email address of the Tax and Customs Control Unit that would be provided to the company in question through the contact persons responsible for cooperative compliance.
In both cases, it will be recorded that the company has submitted the transparency report: through the entry issued by the Registry of the Central Delegation of Large Taxpayers or by replying to the company's email address.
Regarding the deadline for submitting the information, as previously noted, the Annex to the CBPT provides that it will preferably take place prior to the submission of the Corporate Tax return.
However, given the purpose of the Report, it is understood that there is no problem with its presentation after the end of the declaration period for the aforementioned tax.
It is advisable, however, to set an indicative period for the presentation of the Fiscal Transparency Report. For these purposes, it is proposed that companies can send the aforementioned report from the day following the approval of the annual accounts (which must take place within six months following the close of the fiscal year) until three months after the end of the year. deadline for submitting the self-assessment of Corporate Tax, that is, until October 25 if the fiscal year coincides with the calendar year.
IV.- Treatment of the information sent
In the process of exploitation and analysis by the AEAT of the information contained in the Transparency Report, the following phases or stages can be distinguished:
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Submission and receipt of the Report
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Explanation of the Report
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Documentation provision
In this regard, it is worth remembering that the cooperative relationship working group, created within the Large Business Forum, presented in October 2013 a series of conclusions which included the establishment of a bidirectional and specialized relationship channel between the companies and the AEAT. (2)
It is considered convenient to use the aforementioned communication channel in all the phases indicated above.
A) Submission and receipt of the Report
As already noted, the Transparency Report will be sent by the means chosen by the company to the Head of the Tax and Customs Control Unit of the DCGC who, once received, will acknowledge receipt of it. . Within this Unit, a first analysis of the information received will be carried out to verify its suitability for the purposes of reinforcing the company's good fiscal transparency practices. The result of this first preliminary assessment will be communicated to those responsible for the company and at the same time the way in which the explanation stage of the Report described below must be carried out will be established by common agreement with the company.
B) Explanation of the Report
Through the communication channel already mentioned, the company and the AEAT will agree on the best way to proceed with the explanation of all the points contained in the Transparency Report that require said explanation, in particular those that, due to their complexity, confidentiality. or commercial sensitivity would not have been sufficiently explained in the Report itself. In this phase the company will be able to complete, expand, detail and clarify any data and information that is relevant.
At the end of this phase, which will generally be completed after a reasonable and sufficient period of time (four or five months) from receipt of the Transparency Report, the AEAT will provide the company with its opinion on the information provided.
At the request of the company adhering to the CBPT, the contribution of the Transparency Report may be mentioned on the AEAT website with an indication of the fiscal years in which said report was sent.
C) Contribution of documentation
Once the previous phases are completed or during the explanation phase of the Transparency Report, the company, voluntarily or at the request of the AEAT, may provide supporting documentation for the information contained in the Transparency Report, or additional or complementary documentation thereof, for the purposes to allow the Inspection bodies to determine the risk profile of the company and act accordingly.
For these purposes, the provisions contained in the annual control plans relating to the verification and analysis of the information voluntarily provided by the companies adhering to the CBPT will be applicable, and the information and control activities that are deemed appropriate will be planned and developed. .
In this sense, in view of the information contained in the Transparency Report and the documentation subsequently provided to the Tax Inspection, the latter will transfer, to the company, its assessment in relation to certain aspects included in the Report that will allow that is to know the administrative criteria applicable to aspects to which the report refers and that may be useful both for the development of good tax practices in general, and for the presentation of Corporate Tax returns in particular.
Where appropriate, the company may also obtain this assessment by carrying out the consultations provided for in section 2.3 of the CBPT.
Likewise, when the Tax Inspection has carried out the corresponding risk analysis, it will determine what actions it will carry out in order to offer sufficient legal certainty in this regard to the company issuing the Transparency Report.
In any of the above cases, in this phase a dialogue may begin between the company and the Inspection that will allow the construction of a solid and productive cooperative relationship for both parties.
V.- Usefulness of the report for companies
As indicated above, the voluntary contribution by companies adhering to the CBPT of the Transparency Report presents a series of advantages for them that should be highlighted.
In the area of improving the company's reputation, companies that present this Report may give it the level of publicity they consider appropriate for this fact. In turn, the AEAT, without prejudice to the fact that, as previously indicated, the information provided has tax significance and, consequently, is reserved in accordance with the provisions of article 95 of Law 58/2003, of December 17, General Tax, At the company's request, it may disclose on its website that the Transparency Report has been voluntarily made available to the AEAT.
The presentation of the Report and the corresponding documentation will also allow the construction of a useful cooperative relationship to the extent that companies, in exchange for transparency, will receive an early assessment from the Inspection on certain aspects referred to in the Report. , thereby also achieving a reduction in litigation over those same aspects of their taxation.
