Minutes of the meeting

Large Companies Forum

MINUTES OF THE PLENARY SESSION 1/2016

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 Tax Management Department

Mr. Rufino de la Rosa Cordon

Director of the Collection Department

Mrs. Soledad Garcia Lopez

Director of the Department of Aduanas and Excise Duties

Ms. Pilar Jurado Borrego

Central Delegate of Large Taxpayers

Mr. Ignacio Huidobro Arreba

Deputy Director General of Legal Order of the Department of Financial and Tax Inspection

Mr. Marcos Alvarez Suso

Members representing Large Companies

ACERINOX

General secretary

Mr. Luis Gimeno Valledor

ACS

Head of Corporate Tax Department

Mr. Jose Miguel Moreno Perez

AMADEUS IT HOLDING

Deputy Secretary of the Board of Directors

Mr. Jacinto Esclapés Diaz

BANCO SANTANDER

Tax Advisor

Mrs. Carmen Alonso Peña

BANKIA

Director of Tax Advice

Mr. Juan José Lagares Gómez-Abascal

BBVA

Tax Department

Mr. Alberto Marzal Cervantes

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 Affairs

Mrs. Maria Muñoz Viejo

FCC

Director of the Tax Department

Mr. Daniel Gómez-Olano González

GAS NATURAL FENOSA

Director of Taxation

Mr. Jaume Menendez Fernandez

GENERALI ESPAÑA

CFO

Mr. Jose Garcia Naveros

IBERDROLA

Fiscal Director

Mr. Fernando Arias Coterillo

IBERIA

Head of Tax Consultancy

Mrs. Elena Sanchez Llorente

INDITEX

Director of the Tax Department

Mr. Andres Sanchez Iglesias

MAPFRE

Tax Advice Director

Mr. Antonio Lafuente Gonzalez de Suso

MERCADONA

Tax Division

Mrs. Irene Barbudo Puchades

NORFIN HOLDER

Fiscal Director

Mr. Jose Antonio Gibello Saiz

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 Secretariat of the Large Companies Forum

Technical secretary

Mr. Ángel Rodríguez Rodríguez

In Madrid, on June 28, 2016, the twelfth plenary session of the Large Companies Forum was held, attended by the persons mentioned above, and in accordance with the following:

AGENDA

1. Session opening

2. Approval of the minutes of the meeting held on November 2, 2015

3. Large Companies Forum: Current situation

4. Results of the different working groups of the Forum

5. Next call

6. 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, after apologising for the absence of the Secretary of State for Finance and President of the Forum, Mr. Miguel Ferre Navarrete, who was unable to attend due to unavoidable commitments, welcomed the attendees and thanked them for their presence at this Forum and their collaboration with the Tax Agency in achieving the objectives entrusted to it. It also confirms the Tax Agency's commitment to this Forum to work together in the search for greater cooperation, transparency and trust in the relations between the tax authorities and large companies.

2. Approval of the minutes of the meeting held on November 2, 2015

Mr. Santiago 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 11th session of the Plenary of the Forum were sent to the members of the same and adds that no observations 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 2 November 2015 are hereby declared definitively approved.

3. Large Companies Forum: Current situation

The Director General of the State Tax Administration Agency, Mr. Santiago Menéndez Menéndez, briefly presents the work carried out in the different Working Groups during the first half of 2016.

Working Group on Tax Regulation Analysis and Conflict Reduction

The Director indicates the most relevant issues that have been analyzed within this Working Group, which has held a meeting during this semester:

• Deductibility of late payment interest . The Administration's efforts to provide legal certainty and clarify administrative doctrine are highlighted.

• Doctrine of own acts . Based on a note prepared by the Tax Agency, on which the Group's companies had made observations, an attempt has been made to establish some references (unequivocal and untainted will of the Administration, need to motivate the administrative act in the event of a change of criteria and the temporal scope of the effects of the administrative act) that generate stability and certainty and reduce litigation to a minimum.

