FAQ (HTML version)
Frequently asked questions about the Financial Transactions Tax in HTML version (12/19/23)
Exemptions
Letter b) of article 3.1 of the Financial Transactions Tax Law provides that “acquisitions derived from a public offer for sale of shares as defined in article 35.1 of the consolidated text” will be exempt from the tax. of the Securities Market Law, approved by Royal Legislative Decree 4/2015, of October 23, in its initial placement among investors” .
The reference to section 1 of article 35 of the consolidated text of the Securities Market Law is made for the purposes of definition, so that a public offer for sale (or subscription of securities) is considered in said section 1 as any communication to persons in any form or by any means that presents sufficient information about the terms of the offer and the securities offered, so as to allow an investor to decide to acquire or subscribe for these securities.
In light of the above, the exemption would also be applicable to the rest of the cases regulated in the second and third sections of article 35 of the consolidated text of the Securities Market Law.
After the publication of this frequently asked question, Law 5/2021, of April 12, which modifies the consolidated text of the Capital Companies Law, approved by Royal Legislative Decree 1/2010, of April 2, July, and other financial regulations, with regard to promoting long-term shareholder involvement in listed companies, has adapted the consolidated text of the Securities Market Law to Regulation (EU) No. 2017/1129 of the European Parliament and of the Council, of 14 June 2017, on the prospectus to be published in the event of a public offer or admission to trading of securities on a regulated market and repealing Directive 2003/71/EC.
This law rewords article 35 of the consolidated text of the Securities Market Law, which has been in force since May 3, 2021. From that date, the definition and assumptions contained in article 35 of the consolidated text of the Securities Market Law must be understood to be included in the aforementioned Regulation (EU) 2017/1129 of the European Parliament and of the Council, of June 14, 2017, which is directly applicable.
The aforementioned exemption is not applicable to subsequent acquisitions of shares by employees, even if they originate from a compensation plan of their company.
The tax base in this case will be determined in accordance with the provisions of article 5 of the Tax Law. The rule for determining the applicable tax base will depend on the method by which the employee acquires the shares.
The regulations governing securities markets do not establish any provisions that cover the performance of market creation activities by clients of market members who use a direct electronic access service provided by the member. Rather, said clients are subject to control and supervision by the investment services company, a member of the market, that provides said service.
Consequently, the exemption relating to market making activities does not apply to clients of market members simply because they use a direct electronic market access service provided by the member.
Complying with the requirements set forth in the second paragraph of letter g) of section 1 of article 3 of the Tax Law, the acquisitions made by financial intermediaries for the coverage of positions maintained as a result of the activity of “market creation” in derivative instruments, including over-the-counter instruments, whose underlying assets are shares subject to the tax.
Acquisitions made by financial intermediaries corresponding to the exercise or liquidation of positions in derivatives of which they are market makers and whose positions derive from their activity as such will also be exempt.
Letter e) of the second section of article 3 of the Tax Law provides with respect to the exemption included in letter i) of section 1 that the purchaser must communicate to the taxable person acting on behalf of third parties in addition to the factual assumptions that originate your application, the following information: the identification of the entities affected by the business restructuring process, or of the collective investment institutions involved in the merger or spin-off, together with the authorization of the operation by the corresponding competent authority.
It must be understood that the reference to authorization by the competent authority is limited to acquisitions arising from merger or spin-off operations of collective investment institutions or compartments or sub-funds of collective investment institutions carried out under the provisions of their corresponding regulations. regulatory. Said competent authority will be the CNMV in the case of Spanish collective investment institutions.
The purpose of the communication from the purchaser to the taxable person of the factual event determining the exemption and of the information provided for in section 2 of article 3 of the Tax Law is to inform the taxable person of the existence of an exemption case and justify your application.
However, the absence of said communication will not prevent the application of the exemption by the taxable person, who may use any means of proof admissible by law to prove the facts constituting it.
Letter g) of article 3.1 of the Tax Law establishes with respect to the exemption provided for acquisitions carried out within the framework of market creation activities that, for these purposes, those carried out by a service company are considered to be such activities. investment institution, a credit institution, or an equivalent entity of a third country, which are members of a trading venue or a market of a third country whose legal and supervisory framework the European Commission has declared equivalent, and that they meet the rest of the requirements established in said provision.
In accordance with the above, the credit institution, the investment firm or the equivalent entity of a third country must only be a member of a trading venue or a market of a third country whose legal and supervisory framework the Commission European Union has declared equivalent, without the securities whose acquisition gives rise to the right to the application of the market creation exemption necessarily have to be traded in the market in which said entity is a member.
