Minutes of the meeting

Large Companies Forum

MINUTES OF THE PLENARY SESSION 2/2017

Vice-President of the Large Companies Forum

Director General of the State Agency for Tax Administration

Mr. Santiago Menéndez Menéndez

Members representing the Tax Agency

Director of the Department of Financial and Tax Inspection

Mr. Luis Maria Sanchez Gonzalez

Director of the Department of Aduanas and Excise Duties

Ms. Mª Pilar Jurado Borrego

Central Delegate of Large Taxpayers

Mr. Ignacio Huidobro Arreba

Deputy Director General of Tax Technology - Tax Management Department

Mrs. Rosa Maria Prieto del Rey

Deputy Director General of Coordination and Management - Collection Department

Mr. Miguel Lorenz Falomir

Members representing Large Companies

ACERINOX

General secretary

Mr. Luis Gimeno Valledor

ACS

Director of Tax Advisory

Mr. Jose Miguel Moreno Perez

AMADEUS IT GROUP SA

Deputy Secretary of the Board of Directors

Mr. Jacinto Esclapés Diaz

BANCO SANTANDER

Tax Advisor

Mrs. Carmen Alonso Peña

BANKIA

Director of Tax Advice – Tax Advisory Department

Mr. Javier Mª Tello Bellosillo

BBVA

Director of the Tax Department

Mr. Jose Maria Vallejo Chamorro

LA CAIXA

Director of Tax Advisory

Mr. Manuel Alfonso García Rodríguez

CEPSA

Fiscal Director

Mr. Alberto Martin Moreno

COFARES

Advisory Board of Directors

Mr. Luis Valdeolmos Gonzalez

EL CORTE INGLÉS

Director of Taxes

Ms. Pilar Fernandez Medina

ENDESA

Head of Tax Compliance

Mr. Antonio Riquelme Brotons

FCC

Director of the Tax Department

Mr. Daniel Gómez-Olano González

GAS NATURAL FENOSA

Director of Taxation

Mr. Jaume Menendez Fernandez

GENERALI ESPAÑA

Director of Accounting Department

Mr. Martí Jo Ruiz

IBERDROLA

Fiscal Director

Mr. Fernando Arias Coterillo

INDITEX

Director of the Tax Department

Mr. Andres Sanchez Iglesias

MAPFRE

Tax Advice Director

Mr. Antonio Lafuente Gonzalez de Suso

MERCADONA

Tax Manager

Mr. Benjamin Torres Belenguer

MICHELIN

Fiscal Manager

Mrs. Rosa María Peña García

RENAULT ESPAÑA

Director of Tax and Customs Affairs

Mr. Felix Ruiz Madarro

REPSOL

Director General of Economic and Fiscal Affairs

Mr. Luis Lopez-Tello and Diaz Aguado

SEAT

Director of Taxes

Mr. Francisco Javier Baulenas Setó

SIEMENS

Director of Taxes

Mrs. Ana Maria Moreda Galante

TELEFÓNICA

Tax Director Latin America

Mr. Miguel Iglesias San Martin

VODAFONE

Tax Advice Director

Mr. Javier Viloria Gutierrez

Technical secretary

Technical secretary

Mr. Ángel Rodríguez Rodríguez

In Madrid, on November 21, 2017, the fifteenth plenary session of the Large Companies Forum was held, attended by the people mentioned above, and in accordance with the following:

AGENDA

1. Session opening

2. Approval of the minutes of the meeting held on June 13, 2017

3. Large Companies Forum: Current situation

4. Results of the different working groups of the Forum

5. Issues analysed by the Monitoring Committee of the Code of Good Tax Practices

6. Next call

7. Other considerations, requests and questions

1. Session opening

The session was opened by the Director General of the State Tax Administration Agency, Mr. Santiago Menéndez Menéndez, who welcomed the attendees and thanked them for their presence and support, while reiterating the willingness of the Ministry of Finance and Public Administration, as well as that of the Tax Agency, to continue working together with companies within this Forum, which has become the instrument that allows a new relationship model to be put into effect. Thus, it points out that it is within this line of communication established within the framework of the Large Business Forum and the Code of Good Tax Practices approved within it, where the creation of the Transparency Report has had a place, which allows entities to make known to the Administration, in advance, any information that has or may have fiscal significance. The Director General adds that the Tax Agency wishes to thank the efforts made by various companies that have already exercised this option, an effort that the Administration will try to reciprocate with the aim of giving this report the necessary validity. On the other hand, Mr. Santiago Menéndez reiterates his gratitude to the companies for their collaboration in the implementation of the Immediate Supply of Information, a project of which the Tax Agency is very proud and which is now a reality.