• Cooperative compliance in the field of VAT . Based on the report prepared by the VAT FORUM of the European Commission (meetings between tax authorities and large business associations), the aim is to obtain the opinion of the members of the Forum, so the Tax Agency has undertaken to disseminate the text and, where appropriate, to create a working group if it is of interest to the companies in the Forum.

• In the field of international taxation reports on progress made in the area BEPS , regarding the legal value of its actions, and the establishment of information obligations at Community level.

Excise Tax Working Group

The Director points out that this Working Group met once during the first half of 2016, and the following issues were discussed:

• Activity and establishment code (CAE) required for beneficiaries of the super-reduced rate on natural gas to prove their right.

• Treatment of losses in the Coal Tax: It was noted that, although the Special Tax Law does not expressly establish any exemption in this regard, it is contemplated in the regulations of the electricity sector (1%).

• Other matters, such as incidents in supplies to deceased end consumers, the scope and enforceability of the power of representation of the persons who attend the Intervention, the access of operators to a database of territorial records of Special Taxes and the digitalization of documents and their validity.

Cooperative Relations Working Group

The Director explains that this Working Group has held two meetings, in which the following topics were discussed:

• Organization and content of the meeting/conference with companies adhering to the Code of Good Tax Practices.

• Analysis and assessment of the actions to be developed in relation to the Agreement of the Forum of Large Companies, dated November 2, 2015, seeks to satisfy the doubts about implementation, effects and use that will be given to the information voluntarily provided by the companies.

• Study of the conditions of application of Agreement on strengthening good practices in corporate tax transparency, seeking to establish guidelines for the submission of voluntary information to be provided by companies to the Tax Agency.

Mr. Santiago Menéndez goes on to highlight the progress made in cooperative relations and the unequivocal will of the Tax Administration to continue making progress in this area.

The Director General then gives way to the various speakers who will dedicate their interventions to presenting the conclusions of the various Working Groups.

4. Results of the different working groups of the Forum

Working Group on Tax Regulation Analysis and Conflict Reduction

Mr. Marcos Álvarez Suso, Deputy Director General of Legal Regulation of the Department of Financial and Tax Inspection, after apologizing for the absence of the Director of his Department, Mr. Luis Mª Sánchez González, who is currently assisting the Fiscal Affairs Committee of the OECD , goes on to give an account of the work carried out in this Group which, during this first semester, has met on one occasion, fundamentally addressing four topics. Firstly, the Forum representatives in the Working Group were informed of the situation regarding the deductibility of late payment interest on Corporate Tax, arising from settlements arising from tax application procedures. He pointed out that until Law 27/2014 came into force, both administrative doctrine and the jurisprudence of the Supreme Court established that they were not deductible. With the entry into force of the new Corporate Tax Law, the established theory is the deductibility of said interests.

Mr. Marcos Álvarez continued by indicating that the second issue discussed in the Working Group was the application of the doctrine of own acts. He noted that the Tax Agency prepared a working document that was the subject of comments by the companies participating in the Group regarding several aspects of the same; Among them, the tax strategy on anti-abuse by the Tax Agency and against aggressive tax planning. The Deputy Director General added that it was important to highlight that this specific issue was particularly complicated, as it was the subject of constant jurisprudential developments that forced the Tax Agency to adapt, so it was not possible to establish unchangeable criteria. He pointed out that the Tax Agency is aware of the importance of this issue, which particularly affects the situation of audits of medium and large companies and, especially, all obligations of successive tract, such as leases, loan contracts, asset amortization, etc. Mr. Marcos Álvarez adds that after the meeting of the Group, the business representation in the same submitted a proposal to continue advancing in the matters; that, on this matter, common ground could be found, specifically on the consideration of tacit acts, the effects that the performance of general inspection actions may have and the distinction between mandatory and discretionary acts set out in the working document prepared by the Tax Agency. Mr. Marcos Álvarez reiterates the Tax Agency's willingness to establish channels of communication and dialogue to seek common ground. He pointed out that very practical questions arose in the Working Group, such as the effects that the fact that a particular operation had been the subject of express instruction in the initial verification should have, on which he saw it feasible to find common ground. However, he pointed out that in other aspects of the doctrine of own acts it was more difficult to find a clear and general meeting point, since if the jurisprudence changes, the position of the tax administration should also change. Finally, on this subject, he added that further debate is needed within the Working Group and an attempt should be made to make progress on points of agreement between the two representations, before the Administration prepares and distributes a document with the criteria.

