Minutes of the meeting

Large Companies Forum

MINUTES OF THE PLENARY SESSION 2/2020

Vice-President of the Large Companies Forum

Director General of the State Agency for Tax Administration

Mr. Jesus Gascon Catalan

Members representing the Tax Agency

Director of the Tax Management Department

Mr. Gonzalo Garcia de Castro

Director of the Department of Financial and Tax Inspection

Mr. Javier Hurtado Puerta

Director of the Revenue Department

Mr. Guillermo Barros Gallego

Director of the Department of Aduanas and Excise Duties

Ms. Mª Pilar Jurado Borrego

Central Delegate of Large Taxpayers

Mr. Manuel Trillo Alvarez

Deputy Director General of Tax Technology - Tax Management Department

Mrs. Mercedes Jordán Valdizán

Deputy Director General of Legal Management and Legal Assistance - Department of Financial and Tax Inspection

Mr. Marcos Alvarez Suso

Deputy Director General of Coordination and Management – Collection Department

Mrs. Virginia Muñoz Fernández

Members representing Large Companies

ACERINOX

General secretary

Mr. Luis Gimeno Valledor

ACS

Director of Tax Advisory

Mr. Alfonso Moreno Garcia

AMADEUS IT GROUP SA

Vice President of the Board of Directors

Mr. Jacinto Esclapés Diaz

BANCO SANTANDER

Group Executive Vice President

Mrs. Carmen Alonso Peña

BANKIA

Director of Tax Advice - Tax Advisory Department

Mr. Juan José Lagares Gómez-Abascal

BBVA

Director of the Tax Department

Mr. Jose Maria Vallejo Chamorro

LA CAIXA

Director of Tax Advisory

Mr. Manel Alfonso García Rodríguez

CEPSA

Fiscal Director

Mr. Alberto Martin Moreno

COFARES

Advisory Board of Directors

Mr. Luis Valdeolmos Gonzalez

EL CORTE INGLÉS

Director of the Tax Department

Mr. Luis Maria Sanchez Gonzalez

ENDESA

Head of Tax Affairs

Mrs. Maria Muñoz Viejo

FCC

Director of the Tax Department

Mr. Daniel Gómez-Olano González

GENERALI

Director of Accounting Area

Mr. Martí Jo Ruiz

IBERDROLA

Global Director of Tax

Mrs. Begoña Garcia-Rozado Gonzalez

IBERIA

Spanish Tax Lead

Mrs. Cristina Santana Negrin

INDITEX

Director of Tax Advisory

Mr. Andres Sanchez Iglesias

MAPFRE

Tax Advice Director

Mr. Antonio Lafuente Gonzalez de Suso

MERCADONA

Fiscal Director

Mr. Rafael Hilario Lopez Villanueva

MICHELIN

Fiscal Manager

Mrs. Rosa María Peña García

NATURGY ENERGY GROUP

Director of Tax Planning

Mr. Baltasar Gomez Febrel

NORFIN HOLDER

Director of Tax Advisory

Mr. Jose Antonio Gibello Saiz

RENAULT

Director of Tax and Customs Affairs

Mr. Felix Ruiz Madarro

REPSOL

Director General of Economic and Fiscal Affairs

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

Fiscal Director

Mr. Angel Martin Gomez

VODAFONE

Tax Advice Director

Mr. Javier Viloria Gutierrez

Technical Secretariat of the Large Companies Forum

Technical secretary

Mrs. Rosa Maria Prieto del Rey

On November 17, 2020, the twenty-first plenary session of the Large Companies Forum will be held by videoconference, with the following people attending, and in accordance with the following:

AGENDA

1. Opening of the session.
2. Approval of the minutes of the meeting held on June 30, 2020.
3. Results of the different working groups of the Forum.
4. Next call.
5. Other considerations, requests and questions.

1. Session opening

The session was opened by Mr. Jesús Gascón Catalán, Director General of the State Tax Administration Agency, in his capacity as Vice President of the Large Business Forum, who, after greeting the attendees and thanking them for their presence, commented that, taking into account the evolution of the pandemic, it is likely that the next meetings will still have to be held by videoconference.

2. Approval of the minutes of the meeting held on June 30, 2020

Mr. Jesús Gascón gives the floor to Ms. Rosa María Prieto, Director of the Planning and Institutional Relations Service, who points out that the minutes of the 20th session of the Plenary Session of the Forum were sent to its members and adds that, since 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 June 30, 2020 are declared definitively approved.

3. Results of the different working groups of the Forum

The Director General of the State Agency for Tax Administration indicates that, regarding the activity of the working groups during the second half of the year, the “Analysis of indirect tax burdens” and the “Analysis of tax regulations and reduction of conflicts” groups held a joint meeting on November 4. He added that the Special Taxes working group met on October 28 and the Cooperative Relations working group on November 11.

He then gave the floor to Mr. Gonzalo García de Castro, Director of the Tax Management Department, so that he could inform those present about the activity of the working group for the Analysis and rationalization of indirect tax burdens. Mr. Gonzalo García de Castro, after greeting the attendees, pointed out that the development of this point will be carried out by Ms. Mercedes Jordán Valdizán, Deputy Director General of Tax Technique of the Tax Management Department, who attended the meeting of the working group. He added that he would, however, intervene on certain issues from time to time.