2. Approval of the minutes of the meeting held on June 13, 2017

Mr. Santiago Menéndez Menéndez gives the floor to the head of the Technical Secretariat of the Forum, Mr. Ángel Rodríguez Rodríguez, who points out that the minutes of the 14th session of the Plenary of the Forum were sent to its members as documentation attached to the call for this session and adds that no comments have been received and, if there were none at this time, it would be definitively approved. As no observations were made by those present, the minutes of the plenary session of June 13, 2017 are declared definitively approved, and will be published in the space reserved for the Forum on the Tax Agency's website.

3. Large Companies Forum: Current situation

At this point, the Director General of the State Tax Administration Agency briefly presents the work carried out in the different working groups during the second half of 2017.

Working Group on Tax Regulation Analysis and Conflict Reduction

The Director General points out that at the meeting of 2 November 2017 of the working subgroup created to analyse the new obligations arising from the presentation of the so-called “Country by Country Report”, the computer environment for the presentation of Form 231, the Country by Country information declaration, was presented. Likewise, the updates of concepts and interpretative issues analyzed in the OECD working groups in which the Tax Agency and the General Directorate of Taxes participate were discussed. It also notes that the status of publication of the OECD Guides related to the Country-by-Country Report was reported, specifically, the Appropriate Use Guide, the Effective Use Manual for the fiscal risk assessment and the Manual for the effective implementation of the Country by Country Report.

The Director General concludes his presentation in relation to this subgroup by indicating that the proposal to modify article 13 of the Corporate Tax Regulation was discussed, to adapt the regulations of the Country by Country Report to the requirements of the OECD and, consequently, of the European Union.

Excise Tax Working Group

Regarding the meeting of this working group on October 24, information was provided on the status of the draft legislation to modify the Regulations on Special Taxes and the Tax on Fluorinated Greenhouse Gases. The main new features were:

1. the keeping of accounting books for Excise Tax stocks in the Electronic Headquarters of the Tax Agency, through the electronic supply of the processes, movements and stocks that must be subject to registration,

2. the modification and modernization of the circulation system of products subject to Special Taxes through the procedure of sales in route and the provisioning of vessels and aircraft with products subject to the Hydrocarbon Tax, and

3. the registration of final consumers of diesel fuel at a reduced rate under section 1.16 of article 50 of the Law.

Mr. Santiago Menéndez also pointed out that the companies were also informed that, since the public hearing process had been completed in July and the project was in the Technical General Secretariat, the version that was finally approved could differ from what was presented at the meeting.

Working Group on Immediate Provision of Information

The General Director points out that this working group has held a meeting during this second semester, specifically on October 31, 2017, and in it the balance of the implementation of the Immediate Supply of Information was presented, which has meant that more than 90% of the obligated parties included in the census of the SII are informing the Tax Agency of their operations, a percentage that rises to 97% if only non-exempt companies are considered. It was also commented that the quality of the information, measured by the degree of coincidence in the subjects who self-assess VAT , between the invoices they have received and supplied through the SII and its VAT declarations, was very high, reaching 84%, a quality that would foreseeably improve in the coming months. Likewise, an information letter was sent to taxpayers who have not incorporated the required information through SII , or have done so with large discrepancies with respect to the declared information, also informing them of the next actions of the project.

Mr. Santiago Menéndez goes on to point out that companies expressed their doubts about the consequences of invoices not verified for formal reasons, with the Tax Agency stating that verification is an added value of the project, and its absence does not constitute an error.

Finally, the regulatory changes planned for 2018 were presented, as well as the new features incorporated into the “Frequently Asked Questions”.