The third aspect that was discussed in the Working Group was administrative cooperation in matters of VAT and, specifically, the prevention and fight against fraud in VAT . The Group was provided with a guide that has been established by the EU VAT Forum. Clarifies that in this VAT Forum there is a bilateral representation made up of tax administrations and the business sector, specifically, the large European employers' associations. This cooperation guide arises as a consequence of the concern in the business sector of being involuntarily involved in chains of VAT fraud, particularly in intra-community fraud, due to the fact of not having taken due diligence. due, in the opinion of the tax administration. It also addresses issues of how to avoid these unintended implications. Mr. Marcos Álvarez adds that the objective of the guide is to facilitate cooperation between companies and the Administration in order to avoid fraud in VAT , as well as to identify risk situations and sectors, establishing an immediate, direct and permanent communication channel for the exchange of good practices between companies and Administrations, which addresses what level of diligence should be required of companies to avoid being involuntarily involved in fraud schemes and where the Administration informs the companies the risk behaviors detected. He added that, as the Director General of the Tax Agency has stated, the possibility of establishing a type of “good taxpayer” certificate is being studied. The Deputy Director General for Legal Regulations goes on to announce that a meeting of this Working Group on this matter will be held after the summer and urges companies to submit to the Tax Agency any proposals they wish to make.

Finally, the fourth point addressed at the Working Group meeting was issues relating to the implementation of certain recommendations of  BEPS  At the national level, and specifically, the preparation of the ministerial order establishing the obligation to provide information on a country-by-country basis (CbC Report). Comunica que está prevista la celebración el próximo día 6 de julio de una reunión del Grupo de Trabajo a fin de tratar la posible fecha de entrada en vigor de dicha orden, así como el ámbito subjetivo de aplicación y el contenido de la información a facilitar. Añade que la Secretaría Técnica de este Foro remitirá la convocatoria y el orden del día, en breve, e indica que, aunque el número de participantes tiene que estar necesariamente limitado, se ofrece la posibilidad de asistir a empresas que no participan en las reuniones habituales del Grupo de Trabajo.

Excise Tax Working Group

Ms. Pilar Jurado Borrego, Director of the Customs and Excise Department, explains that during this first semester the Group has met once and that the issues discussed were all proposed by the companies and focused on improving the procedures in order to delimit the possible responsibilities that may arise from the application of the regulations of II.EE. , since, in this matter, the regulations are very strict regarding formal procedures. Ms. Pilar Jurado adds that the Director General has already mentioned some of the issues discussed and that she would like to focus on the super-reduced rate for natural gas. He says that what companies are asking for is the establishment of a census of beneficiaries, so that the supplier can be sure that they are selling to an appropriate recipient. He points out that, in addition to requiring a regulatory change, which could be undertaken, it would be necessary to go against the formalistic simplicity that was established at the origin of the Tax on natural gas, but that, nevertheless, the issue would be analysed. He also expressed the interest of the Tax Agency in knowing the number of final consumers and asked companies to provide the information as far as possible.

As regards the losses in the Coal Tax, the Director of the Customs and Department points out that they are not regulated, because the tax regulations do not include them within the cases of non-taxation. Thus, in this too, a legal amendment would be necessary and adds that it would also be necessary to present a proposal justifying the existence of these losses and their percentage, to be studied by the General Chemical-Technological Subdirectorate of the Customs and Excise Department.

Ms. Pilar Jurado goes on to point out that another of the topics discussed was the supply of diesel at a reduced rate to deceased recipients. He points out that, without prejudice to the improvements that the Administration may make in terms of providing information to companies, it would also be interesting for companies to establish a permanent review protocol for the recipients of the service in their sales departments.