Next, Ms. Mercedes Jordán takes the floor and begins her presentation by pointing out that, at the meeting held on 4 November, the following issues were addressed, among others:

• News in VAT : The working group discussed the changes, mainly technical, that would come into force on January 1, 2021, with the main purpose of improving assistance to taxpayers through the service for completing Form 303. Thus, in relation to SII , it was pointed out as an example that a new key had been added to the register of invoices received to identify investment goods. Also, the section of the intra-community operations register had been developed for agreements on the sale of goods on consignment. It was also stressed that the Pre303 service, starting in January 2021, would be more comprehensive in terms of the pre-filling of boxes that would be offered to the taxpayer with the information known to the Tax Agency.

  To conclude this section, Ms. Mercedes Jordán invites attendees, as has been done through information letters, to try this help service.

• News in the next campaign of informative declarations: It was indicated at the meeting that the changes in the 2020 campaign were also going to be mainly of a technical nature and that most of them affected financial information declarations. It was added that the aim of these changes was, above all, to improve assistance in the IRPF campaign, in terms of the tax data provided to taxpayers. It was also noted that the main change affected form 198, although the modifications had been approved in 2019 and their application had been postponed until 2020. The changes introduced in Form 187 were also discussed, in order to reduce the requirements for identifying payments on account made by the partners themselves.

• The regulatory changes that would need to be processed as a result of:

  • Council Directive (EU) 2018/822 of 25 May 2018 (Directive on Fiscal Intermediaries or DAC 6): It was commented that its transposition was still pending, although the different regulations that made up the project as a whole had already completed the public information process, including the ministerial orders that would approve the three models of information declarations. It was noted, however, that since 1 July 2020, the technical information necessary to carry out the IT developments had been published on the Tax Agency's website since, although provisional until the law was approved, no changes were expected given the degree of consensus reached in the Commission's IT working groups.

  • Financial Transaction Tax: Ms. Mercedes Jordán comments that the hearing and public information process for the draft ministerial order approving form 604 ended on November 13. He also indicated that the following issues were raised at the meeting:

    • The tax comes into effect on January 16, 2021.

    • The model must be submitted on a monthly basis (from the 10th to the 20th of the following month) and only during periods in which taxable transactions are carried out. If no taxable transaction is carried out, it will not be necessary to submit the self-assessment.

    The Deputy Director General of Tax Technology adds that the technical and relevant information on the completion of the form, as well as any issues that the General Directorate of Taxes considers appropriate, will be published on the Tax Agency's website.

  • Tax on Certain Digital Services: The following was highlighted in the working group:

    • The tax also comes into effect on January 16, 2021.

    • Form 420 is submitted on a quarterly basis and is submitted in the month following the calendar quarter.

    To conclude this point, the Deputy Director General of Tax Technology indicates that, given that the first declaration will have to be made in April, there is still a reasonable period of time to publish the Regulation and the draft ministerial order by which the model would be approved.

Mr. Jesús Gascón thanks Ms. Mercedes Jordán for her intervention and gives the floor to Mr. Gonzalo García de Castro in case he wishes to make any comments.

The Director of the Tax Management Department comments that, in fact, there are no major regulatory changes except for the two new tax figures mentioned by the Deputy Director General of Tax Technique, the Tax on Financial Transactions and the Tax on Certain Digital Services. He added that his Department is awaiting the publication of the regulatory developments in order to specify the entire management approach for the two taxes. It also indicates that information notes are planned to be issued, both in Spanish and English, as well as a series of frequently asked questions (FAQ), which, in a systematic and orderly manner, clarify the basic concepts of the new taxes.

To conclude his speech, Mr. Gonzalo García de Castro, in relation to the 2020 informative declaration campaign, highlights its essentially continuous nature, without major new developments. Likewise, he comments that, regarding VAT , the adjustments have also been the traditional ones, that is, those derived from the transposition of directives and, above all, those linked to the improvement of the validations in the SII , so that the Pre303 help service has a greater subjective scope and offers taxpayers a more complete precalculation.

Mr. Jesús Gascón thanks Mr. Gonzalo García de Castro for his intervention and comments that in the next sessions it will be necessary to deal with the regulatory changes that are currently being processed, such as the General State Budget Law, whose deadline for the presentation of amendments ends, precisely, on the day of this Plenary Session, as well as a series of regulatory projects that affect new taxes and those already existing. He also indicated that, in addition, if the Budget Law is not approved before December 31, some regulatory adjustment instrument will also have to be established so that no period of time is left uncovered. He added that there are therefore some complicated and complex weeks ahead in terms of the regulations being processed, but that there will be time to deal with them in the upcoming meetings.

The Director General of the Tax Agency then offers the floor to those attending in case they wish to make any queries or comments regarding what has been discussed so far in the meeting. Since no interventions were made, the floor was given to Mr. Javier Hurtado Puerta, Director of the Department of Financial and Tax Inspection, so that he could comment on the activity of the working group on the Analysis of Tax Regulations and the Reduction of Conflicts.