Indeed, the presentation of this information will allow the initiation of an informal discussion process with the AEAT in which the company will be able, if necessary, to clarify the information provided or provide additional details on the criteria applied in its preparation, favoring a reduction in the legal uncertainty to which they could be exposed, as well as litigation between both parties. If, in addition, this document is submitted prior to the end of the regulatory deadline for submitting the declaration, the company may adapt its content based on the criteria expressed by the AEAT, further increasing its legal certainty.
Additionally, if, in relation to any specific aspect that may have arisen during this process, the company would like to obtain the AEAT's written criteria, it may raise its doubts in writing about the tax treatment of certain transactions or transactions, in accordance with the provisions of section 2.3 of the CBPT.
This possibility provided for in the CBPT has been developed in section II.2 of the document “Conclusions of the working group on the new model of cooperative relationship between the tax agency and the companies adhered to the Code of Good Tax Practices”, dated December 29. October 2013, according to which, independently of the legal consultation mechanism before the General Directorate of Taxes, companies may raise their doubts to the AEAT about the tax treatment of operations of special complexity and economic significance, accompanying a report in which They will present the criteria that they consider applicable. The AEAT, in view of the above, may issue a report on the issues raised, collecting the criteria on the subject of the tax application bodies, in the terms established in said document.
On the other hand, it is worth remembering that section 2.4 of the CBPT already provides that member companies can present an explanatory annex together with their tax returns which, to the extent that the data communicated is adapted to reality and the criteria applied are reasonably founded , will be valued favorably for the purposes of determining the diligence, fraud or fault referred to in the General Tax Law.
Finally, the preparation by the Inspection of a correct analysis of the company's fiscal risks will result in a more efficient and earlier administrative control of the company and, therefore, in obtaining legal certainty closer in time, allowing the company to know more quickly which aspects can be considered tax risk by the Tax Administration and which cannot.
VI.- General conclusion
The agreement between the AEAT and companies on the reinforcement of good tax transparency practices that is reflected in the Transparency Report, as well as the use that will be made of it, represents a significant advance in the establishment of a model of cooperative relationship between both parties, based on the principles of transparency and mutual trust through knowledge and sharing of problems that may arise in the application of the tax system, as well as in compliance with the objectives included in the CBPT.
This new step towards a more cooperative relationship between companies and the tax administration will require, however, an evaluation of its operation and results in the future, making it very convenient that for these purposes any of the parties proposes the modifications and/or improvements that are considered appropriate. , both in relation to the content and in relation to the monitoring carried out on these good transparency practices.
VII.- Year 2016. Transitional period of experimental nature
It is considered that the voluntary presentation by companies in 2016 of a first Transparency Report can serve as a pilot experience to improve, complete and modulate this proposal for good transparency practices in the future.
In this sense, it is proposed that companies that consider it convenient and useful during 2016 to enter into this experimental process present the Transparency Report reinforced with the content that they consider sufficient and appropriate for their situation and activity, taking into account the objectives and the scope of information described above.
However, this proposal includes general and flexible guidelines on the possible structure and content of the report model that companies that consider this may voluntarily follow for the preparation in 2016 of an Annual Fiscal Transparency Report corresponding to the 2015 financial year. .
Guidance on the structure and content of the “Annual Tax Transparency Report for companies adhering to the Code of Good Practices” model
IDENTIFYING DATA OF THE ISSUER OF THE REPORT
FINANCIAL DATE REFERENCE:
CIF :
SOCIAL DENOMINATION:
REGISTERED ADDRESS:
STATEMENT BY THE ISSUER OF THE REPORT
The company voluntarily provides this information in development of the Annex to the Code of Good Tax Practices, approved on 11/2/15.
The information has been provided after the presentation of the annual accounts and is reserved. The company expressly declares that the information provided is true and reliable.
Explanation of the reasons why the company has voluntarily decided to present this information.
Explanation of the general scope of the information provided, indicating those sections of the Report in which the company chooses to report only on aspects that have or may have tax significance in Spain.
A.- STRUCTURE AND INTERNATIONAL ACTIVITY OF THE GROUP
Explanation and description of the group's main business lines and their geographical location and size of each of the business lines.
B.- PRESENCE IN TAX HAVENS
Description of the typology of the activities carried out in these territories as well as the functions, risks and size of the group entities that carry them out, as well as other data that allows such activities to be analyzed and justified.
For these purposes, the company may report on the territories classified as tax havens in accordance with Spanish regulations or also include information on those other territories that, according to other criteria it considers appropriate, could be included in the category of tax havens or zero zones. taxation.
C.- INTERNATIONAL AND CUSTOMS TAXATION
C.1. FINANCING
Description of the main aspects of the group's financing structure with the explanation considered appropriate and sufficient about the companies that obtain financing from outside the group, from the group, or grant financing within the group.
Explanation of the use of the conditions of provision of services
Description of the group's general policy regarding the use of derivative financial instruments.