Ms. Pilar Jurado went on to comment that another issue that arose at the Working Group meeting was the dialogue by the company regarding the people who assist with the intervention at the facilities. The Director of the Customs Department and II.EE. points out that the Tax Agency is analyzing the various actions carried out by the intervention in light of their nature and content and how the power by which the representative of the owner of the establishment is appointed to attend to the Intervention must be verified.

Another issue discussed in the Working Group was the proposal made by a company to allow operators access to a database of territorial records of Special Taxes. The Director of the Customs Department and II. EE. reports that this request has been considered feasible and work is being done on establishing a query in which an authorized entity can see all its authorizations together.

The last topic discussed at the Working Group meeting concerned the possibility of establishing the validity of a taxpayer's declaration as a final consumer in electronic format as if it were a paper document. Ms. Pilar Jurado points out that the Tax Agency is also studying this matter, in order to hinder the commercial distribution of operators as little as possible.

Cooperative Relations Working Group

Mr. Ignacio Huidobro Arreba, Central Delegate of Large Taxpayers, begins his presentation by highlighting two initiatives that have occurred within the scope of the DCGC . The first refers to instructions for the dissemination and application of the Code of Good Tax Practices and the recommendations and commitments arising from the Agreement on the development and monitoring of the application of the CBPT , approved at the plenary session of November 2, 2015. In the second part of the instruction, the practices of monitoring and permanent evaluation of compliance with the Code's recommendations have been incorporated. The Central Delegate goes on to point out that within the scope of the inspection procedure, the actuaries will comply with the commitments arising from the Code and will verify that they are also complied with by the companies. Thus, in the inspection procedures, before the file is made public, the Tax Agency, as promised, will explain the reasons for the regularisation.

Mr. Ignacio Huidobro goes on to explain that the second initiative has been the implementation of a series of activities to prepare the operating conditions for the census of companies adhering to the Code of Good Tax Practices. To this end, a Working Group has been created in the Central Delegation of Large Taxpayers, whose objectives are the identification of the participating companies, the establishment of a computer solution that supports the census with the verification tool for the procedures, the design of a permanent management procedure, the study of the information and standardized documentation to be incorporated into the procedures, as well as the study and proposal of action protocols by the different management centers. It should be noted that participating companies are not only affiliated with the Central Delegation, but may also be affiliated with other territorial delegations. The Central Delegate clarifies that this is the reason why some companies may receive a request for clarification, since there were doubts regarding the scope of the extension of adherence to the Code.

Mr. Ignacio Huidobro goes on to comment that, with regard to the Cooperative Relations Working Group, it has met twice during the first half of the year and, as the Director General of the Tax Agency has already mentioned, the suitability of organizing a day with companies adhering to the Code of Good Tax Practices was discussed, aimed especially at those that do not participate in the Large Companies Forum, in order to provide them with more precise knowledge about it. However, due to the existence of pending issues, it has been decided to postpone the meeting. Another issue discussed at the Working Group meetings was the strengthening of corporate tax transparency. In this regard, the Central Delegate adds, there have been a series of informal contacts with the collaborator of the Technical Secretariat of the Forum, who sent a document based on the voluntary and bilateral nature of the additional exercise of transparency, and stating that, in advance, each company and the AEAT , by mutual agreement, would establish the content and scope of the information, as well as the format in which it would be provided, pointing out the inappropriateness of establishing standardized models. With regard to the process of offering information, companies propose taking into consideration the following aspects: the opportunity and timing, the ways to avoid unnecessary workloads, the establishment of a dynamic communication channel as well as regular meetings, the confidentiality of information, the scope of the reportable content and its format and the specification of the recognition corresponding to the degree of transparency. Mr. Ignacio Huidobro goes on to indicate that on this basis the Tax Agency considered it appropriate to prepare a working document for study and debate by the working group. He goes on to point out that the document begins with an introductory point where a series of reflections are collected in relation to transparency and the cooperative relationship, to continue developing the following aspects: the purpose of the proposal, the scope of the information (nature, use, form and deadline for submission), its treatment and the usefulness of the report for companies. End the paper with a general conclusion. Mr. Ignacio Huidobro adds that the document considers 2016 as an experimental period to improve, complete and consolidate this matter, determining the most effective and useful measures. The Central Delegate then gives a presentation on each of the points included in the document.