Monitoring Committee of the Code of Good Tax Practices

The Director General reports that, following the commitment made at the last Plenary Session held in June, the Monitoring Committee of the Code of Good Practices met on 6 November 2017. During the course of the meeting, representatives of the Tax Agency and the companies in attendance analysed compliance with some of the commitments assumed by both parties in the Code of Good Tax Practices, in particular, the communication of the detection of fraudulent tax practices existing in the markets, the commitment to good faith and collaboration in the inspection procedure, the obtaining of legal certainty through consultations and publication of criteria, and the transparency report.

Mr. Santiago Menéndez goes on to point out that, in addition, the situation of the working groups was reviewed, considering that the working group of SII could be left open, since, although it has fulfilled its purpose, some additional meeting might be necessary.

4. Results of the different Working Groups of the Forum

The Director General of the Tax Agency then moves on to point 4 of the agenda, where the work and perspectives of the Working Groups on the Analysis of Tax Regulations and Conflict Reduction, Special Taxes and the SII will be addressed in more detail, giving the floor to Mr. Luis María Sánchez González, Director of the Department of Financial and Tax Inspection.

Mr. Luis María Sánchez begins his presentation by pointing out that during this second semester the activities of this working group have been focused on the Country by Country Report (CbC Report), indicando que el objetivo fundamental ha sido la clarificación de las dudas que se pueden plantear las empresas españolas que están obligadas a presentar el informe. Añade que, desde un punto de vista interpretativo, se plantean cuestiones complejas, ya que al tratarse de una obligación internacional donde la información va a ser objeto de intercambio es necesario arbitrar soluciones conjuntas, no siendo suficiente con la transposición de la Directiva de la UE y el cumplimiento de los estándares del Foro Global. Continúa indicando que en la reunión de este grupo que tuvo lugar el pasado 2 de noviembre, la Agencia Tributaria tuvo una participación muy transversal con representantes por parte del Departamento de Inspección Financiera y Tributaria, del Departamento de Gestión Tributaria, del Servicio de Planificación y Relaciones Institucionales, de la Delegación Central de Grandes Contribuyentes y del Departamento de Informática Tributaria. Prosigue el Director del Departamento de Inspección Financiera y Tributaria señalando que a la reunión también asistió la Dirección General de Tributos ya que se considera más efectivo que las personas que están participando en el grupo ad hoc de la OCDE sean quienes informen directamente sobre las cuestiones tratadas en las reuniones del mismo. En este sentido, D. Luis María Sánchez recuerda que es en este grupo ad hoc where the criteria for interpretation are being set at an international level and, in the absence of an agreement, flexibility is the rule. The agreed criteria are incorporated into the implementation guide prepared by the ad hoc group . Thus, it informs that the OECD has published four documents on its website, which can be grouped into two blocks:

• A first block with the documents that are the result of the work of the ad hoc group of the OECD :

  • “Country-by-Country Report Implementation Guide”.

  • “Guide on the appropriate use of information contained in country-by-country reports”.

• And a second block with two other documents that fall within the program ICAP (International Compliance Assurance Programme), which has the participation of the Central Delegation of Large Taxpayers:

  • ”Country by country report: “Manual for effective implementation”.

  • ”Country by country report: “Manual on effective use for tax risk assessment”.

Next, Mr. Luis María Sánchez points out that at the meeting held on November 2, the Tax Information Technology Department addressed the IT environment for filing Form 231, the Country-by-Country information declaration, and analyzed the alternatives for filing it, the requirements and deadlines for filing it, and the result of its filing with a practical demonstration. He stressed that the Tax Information Technology Department has made a great effort in developing this model, which facilitates compliance with the obligation.

On the other hand, and continuing with the group ad hoc of the OECD , Mr. Luis María Sánchez reports that the developments discussed at the Working Group meeting were the following: issues related to the use of aggregated or consolidated data, entities owned by more than one unrelated multinational group, concepts of income, tax paid and accrued, and assumptions of multinational groups with a short tax period. The Director of Financial and Tax Inspection continues by pointing out that the proposal to modify article 13 of the Corporate Tax Regulation was also discussed, to adapt the regulations of the Country by Country Report to the requirements of the OECD .