Mr. Javier Hurtado indicates that the meeting of this working group took place on November 4 and that representatives of the General Directorate of Taxes participated in it. He added that the following issues were discussed as the most relevant topics:

• Draft Law on measures to prevent and combat fraud, transposing Council Directive 2016/1164 of 12 July 2016: The Deputy Director General of Taxes pointed out that the draft law, in terms of transposition of the Directive, only affected two points of the same, since it was understood that the other sections were either already transposed or there was still time for future transposition. He added that, basically, what the bill was going to transpose was a new regime of international tax transparency and the regulation of the so-called “exit tax” or “ exit tax ”.

  The following new features introduced by the bill in various areas related specifically to the fight against tax fraud were also discussed in great detail:

  • Express prohibition of extraordinary tax regularizations, also known as “tax amnesties.”

  • Ban on dual-use software: It was noted at the meeting that, by amending letter j) of article 29.2 of the General Tax Law, the obligation to use a software that would prevent the alteration of records was established and a minimum standard was set that the systems had to meet. However, it was indicated that this point should be the subject of regulatory development. Likewise, the Department of Financial and Tax Inspection explained at the meeting that this was not an isolated measure, but rather the aim was to establish the bases for future developments aimed at achieving what has been called "compliance by design", that is, achieving a reconciliation between the taxpayers' computer systems and the tax administration's declaration filing system, in such a way that, while the taxpayer's management task would be simplified by not having to transform their records to file a self-assessment, since these would be created in a format that could be perfectly read by the administration's systems, the integrity, conservation, traceability and inviolability of the records would also be ensured.

  • Modification of the defaulters list regime: It was noted that the threshold for outstanding tax debt was reduced from €1,000,000 to €600,000. It was also stated that the debtor could be excluded from the list if he paid the entire debt and the penalties before the deadline for objections to inclusion on the list ended.

  • New reporting obligations in relation to cryptocurrencies: with the modification of the DA 18 of the General Tax Law should be recorded in form 720.

  • New cash payment restrictions: Mr. Javier Hurtado comments that this limitation has proven to be very useful in the fight against the black economy and that the current limit of €2,500 for transactions between businessmen will be reduced to €1,000, remaining at €2,500 between individuals. It also indicates that in the case of individuals residing outside Spain, the limit is reduced from €15,000 to €10,000. On the other hand, the sanctioning regime is also modified, in order to adapt it to Law 39/2015, of October 1, on the Common Administrative Procedure of Public Administrations and Law 40/2015, of October 1, on the Legal Regime of the Public Sector, establishing a 50% reduction of the sanction if it is paid during the hearing process.

  • Measures to encourage voluntary compliance with tax obligations:

    • Exclusion of the surcharge for late submission for voluntary regularizations that occur as a result of a previous regularization by the Administration for the same tax concept and circumstances, but for other periods.

    • Modification of the method of calculating the surcharge for late submission in order to avoid the so-called “skip error”, establishing a system of increasing surcharges of 1% for each full month of delay without accruing late payment interest until twelve months have passed since the end of the period for submission or voluntary payment. From the day after the end of the twelve months, a 15% surcharge would be charged and late payment interest would begin to accrue.

    • Reduction of the penalties of Article 188 of the General Tax Law, in order to promote simplification in its application, voluntary payment and the reduction of litigation: In minutes with agreement, the reduction would increase from 50 to 65% and in minutes of conformity, in addition to the 30% reduction, an additional 40% is established, which would allow the reduction to rise to 58%.

      The Director of the Department of Financial and Tax Inspection points out that, in relation to this point, he wishes to highlight the elimination of the report of disagreement, a document that is currently absolutely redundant with the content of the report, since, although its objective is to ensure a better explanation of the same for a better defense of the taxpayer, today the report includes all the factual and legal arguments on which it is based, making an additional report unnecessary.

  • Modification of the list of tax havens: The Deputy Director General of International Taxation of the General Directorate of Taxes explained that these types of territories are now called “non-cooperative jurisdictions.” He added that Spain was committed to the OECD criteria for considering a country or territory as a “non-cooperative jurisdiction” and that these criteria were, basically:

    • territories with which there is no effective exchange of information on the owner of the assets or rights;

    • or where there is low or no taxation;

    • or facilitate the existence of offshore companies and harmful tax practices.

    Likewise, it was noted at the meeting that the list would be subject to constant review, taking into account the forecasts made by both the EU and the OECD .

  • Modifications affecting the taxes on assets, inheritance and donations and on property transfers and documented legal acts in relation to the value of real estate: It was noted that the “actual value” was replaced by the “value”, which is a fixed reference value that aims to approximate the market value. Mr. Javier Hurtado comments that this measure seeks to avoid the conflict arising from the valuation of real estate by providing a value that, approaching the market value, can be taken with certainty by the taxpayer.

  • Changes to the Value Added Tax regarding the subsidiary liability of the owners of tax warehouses for products included in the scope of the Hydrocarbon Tax: The Director of the Department of Financial and Tax Inspection points out that organized fraud in VAT in the marketing of hydrocarbons is a cause of concern for the Tax Administration. He added that, at the meeting, the Deputy Director General of Consumption Taxes of the General Directorate of Taxes explained that a "register of extractors" was being established, so that the owners of the deposits would be obliged to verify the registration of the extracting person or entity in the same when carrying out an operation.