The Central Delegate concluded his speech by highlighting that the general conclusion contained in the document is that the transparency report represents a significant advance in the cooperative relationship model, based on the principles of transparency and mutual trust. Mr. Ignacio Huidobro adds that it will be necessary to monitor and assess the functioning of this proposed cooperative relationship instrument by gradually introducing the improvements that are considered appropriate. The document also proposes a period of experimentation and a series of general and flexible guidelines on the possible structure and content of the transparency report.

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

The first to speak was Ms. Carmen Alonso Peña, Tax Advisor at Banco de Santander and collaborator of the Technical Secretariat, who, after thanking the Vice President for his words and the presentation of the representatives of the Tax Agency, went on to comment on the situation from the point of view of the companies:

• In relation to the Working Group for the Analysis of Tax Regulations and the Reduction of Conflict, he highlights two fundamental aspects on which, in his opinion, further work is needed: On the one hand, the effects of the Administration's own actions and, on the other, in international taxation, the doubts regarding the "country-by-country report", especially for companies that already have to prepare said report. In both areas, the Technical Secretariat Collaborator undertakes to provide all members of the Forum with the Group's working documents and requests any comments they deem appropriate regarding them. It also encourages companies that are members of the Forum and that do not have representation in the Working Group to participate in the next meeting of the Forum.

• As regards the Excise Working Group, he points out the active role of companies and the good communication that exists.

• Regarding the Cooperative Relations Working Group, he appreciates the document prepared by the AEAT regarding corporate tax transparency and adds that they are currently analyzing it. Ms. Carmen Alonso undertakes to send it to all company representatives at the Forum, so that they may submit any observations they deem appropriate and to be able to draw up a mutually agreed document based on the voluntary nature of enhanced transparency and bilaterality, pointing out that standardisation can lead to very different situations in the relationship between the Administration and one company or another, since not all of them start from the same situation or have the same capacity for adaptation. On the other hand, the reputational effect for companies resulting from the preparation of a transparency report is positively highlighted.

Next, Mr. Jacinto Esclapés Díaz, Deputy Secretary of the Board of Directors and Director of Taxes at AMADEUS IT HOLDING, takes the floor and proposes that when a document is submitted to the Plenary sessions for approval, it should be attached to the minutes of the same.

Mr. Ángel Rodríguez intervened, indicating that he had taken note and that when a document was to be submitted for approval by the Plenary, it would be distributed along with the call.

Next, Mr. Santiago Menéndez took the floor and explained that, with regard to the Immediate Supply of Information (SII) Project, the draft Royal Decree for which already had a report from the Council of State, due to the fact that there is currently a caretaker Government, it will not be possible to implement it on the planned date (1 January 2017). However, the Tax Agency still considers it a very important project, which changes the way of relating to the tax administration from a management point of view, adding greater immediacy with respect to the moment in which the operations take place.

The Director General of the Tax Agency goes on to stress that the Tax Agency has a firm intention to improve and move forward in terms of cooperative relations.

The Vice President then asks if anyone else has any comments to make, and if none are made, he moves on to the next item on the agenda.

5. Next call

The Vice President points out the benefits of maintaining this semi-annual cadence that has been recovered in the Plenary meetings and states that the 13th meeting will be convened in the next semester. He then moves on to the last point on the agenda.

6. Other considerations, requests and questions

Mr. Santiago Menéndez proceeds to open the floor and, as no comments were made by the attendees, after thanking everyone, he closes the 12th plenary session of the Large Business Forum and says goodbye until the next meeting.