Next, Mr. Santiago Menéndez asked if anyone wanted to make any comments and, when none were made, he gave the floor to Ms. Pilar Jurado Borrego, Director of the Customs and . . Department, who began by explaining that at the meeting of this Working Group on October 24, information was provided on the status of the draft legislation to modify the Regulations on Special Taxes and the Tax on Fluorinated Greenhouse Gases, and that the main new feature is to undertake the keeping of the accounting books for the stock of the different types of products from the Tax Agency's own electronic headquarters. It also clarifies that it is something similar to the Immediate Supply of Information, since it will also involve sending XML files through a web service or through a form, but that, nevertheless, what it is about is standardising the information that is to be received, allowing, on the other hand, that each company manages as it considers appropriate the additional information that it needs for its operation. It adds that wine producers with an annual production that does not exceed 100,000 litres will be excluded, as well as artisanal distillers in the areas of Castilla y León, Galicia and Asturias. She also commented that this is a project that will be worked on very closely with companies in the sector, and is expected to come into force in January 2020. On the other hand, Ms. Pilar Jurado continues and, in relation to the circulation system for products subject to Special Taxes through the en route sales procedure and the provisioning of vessels and aircraft with products subject to the Hydrocarbon Tax, comments that it is also expected to be done by electronic means, with the amendments coming into force in January 2019. Finally, the Director of the Customs Department and II. EE. reiterates what was stated by the General Director of the Tax Agency, regarding the fact that the draft amendment to the Regulations is currently in the Technical General Secretariat, so the version that is finally approved could differ from what was presented at the meeting of the Working Group.

Mr. Santiago Menéndez then gives the floor to Ms. Rosa María Prieto del Rey, Deputy Director General of Tax Technology of the Tax Management Department, who begins her presentation by pointing out that the Working Group on the Immediate Supply of Information was established with the aim of having the collaboration of companies in the development and implementation of the system, an objective that has currently been fully met. He adds that, on the other hand, it should be noted that the collaboration of the companies has been spectacular. Ms. Rosa María Prieto continues by reiterating what has already been stated by Mr. Santiago Menéndez, in that we can speak of 90% compliance of those obliged to be included in the SII census, A percentage that would rise to 97% if only non-exempt companies are taken into account, that is, those that pay VAT . The Deputy Director General of Tax Technology also went on to point out that the purpose of the last meeting of the Working Group was to analyse the situation of the SII and what challenges would have to be faced in the future. Thus, Ms. Rosa María Prieto points out that at this meeting it was raised that, once the system had been established in a manner that was, in her opinion, satisfactory, although there were still minor peculiarities that needed to be improved, the next challenge had to be the quality of the information provided. In this regard, companies expressed some concern during the meeting regarding the contrast in operations. However, it was clarified that the quality of the information would improve considerably when companies could consult the imputations of third parties (suppliers and customers) and that this option would be available before the end of the year. On the other hand, the Deputy Director General of Tax Technology continues, the Working Group also addressed improvements to the "query", and reports that the sums by columns are now available in the registry queries and that, in addition, it is planned to add an aggregate data table that allows companies to check that there have been no losses or distortions in terms of the information that they wanted to send to the Tax Agency. Finally, Ms. Rosa María Prieto points out that regarding the regulatory developments for 2018 relative to the modifications of the VAT Regulation and the Ministerial Order by which the regulatory specifications are regulated and techniques for keeping VAT record books through the Electronic Office, will finally come into force on July 1 and highlights the following:

• Clarifications are introduced in relation to certain situations that are already being reported through SII in order to improve the information provided.

• Unforeseen situations are contemplated, such as, for example, the case of restructuring operations, so that all the particularities of this type of operations are included and can be reported correctly through SII .

• An attempt will also be made to simplify other types of issues that were already provided for in the initial Order, such as the refund of VAT of travelers. Once it has been defined how it will be implemented, it will be published on the website.