• New tax figures: Financial Transactions Tax and Tax on Certain Digital Services. Mr. Javier Hurtado indicates that, although the Deputy Director General of Tax Technology has already presented the new developments in this area, he wishes to highlight some aspects of these two taxes, wrongly called rates (Tobin tax and Google tax):

  • Financial Transaction Tax: It was commented that the draft royal decree established a novel figure, the central securities depository, which would bear a significant part of the management burden and which would greatly simplify management for stock market operators, resulting in greater ease in voluntary compliance with obligations.

  • Tax on Certain Digital Services: Mr. Javier Hurtado points out that this tax represents a challenge for the Tax Agency, since, in addition to the fact that the taxable events fall within the scope of the information society, it also presents an extraterritorial component insofar as many of the multinationals obliged to comply with the obligation are domiciled outside our country.

• Evolution of the work of the OECD in relation to the challenges presented by the digitalization of the economy: The General Directorate of Taxes commented that an agreement was expected to be reached at the end of 2020, but that due to the health situation caused by COVID-19, as well as the disagreement between countries, it had been delayed until June 2021. It was also noted that a public consultation on the project was scheduled for December. The basic lines of the two pillars were also explained:

  • Pillar I: Its aim is to ensure that jurisdictions that provide the “market” participate in the distribution of taxation of multinationals, even if they do not have a physical presence in the country in question. This pillar consists of three elements:

    • Amount To: It is determined through a formula whose percentages are pending political decisions, although progress has been made on the determining elements of the tax base. A system of compensation for losses is also being considered, although the number of years of losses to be taken into account retroactively is still pending debate.

    • Amount B: additional fixed amount to amount A and accrued for the development of basic marketing activities in the market jurisdiction. Progress has been made in defining these activities and, although it is still pending debate, a positive and negative list has been drawn up. It seeks administrative simplification and to avoid conflicts between tax administrations. And it also seeks tax certainty for the taxpayer.

    • Conflict resolution mechanism: Its objective is to provide legal certainty to companies, while preventing and resolving disputes that may arise between different Administrations. In other words, it is about establishing a “one-stop shop” system, so that the multinational has a single interlocutor who can provide it with a definitive solution regarding its taxation in the different jurisdictions in which it is operating.

  • Pillar II: Its objective is to establish a minimum global tax standard so that, when income is resident in countries with very low taxation, it can be understood that the market country has a direct right to tax said income. This pillar is of a very technical nature and is the subject of minor controversy between countries.

• Tax measures adopted as a result of the health crisis caused by COVID-19:

  • It was noted that, once the suspension periods established by Royal Decree-Law 8/2020 had ended and their duration was extended by Royal Decree-Law 15/2020, the Tax Agency had gradually resumed its ordinary activity in all services, albeit with a series of limitations imposed by health recommendations. Specifically, the return of staff in person was limited so that it did not exceed 50% at any time, especially restrictive rules were established regarding the duration and capacity of meetings, rooms were prepared for meetings with taxpayers that met safety standards, etc.

  • It was reiterated that there had been two exceptions to the suspension of proceedings: those cases in which the taxpayer had requested continuation and those others from which favourable effects were derived for the taxpayer, such as tax refund procedures.

  • It was clarified that during the period of confinement all services had continued to work and efforts had been made to advance the development of techniques that, in some way, would preserve personal distance. The establishment of a new system of “virtual visits” regulated in articles 99 and 151 of the General Tax Law was thus explained, which could be used both for the provision of information and assistance services, as well as for the processing of inspection procedures.

• Consultations made within the framework of the Code of Good Tax Practices: In relation to this point, the Deputy Director General of Legal Management and Legal Assistance took the floor to point out that the working group discussed the evolution of this instrument in which, although the Department of Financial and Tax Inspection is the final issuer of the response, the collaboration of the Central Delegation of Large Taxpayers is of great importance. He added that the most relevant issues were the following:

  • Since 2015, the year in which this tool was implemented, 26 queries have been formulated, of which 13 were received in 2020. In other words, in the last year there has been a notable increase in the use of this mechanism by companies, motivated, in part, by the effort made by the Tax Agency to speed up responses.

  • Not all queries can be answered by the Tax Agency, as some fall on interpretative aspects of the law, which are the responsibility of the General Directorate of Taxes. Likewise, some questions may remain unanswered due to a lack of clarity in the presentation of the facts or because, for various reasons, a risky situation may arise in which it is not considered appropriate to make a statement.

  • The subjects consulted are very varied: movement of workers abroad, Corporate Tax, VAT , invoicing, deductions for R&D, etc.

  • Consultations under the Code of Good Tax Practices cannot replace the interpretative work assigned to other bodies, mainly the General Directorate of Taxes and the Central Economic Administrative Court (TEAC), and must deal with specific aspects of the application of the rule in certain factual circumstances.

  • Issuance of general criteria based on the consultations: As a general rule, the questions asked by companies are of a very varied nature and very specific, so it is difficult to extract from them a general criterion that could be useful to disseminate. However, it is possible that a single issue may be the subject of numerous consultations.