Description of the group's general policy regarding the distribution of dividends (intra- and extra-group).
C.2. INDUSTRIAL AND INTELLECTUAL PROPERTY MANAGEMENT
Description of the main intangibles of the group and where the centers dedicated to research and development activities are located.
Description of the main agreements for the creation, acquisition, license and transfer of intangibles in force during the year, both between group entities and with entities outside the group.
C.3. INTRAGROUP SERVICES
Description of the services provided by group entities to other group entities with special reference to those called “
Description of the existence of services “ on demand ” or “ available ” and “ with low added value ” .
Description of the way to determine the remuneration of the aforementioned intra-group services and the chosen valuation method.
Explanation of whether the group has a “purchasing center” and, if applicable, its operation and remuneration.
C.4. FOREIGN TRADE OPERATIONS OF GOODS AND SERVICES
Description of the organization of foreign trade and service operations, with reference to purchases and sales and the services provided and received.
C.5. DEGREE OF CONGRUENCE WITH THE PRINCIPLES AND ACTIONS
Explanation of the degree of congruence of the company's fiscal behavior, in relation to the principles and actions
The company may consider providing information on possible operations subject to disclosure obligations in other jurisdictions.
Explanation of whether any operations have been carried out or are in force with respect to which any agreement or administrative decision has been obtained from the following: agreements relating to the application of preferential tax regimes; Apas; agreements that include some downward adjustment of benefits; agreements relating to permanent establishments; agreements regarding income channeling companies.
D.- SIGNIFICANT CHANGES IN STRUCTURES HOLDING AND SUBHOLDING
Explanation of the implementation of significant changes in the structures holding and subholding that have been totally or partially executed during the year and explanation of the operations and their economic reasons.
E.- MOST SIGNIFICANT CORPORATE OPERATIONS
Explanation of the most significant corporate operations, including branches and permanent establishments and intra- and extra-group business acquisition or transfer operations that have been carried out during the year, indicating the operations and their economic reasons.
F.- TAX STRATEGY OF THE GROUP APPROVED BY THE GOVERNING BODIES (529 ter Capital Companies Law)
Description of the group's tax strategy; how said strategy is determined; who is responsible for it and where it is collected and what internal control measures apply to guarantee that all employees affected by said strategy know and apply it (fiscal control framework).
G.- CATALOG OF TAX OPERATIONS SUBMITTED TO THE BOARD OF DIRECTORS (529 ter Capital Companies Law)
Explanation of how special tax risk operations whose approval must be submitted to the Board of Directors are determined and who determines it.
Explanation of what internal control measures are applied to ensure that all operations requiring Board approval are agreed by the Board (e.g. internal controls, external audit, etc.).
Explanation of the periodic supervision of the effectiveness of control measures.
H.- INSTRUCTIONS REGARDING THE PREVENTION OF ILLICIT OPERATIONS, LAUNDERING OR LIFTING OF ASSETS
Explanation of whether you have internal instructions regarding the prevention of illicit operations, laundering or seizure of assets and who is responsible.
Explanation of whether these instructions are accessible to all staff and how they can be accessed.
Explanation of the internal control measures applied to guarantee that these instructions are complied with.
Brief description of said instructions.
I.- OTHER ISSUES
Explanation of the main existing tax disputes.
Explanation of the tax queries presented by the entity in the year, which may affect its taxation in Spain.
Explanation of whether any of your group entities participate in cooperative compliance programs.
Explanation of the tax treatment of other operations and activities that the entity considers relevant.
Reproduction, if applicable, of the mention of tax aspects to be included in the management or integrated report of the entity. (Corporate tax governance note).
J.- GENERAL OBSERVATIONS
The information relating to natural or legal persons individually will be provided completed using the corresponding NIF , CIF or similar code when applicable, without prejudice to its consideration as non-public information, as well as as well as subjection, in the case of natural persons, to the regulations for the protection of personal data.
The information, unless otherwise considered, is as of the closing date of the year to which the Report refers.
All information that must be included in the report and is not under the control of the company, will be provided based on the knowledge that the company has, the communications that have been made to it in compliance with the current provisions and the information that recorded in public records.
To determine the extent and specificity of the information contained in the report (data, background, participating group companies, volume of operations, tax magnitudes, etc.), the company will take into consideration its reputational objectives in terms of strengthening transparency and its sufficiency for the purposes of promoting adequate risk control by the Administration.
(1) "Conclusions related to the development and monitoring of the application of the Code of Good Tax Practices within the framework of the cooperative relationship model between the Tax Agency and Companies, approved in the plenary session of November 2, 2015" . New window (Back)
(2) "Conclusions of the Working Group on the new model of cooperative relationship between the Tax Agency and the companies adhering to the Code of Good Tax Practices for the Plenary Session of the Large Companies Forum on October 29, 2013" . New window (Back)