In this regard, he added that the quasi-final text will be published on the Tax Agency's website, and the "frequently asked questions" will be modified in order to address these situations. Furthermore, Ms. Rosa María Prieto points out that IT developments will go hand in hand with regulatory developments, and that the forecast is to have an advanced IT scheme before the end of the year, so that there is still enough time before its implementation to address any issue that is not sufficiently clear or to introduce improvements.

Mr. Santiago Menéndez then opened the floor for the representatives of the Forum's member companies to make any comments they deemed appropriate.

Ms. Carmen Alonso Peña, representative of Banco de Santander and collaborator of the Technical Secretariat of this Forum representing the companies, took the floor and stated that she wished to make some clarifications regarding the activity of the Working Groups. Firstly, in relation to the Working Group dedicated to Country by Country Report asks whether the documents used in the meetings can be distributed among all the companies represented at the Forum. In addition, and in relation to the latest dubious questions raised by companies, the Tax Agency is requested to provide some guidance or criteria, or, taking into account the principle of flexibility, to leave it open and for each company to adopt the solution that it considers most appropriate and to provide the appropriate explanations in the report itself. Ms. Carmen Alonso adds that the main pending issues are income from dividends, provisions for loss of value and the valuation of negotiable portfolio assets. On the other hand, as regards the IT part of Form 231, he thanks the Tax Information Technology Department for the effort made to simplify the presentation of the report. It also encourages all companies to carry out practices before 31 December in order to detect any errors or deficiencies and to allow time for them to be corrected. On the other hand, in relation to the Special Taxes Working Group, he points out that the representatives of the companies that participate in this group continue to highlight its dynamism and that communication is very fluid. Finally, regarding the Working Group on the Immediate Supply of Information, we reiterate what was pointed out by the Deputy Director General of Tax Techniques, in that the objective for which the group was established has already been fulfilled and it would be necessary to consider whether to terminate it or continue, at least during the first half of 2018, due to the expected regulatory changes.

At this point, Ms. Pilar Fernández Medina, representative of El Corte Inglés, takes the floor and points out that although she has previously been somewhat vehement in her criticism of the project, she must now emphasize that the Tax Agency has performed impeccably in the SII in terms of availability and permeability to the specific and diverse issues that companies have raised, and that if the Tax Agency agrees to continue with the same dynamic, she does not know to what extent it is necessary to continue with the group meetings.

Ms. Rosa María Prieto takes the floor and points out that, of course, the Tax Agency assumes the commitment to continue providing the same support and assistance service to companies and adds that, perhaps, it is no longer so necessary to have a working group set up, if anything, to organize an informative meeting on the final situation within three or four months.

Mr. Santiago Menéndez then intervened to thank the representative of El Corte Inglés for her words and added that it is normal for criticism to be made in projects of this importance, especially after the delays suffered by the project and the shortening of deadlines. The Director General of the Tax Agency also said that he hopes that future projects will be able to enjoy the same fluidity in communications.

The Director of the Financial and Tax Inspection Department then clarifies that the Tax Agency has no objection to the documents used in the meetings of the Subgroup of the Tax Agency being distributed among the representatives of the companies. CbC . On the other hand, in relation to the latest doubts raised by companies, he comments that it is difficult for the Tax Agency to give instructions on issues that have not been defined by the OECD . In his opinion, what could be done, making it clear that this is not a OECD criterion, is to prepare an alternative for completion agreed upon by companies and analyzed by the Tax Agency, that could be applied based on the principle of “flexibility”.

Ms. Carmen Alonso takes the floor again to inform that she will send the working documents of the Subgroup to all the representatives of the companies in this Forum. CbC , and states that he is available to those present for any clarification.

Next, the General Director of the AEAT intervenes to comment on the importance of communication and the flow of information. In this regard, he points out that companies adhering to the Code of Good Tax Practices have expressed their interest in participating in the meetings of this Forum. Due to the physical limitation of space to accommodate more people, Mr. Santiago Menéndez suggests the convenience of organizing an annual information session with all the companies adhering to the Code where the subjects that are being worked on in the different groups are explained to them and where these companies can raise issues that are of interest to them. For this reason, the Tax Agency will organise a meeting with all companies adhering to the Code of Good Tax Practices in the first half of 2018.