    To conclude the presentation on the activity of the working group for the Analysis of tax regulations and the reduction of conflicts, Mr. Javier Hurtado takes the floor again and, in relation to the queries made within the framework of the Code of Good Tax Practices, adds that, as the Central Delegate will surely comment, questions raised by companies are also answered from the Central Delegation itself.

Mr. Jesús Gascón thanks the representatives of the Department of Financial and Tax Inspection for their interventions and offers the floor to those present in case they wish to make any comments. Since none are made, he gives the floor to Ms. Pilar Jurado Borrego, Director of the Department of Customs and II. EE. , in order for her to comment on the activity of the Special Taxes working group during the second half of the year.

Ms. Pilar Jurado begins her presentation by pointing out that the Special Taxes working group met on October 28 and that, among the topics discussed, she would like to highlight the following:

• Main modifications introduced by the draft order establishing the structure and operation of the census of taxpayers for the Special Tax on Electricity and approving form 560:

  • New CIEs (Electricity Identification Codes) are established in order to detail the different reduction assumptions provided for in article 98 of Law 38/1992, of December 28, on Special Taxes, while providing information on supplies to beneficiaries of exemption and reduction of the tax base, since these tax benefits, as is known, are the subject of analysis by the European Union;

  • the conversion of the CIE will be carried out ex officio by the managing offices, as well as the issuance of the corresponding card;

  • The ministerial order will apply to accruals arising from October 1, 2021.

• Hydrocarbon tax warehouses: The draft Law on Fraud Prevention Measures introduces in its tenth article a modification of the concept of “tax deposit” in such a way that, in order to have such a condition, the physical storage of the products in the establishment will be required. That is to say, the storage capacity must reflect the operational flow of inputs and outputs of the product, and cannot be disproportionate in any case.

• Status of the revision of Directive 2003/1996 on the harmonisation of the taxation of energy products and electricity:

  • It is worth noting, first of all, the background to the proposal to amend this Directive promoted by the Commission in 2011, which established the tax rates on energy products based on their energy capacity and carbon dioxide emissions and which was shelved in 2015 when no agreement was reached between the different Member States.

  • On 11 September 2019, the European Commission published its assessment of the Directive, concluding that, although there is a lack of harmonisation between Member States at the level of taxation, implementation can nevertheless be approached in a more advantageous way at the European Union level than at the national level.

  • A public consultation on the Directive was held from 22 July to 14 October 2020, so that operators could transmit their assessments to the European Commission. In Spain, energy companies have expressed their preference for energy taxation to focus on carbon dioxide emissions and have requested a meeting with the General Directorate of Taxes in order to find out the position of the Spanish Administration. In this sense, the Directorate General of Taxes has considered the proposal to be appropriate, since when presenting and defending the Spanish position before the European Commission it is essential to know with certainty the approach of the private sector.

Mr. Jesús Gascón thanks Ms. Pilar Jurado for her intervention and, since none of those present wish to speak, he gives the floor to Mr. Manuel Trillo Álvarez, Central Delegate of Large Taxpayers, in order for him to comment on the activity of the Cooperative Relations working group.

The Central Delegate reports that the meeting of the Cooperative Relations working group took place on November 11 and that the agenda was set to be a session of debate and exchange of views. Thus, the issues addressed were the following:

• First, the quantitative perspectives derived from DAC 6 were addressed: The Tax Agency wanted to know what the impression of companies was regarding the volume of submissions that could be expected from January, especially considering that the first ones referred to events that occurred from the summer of 2018 onwards. The entities agreed that they had been analysing their operations based on DAC 6 for some time and that the conclusion was that the volume would be small. It was added that, in some cases, this analysis had acted as a prior filter and operations that raised excessive doubts from a tax perspective had been discarded, which the Tax Agency valued as a positive effect of this new instrument.

  The companies' requests were as follows:

  • Flexibility in the sanctioning regime: They were told that both in this and other occasions when new situations are addressed, the Tax Agency's actions are always prudent, especially taking into account that in this case all parties would have to move forward together and outline the clearly reportable situations and analyse other more complex ones.

  • Agility and speed in resolving queries by the Administration, especially in the initial stages: Companies noted that implementation had been very complex and requested to allow for early resolution of disputes and information about how the process was developing. In addition, it was commented that a high number of consultations was expected. For its part, the Tax Agency offered its collaboration to ensure that the level of compliance was acceptable.

• The second point discussed at the meeting was the new taxes on Financial Transactions and Certain Digital Services, respectively: It was reported that the organisation for management and control purposes would be simpler, a priori, in the first of the two taxes since, foreseeably, there would be a main interlocutor (the central securities depository) who would be based in the Central Delegation and that, in any case, a small number of interlocutors was expected. However, it was pointed out that the Tax on Certain Digital Services was more complex, not only because of its cross-border nature, but also because the three taxable events of this tax were not carried out exclusively by companies in the digital sector, but, as was made clear during the meeting, many companies, including large Spanish business groups, carried out some of the events taxed by the tax, although taking into account that to a large extent the taxable base would be zero, since these were generally free operations. It was noted that work was being done on compiling a census for our country and that, at the moment, it was unknown how many taxpayers there were outside our jurisdiction. In this regard, it was mentioned that a series of mechanisms were being studied in order to publicise abroad the entry into force of this tax in Spain. On the other hand, it was pointed out that the Tax Agency believed it was appropriate to centralise all tasks, both census and assistance and information, as well as those related to tax management and verification, but that the organisational scheme had not yet been decided, given the diverse case law that would foreseeably arise among taxpayers. However, the approach was to present a unified performance. Finally, it was stressed that this tax was highly technical and companies were asked to cooperate, given their knowledge of the digital economy, in order to be able to reasonably monitor this tax. The companies, for their part, highlighted the high complexity of the investigation and control functions, given the nature of the activities that make up this tax, and proposed the creation of a working group where experiences could be shared and exchanged. The Tax Agency thought that it might be appropriate and that it would have to wait and see how the implementation developed.

  To conclude this point, Mr. Manuel Trillo points out that he would like to thank the companies for their collaboration.

• Thirdly, the issue of consultations carried out within the framework of the Code of Good Tax Practices was addressed: The Central Delegate points out that the figures go beyond those offered by the representatives of the Department of Financial and Tax Inspection, precisely because of something that they have also pointed out and that is the fact that many of the queries are of a lesser complexity and do not require the formality that is necessary in other types of issues. He added that it is a mechanism that is working well and that the Tax Agency is trying to rise to the occasion, but that limitations must be taken into account not only in terms of material and human resources, but also legal ones. On the other hand, it indicates that companies requested greater publicity, to which it was replied that, indeed, the Tax Agency agreed but that, unfortunately, the health crisis had caused a considerable alteration in the organization's priorities and that, in addition, many of the queries referred to very specific issues, focused on very specific facts and that only those that were sufficiently generic could be of general interest and, duly reworked so as not to breach the duty of confidentiality, could be published. However, it was added that several general criteria were already prepared and were expected to be made public shortly.

• In the fourth point of the agenda, a general overview of the situation of prior valuation agreements and mutual agreement procedures as instruments to avoid conflict was presented: The Director of the Department of Financial and Tax Inspection pointed out that the National Office of International Taxation (ONFI), equipped with highly specialized personnel, was experiencing increasing activity, although not well known, except by those who were directly affected. He added that the three lines of action of the ONFI were, fundamentally, the following:

  • Collaboration with inspection teams, both from the Central Delegation and the territorial delegations, in matters of international taxation, with an average of more than 150 collaborations per year.

  • Advance Valuation Agreements (APAS): It was noted that the use of this instrument was also experiencing considerable growth, with an annual average of more than 140 requests for agreement, doubling the average of the previous four years.

  • Friendly procedures: It was reported that the annual average was more than 300 applications, having multiplied by 2.2 in the last two years compared to the average of the previous two years.

  In addition, it was noted that ONFI carried out other types of actions such as participation in working groups of the OECD , training in tax matters international and reporting.

  For his part, the Head of the ONFI explained the “360-degree strategy”: Based on the connection and integration of the aforementioned mechanisms, it would consist of carrying out an effective risk analysis in terms of transfer pricing, so that if it is decided that they are correct, they do not have to be repeated and the activity can be focused on other areas. Otherwise, a verification would be initiated and, if an adjustment was made as a result, a friendly procedure could be proposed.

  On the other hand, companies asked about the prevalence of APAS in relation to bilateral ones, to which the Head of the ONFI replied that the ideal scenario was that there would be more and more bilateral APAS, since they would represent a definitive solution, but that, although the applicant's wish would be to obtain a quick and agile response, the procedure is slower and the desirable number of bilateral or multilateral APAS would not yet be reached.

• The last point of the meeting addressed tax conflicts: It was reiterated that reducing this was one of the objectives included in the Strategic Plan of the Tax Agency 2020-2023 and that it was a matter of constant concern for the Administration. It was noted that various measures were being taken, including scrupulous compliance with established procedures and the use of the instruments mentioned above. It was also reiterated that in this matter, cooperation between all parties involved was necessary through existing preventive collaboration mechanisms and any others that may be proposed in the future. It was also noted that a reduction could already be seen and the following quantitative data were provided:

  • Of the twenty million administrative acts produced, 300,000 were appealed (1.1%).

  • In the area of the Central Delegation, 3 out of 4 minutes were signed in conformity or with agreement, so only 25% were appealed for reconsideration or directly through the economic-administrative route, where 66% of the resolutions were favorable to the Administration's criteria. In 33% of the cases that reached the National Court, it upheld the opinion of the Central Economic-Administrative Court, in another 33% it fully upheld the taxpayer's claims, and in the remainder, it issued a partial upholding. It was pointed out that in the latter 33% it had to be taken into account that, although in many cases an assessment was made as to the substance of the matter, the partial rejection was caused by the sanctions.

  In summary, it was added that, although most of the administrative acts did not present any type of conflict, the figures were cause for concern since they translated into 7,000 million euros suspended due to procedures in process, of which, 2,500 had been in this situation for 5 years or more, 2,500 between 3 and 5 years and the rest between 1 and 3 years. The Tax Agency also considered this situation to be inefficient and costly for both parties, as well as having an added cost in terms of uncertainty and insecurity.