5. Issues analysed by the Monitoring Committee of the Code of Good Tax Practices

The Director General then moved on to the next point on the agenda and gave the floor to Mr. Ángel Rodríguez Rodríguez, Director of the Planning and Institutional Relations Service, who began his presentation by reporting that the Monitoring Committee of the Code of Good Practices met on 6 November with the aim of analysing compliance with the commitments included in the Code and, specifically, the following aspects were discussed:

• The commitment to collaboration between companies and the Tax Agency to detect fraudulent tax practices that occur in the markets was analyzed, as well as to find solutions, both to eradicate them and to prevent their spread. The Agency expressed its interest in receiving this information and its commitment to act, especially with preventive measures to prevent such conduct from becoming widespread in a sector.

• The general compliance of companies with respect to the commitment of good faith and collaboration in the inspection procedure was highlighted. It was reported that the Tax Agency has issued two Instructions to disseminate the Code of Good Tax Practices among actuaries, in addition to having carried out two FISCALIS on the subject of cooperative relations in order to learn about other international experiences.

• As regards the commitment that enables taxpayers with doubts about the tax treatment of certain operations or transactions to know the criteria that the Tax Agency would apply, although there have not been generalized queries, its compliance was valued positively by the companies present at the Commission, as it is an instrument that allows for increased legal certainty.

• Regarding the publication of criteria applied in control procedures insofar as they are susceptible to being applied in a general manner, the Tax Agency stated the difficulty of making general approaches, since in most cases the criteria refer to specific conduct and assumptions. The companies stressed that the publication of the criteria would strengthen the Code, and both parties committed to analysing in the Cooperative Relations Working Group the issues on which it would be interesting to know the criteria applied by the Agency.

• In relation to the Transparency Report, the companies pointed out that, in order for it to be useful, it would be necessary to modify the control model and bring the verifications closer to the time of the events. The Tax Agency stressed the need to implement some type of cooperative procedure, different from the existing inspection procedure, which would allow the analysis of the tax information collected in the report and provide greater legal security to the companies that submit it.

• Finally, the status of the working groups was reviewed, leaving the SII Working Group on hold, which, having fulfilled its purpose, might require holding an additional meeting. Within the Working Group on the Analysis of Tax Regulations and Conflict Reduction, it was proposed to maintain the Country-by-Country Report Subgroup, and to convene meetings on other more general topics. As for the rest of the groups, it was reported that the working groups on Special Taxes and Cooperative Relations would also be maintained, while the working group on Tax Burdens should be promoted.

Next, Ms. Carmen Alonso, representative of Banco Santander, took the floor and commented that, in relation to the meeting of the Code Monitoring Committee, the issues that companies insisted on the most were the following:

• The need to publish more criteria for action on the Tax Agency's website, so that companies that do not have representation in this forum are also informed and have tools that result in greater legal security.

• The reasons for the lack of queries submitted by companies were analyzed.

• As regards the transparency report, companies complained that the Tax Agency had urged them to submit it, but the expected comments were not forthcoming, resulting in a lack of motivation on the part of companies. In this regard, the Tax Agency reported that it was going to give priority to this matter and that it would soon begin to meet with the companies that had submitted it in order to clarify concepts and that the report could serve them to prevent risks in the future.

Mr Santiago Menéndez then took the floor and asked if anyone else wished to make any comments regarding the Monitoring Committee. Since none is produced, it gives way to the next point on the agenda.

6. Next call

The Vice President said that the 16th meeting would be held in the next semester, probably in June.

He then moves on to the last point on the agenda.

7. Other considerations, requests and questions

The Director General proceeds to open a round of interventions and, as none were made, he reiterates the Tax Agency's willingness and interest in organising a meeting with companies that have signed up to the Code of Good Tax Practices in 2018. Lastly, he reports that Ms Pilar Jurado Borrego, Director of the Customs Department and II. EE. , has been chosen by the European Union and its member countries as the sole and common candidate for the post of Secretary General of the World Customs Organisation, an institution of utmost importance on the international level that has representation from more than 180 countries.

Finally, the Director General of the Tax Agency concluded the 15th plenary session of the Large Business Forum and said goodbye until the next meeting.