  Companies commented that, although administrative cooperation was being reflected in various instruments, it was necessary to continue making progress through mechanisms such as the publication of general criteria, the impact of transparency reports on inspection actions and early knowledge of the reasons for regularisation in inspection procedures, as well as regulating progress in this area in some way.

  The Tax Agency replied that transparency reports were a very important element in preventing litigation and that many hours of work were therefore being devoted to their analysis, but that, nevertheless, they could not constitute a kind of seal in the face of future conflicts.

  As regards the publication of general criteria, it was acknowledged that there was an obligation on the part of the Tax Agency and it was reiterated that there were several in preparation that would be published shortly.

  On the other hand, as regards the early knowledge of the reasons for regularisation in the verification procedures, it was pointed out that the need for transparency regarding the core issues of the procedure had been conveyed to the inspection teams. It was added that both sides had their strategies, however, and the more transparent the proceedings were, the sooner early knowledge would be achieved.

  The companies also raised the need to hold a meeting on this issue of conflict, to which the Tax Agency commented that there was no problem in dedicating a meeting of the working group exclusively to this matter.

  Finally, it was pointed out that when the Tax Agency referred to the need to reduce litigation, it always did so with reference to and bearing in mind the current legal framework.

Mr. Jesús Gascón then thanks Mr. Manuel Trillo for his intervention and offers the floor to those present in case they wish to make any comments in relation to the working groups.

Firstly, Mr Javier Hurtado takes the floor to indicate that, in relation to the meeting of the Cooperative Relations working group, he would like to add three brief notes to complement the presentation of the Central Delegate, which, on the other hand, he considers to have been very complete:

• In relation to the new Tax on Certain Digital Services, it was mentioned that when talking about a cooperative relationship, the Tax Agency understood that the reporting by companies of any illicit conduct of which they were aware was also within this scope. It was noted that the entities participating in the Forum had a great knowledge of different markets, including in other territories, which were very important for the Administration and their collaboration was requested to identify this type of behaviour, which also had a strong component of unfair competition.

• Regarding the joint use of conflict reduction mechanisms such as APAS and mutual agreement procedures, it was indicated that, in relation to verification procedures, it would be desirable for inspection actions not to be the basis of the relationship between companies and the Administration, but it could be limited to maintaining a certain level of supervision. It was pointed out that this type of instrument could contribute in the medium term to smoothing the way in such a complicated and contentious issue as the distribution of tax bases in terms of transfer pricing. Hence the value of the “360-degree strategy” as a new form of relationship in which, based on verification, agreements would be reached that would result in the signing of an APA, which would constitute the framework that would allow controversies to be overcome in a certain matter. It was added that there were matters in which it would be possible to continue the debate, but that in an issue as complex as transfer pricing, it could constitute a way of bringing positions closer together and of pacifying such a controversial issue, where it was not easy to find out who was right and that, therefore, it would be of greater importance to reach an agreement on the valuation.

• Regarding the reduction of litigation, it was said that a determining factor was the speed of conflict resolution, since this would provide a criterion to follow and would result in the elimination of future disputes. It was added that working to streamline procedures and avoid delays was therefore also a way of reducing conflict in the medium and long term.

Next, Ms. Carmen Alonso Peña, representative of Banco de Santander and Collaborator of the Technical Secretariat of the Forum representing companies, took the floor. After commenting that the speakers had made a very comprehensive presentation of the issues discussed at the working group meetings, she pointed out that she wished to emphasise and reiterate the offer made by companies in the working group on Analysis of tax regulations and reduction of conflicts to convey to the Administration the vision of the business sector on issues such as the digitalisation of the economy and new tax figures, as well as to share their knowledge about possible future taxpayers who, not being residents in Spain or not operating directly in our country, would be forced to interact with the Spanish tax authorities due to regulatory changes.

On the other hand, he indicates that in relation to the “360-degree strategy” he questions how this new way of acting affects companies and how it links with the verification procedures in progress. For this reason, it is believed that it would be desirable to delve deeper into this topic, which is of great interest to companies, in order to find out what the ONFI could do within the framework of inspection activities. Likewise, it proposes that the National Office of International Taxation hold a presentation on this form of cooperative relationship that could be attended by a greater number of companies than those that attended the working group meeting and that it be possible to address how a verification would be linked in course with a subsequent APA and with other mechanisms, such as mutual agreement procedures, in order to improve the cooperative relationship in transfer pricing, as well as in other facets of international taxation.

Mr. Javier Hurtado answers that the Head of the National Office of International Taxation will be delighted to prepare the requested presentation and that, taking advantage of technological means, it could be directed to a greater number of companies that could connect. He also points out that a case could be shared in which, from the Administration's approach, all the collaboration instruments had been perfectly integrated, forming a coherent whole. He adds that, of course, the collaboration of companies is needed, since without it any approach would be incomplete.

Carmen Alonso points out that, in fact, it would be a matter of seeing, through a practical case, how the parties would approach each other and what the actions of each of the participants would be.

Mr. Jesús Gascón then stated that he agreed and that the use of audiovisual media allows for the participation of more people than in the case of face-to-face meetings.

Next, Mr. Guillermo Barros Gallego, Director of the Collection Department, intervenes and reports that, in terms of reducing conflicts, a series of actions are planned to be carried out in 2021 that will allow a drastic reduction, under certain conditions, of third-party claims with a better right.

The Director General thanked the speakers for their participation and moved on to the next item on the agenda.

4. Next call

Mr. Jesús Gascón stated that the intention was to maintain the semi-annual frequency of the meetings, noting in this regard that the next meeting would likely be held in June. He added that the format will depend on how the health crisis evolves.

5. Other considerations, requests and questions

The Director General then moved on to item 5 of the agenda, “Other considerations, requests and questions” and, since there were no new interventions, indicated that he would like to comment on a number of issues: Firstly, it indicates that at the next plenary session the Tax Agency wants to present its strategic planning for 2021, a year that, at least in its first half, is going to be complicated in terms of planning for all organizations. He added that, as stated in the Tax Agency's Strategic Plan 2020-2023, the evaluation of the results of the objectives plan, as well as the evolution of the strategic indicators, corresponding to the year 2020, will be published in 2021. As an example, he cites conflict as a strategic indicator and reiterates what was already discussed during the plenary session on the importance of this matter for the Tax Agency. Thus, it points out that the monitoring of conflicts is practically permanent and both the absolute (number of appeals or claims) and the relative (percentage that represents what is appealed with respect to the total number of administrative acts issued, as well as the percentages of total and partial approval or rejection) are analyzed. He also notes that other indicators closely related to conflict are also being analysed, such as late payment interest, since part of this is derived from resolutions in favour of the taxpayer, and the evolution of manageable debt. Mr. Jesús Gascón adds that, in this last concept, one of the factors to be taken into account is the debt that is suspended due to appeals and claims which, taking into account the actions of the Tax Agency as a whole, is above 12,000 million euros, a figure that is significant enough to be of special interest to the Administration. The Director General also comments that the Tax Agency is making an effort to investigate the causes of the conflict in depth and that all available mechanisms are being applied to reduce it, whether preventive or through the use of instruments to reach agreements, such as APAs, minutes of compliance, etc. He adds that, however, once the conflict has arisen, another critical point arises, which is the capacity of the courts to assume the resolution of the conflict within the period specified in the regulations, which, due to lack of resources, are difficult to comply with. He reports that, in this regard, the Tax Agency has been providing qualified and experienced staff to the economic-administrative courts, but that, for various reasons, they end up returning to their original position, so this reinforcement does not have a direct impact on the reduction of pending litigation. Thus, Mr. Jesús Gascón continues, along these lines, in the last two years new personnel from groups A1 and A2 have been assigned to the courts, who arrive with a good theoretical background, although with little practical knowledge of the application of the tax system, but who as speakers can provide a great service, always reviewed by those who have the responsibility for decision-making. Furthermore, this staff works with complete autonomy, without any dependence on the Tax Agency.

Mr. Jesús Gascón continued his presentation by reporting that the Tax Agency is participating in a technological development project with the General Directorate of Taxes and the economic-administrative courts, which, for budgetary reasons, have less autonomy when it comes to deciding their priorities. Mr. Jesús Gascón points out that the Tax Agency allocates a significant part of its budget to the Tax Information Technology Department (DIT), in order to ensure that it is very powerful. In this way, the DIT is in a position to support other bodies more efficiently than if they were to undertake the project of improving their computer systems on their own. The project will take time to develop, as its objective is to ensure that both the General Directorate of Taxes and the economic-administrative courts are on the same level as the Tax Agency in terms of implementing new technologies, which is so necessary to achieve a modern Administration while always guaranteeing its full autonomy.

The Director General of the Tax Agency continued his intervention by announcing that on November 5 he appeared before the Budget Committee of the Congress of Deputies, on the occasion of the presentation of the draft General State Budget Law for 2021. He added that, if anyone is interested, the appearance was recorded and is posted on the information channels normally used by Congress. He also said that during the meeting, the parliamentary groups raised various questions, some of them related to tax control of large companies. Mr. Jesús Gascón points out that the response was that in terms of fraud prevention, one could not be reductionist, since each segment of taxpayers presented a different problem and simplifications and generalizations could lead to erroneous interpretations. It was explained that large companies, attached to the Central Delegation of Large Taxpayers, were subject to almost permanent control, although, generally, a posteriori and covering several years, normally those not prescribed. It was made clear that this system posed certain problems, such as the fact that it consumed many highly qualified resources from both the Administration and companies. It was added that work was underway to find formulas to move towards a more preventive model, which would allow for the resolution of problems in advance. As an example, the impact that the disclosure of the criteria applied by the Administration could have on reducing conflicts was cited, so that companies would be aware of them and could, where appropriate, apply them, or the use of mechanisms such as APAs. Likewise, it was indicated that the control actions on taxpayers with a turnover of less than 6 million euros (SMEs, self-employed workers, etc.) had their own characteristics, based, above all, on prevention through the reinforcement of information services. and assistance to the taxpayer, such as the provision of tax data held by the Administration or greater standardization of record books for VAT purposes.

Finally, the Director General of the Tax Agency thanked all those present for their presence and closed the twenty-first plenary session of the Large Business Forum, saying goodbye until the next meeting.