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The United Kingdom ceased to be part of the European Union on 31 January 2020 and agreed with the European Union the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Energy Community Atomica (Official Journal of the European Union of January 31, 2020), whose article 126 establishes a transitional or execution period, which ended on December 31, 2020. As of January 1, 2021, the United Kingdom is a third country for all purposes.
Letter g) of section 1 of article 3 of the Tax Law establishes the requirement that market creation activities be carried out by an investment services company, a credit institution, or an equivalent entity from a third country, who are members of a trading venue or market in a third country whose legal and supervisory framework has been declared equivalent by the European Commission.
Consequently, until the corresponding equivalence decision is adopted by the European Commission, the mere condition of being a member of a United Kingdom market will not be sufficient to be able to apply the exemption provided for acquisitions made within the framework of the activities of market creation.
The first paragraph of letter i) of article 3.1 of the Tax Law establishes the tax exemption of acquisitions to which the Special Regime of mergers, divisions, contributions of assets, exchange of securities and change of registered office of a European Company or a European Cooperative Society from one Member State to another of the European Union regulated in Chapter VII of Title VII of Law 27/2014, of November 27 , Corporate Tax.
For the application of the aforementioned exemption, the effective application of the aforementioned special regime is not necessary. It will be sufficient that business restructuring operations, which can be carried out by both resident and non-resident entities in Spanish territory, can be framed in the cases of merger, spin-off, contribution of assets and exchange of securities defined in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Tax.
Letter b) of article 3.1 of the Financial Transactions Tax Law provides that “acquisitions derived from a public offer for sale of shares as defined in article 35.1 of the consolidated text” will be exempt from the tax. of the Securities Market Law, approved by Royal Legislative Decree 4/2015, of October 23, in its initial placement among investors” .
The reference to section 1 of article 35 of the consolidated text of the Securities Market Law must be understood as being made to article 2.d) of Regulation ( EU ) 2017/1129 of the European Parliament and of the Council, of June 14, 2017, on the prospectus that must be published in the event of a public offer or admission to trading of securities on a regulated market and repealing Directive 2003/71/ EC.
As has been pointed out in these frequently asked questions, first of all the definition contained in said provision will be applied to determine whether the offer of securities can be considered a public offer for sale (or subscription of securities), so that a communication to persons, in any form and by any means, that presents sufficient information about the terms of the offer and the securities being offered so as to allow an investor to decide to acquire or subscribe for said securities, will be considered a public offering of securities.
Furthermore, it is a necessary requirement that the public offer for the sale of shares consist of their initial placement among investors, which requires that the offeror be the owner of the shares prior to the admission to trading of the company's shares in a regulated market. , not having acquired the shares after the securities were admitted to trading.
For these purposes, the aforementioned exemption is not applicable to acquisitions resulting from a subsequent resale of the shares, even if said resale could be considered a public offering of securities.
Finally, as indicated in these frequently asked questions, it should be noted that in the case of shares of companies that are admitted to trading for the first time on a regulated market as a result of a public offer for sale, the element would not be met. temporary provision provided in letter b) of article 2.1 of the Tax Law (the company would lack market capitalization on December 1 of the year prior to the acquisition), so acquisitions derived from that public sale offer will not be subject to the tax.
Letter h) of article 3.1 of the Financial Transactions Tax Law provides that “acquisitions of shares between entities that are part of the same group under the terms of article 42 of the Commercial Code” will be exempt from the tax. ” .
From said regulation it is clear that the exemption is applicable to any acquisition for consideration of shares subject to tax, defined in the terms of article 92 of the consolidated text of the Capital Companies Law and representative of the share capital of companies of Spanish nationality, when it is carried out between entities that are part of the same group, and this regardless of the residence of these entities.
Law 12/2022, of June 30, regulating the promotion of employment pension plans, which modifies the consolidated text of the Law on the Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, has introduced a new exemption to the Tax, adding letter m) to section 1 of article 3 of Law 5/2020 with the following content:
"m) Acquisitions made by Employment Pension Funds and by Social Security Mutual Funds or non-profit Voluntary Social Security Entities."
Likewise, in relation to the form of accreditation of the exemption, letter i) has been added to section 2 of article 3, with the following wording:
"i) Regarding the exemption included in letter m) of section 1, the identification of the Employment Pension Fund, the Social Security Mutual Fund or the Voluntary Social Security Entity."
Given the lack of specification of the scope of application of this exemption, its precise delimitation is necessary in accordance with an integrative interpretation, which takes into account the legislative history, in particular the amendment for which it is the cause, in whose justification the exemptions are taken as a reference. existing in the financial transactions tax of France and Italy whose scope is limited to corporate social security instruments; the regulatory context in which this exemption is approved, which is none other than a norm whose main purpose is to promote employment pension plans; and finally, the principle of non-discrimination applicable in the field of Community law.
In coherence with the criteria set forth, it must be understood that the exemption provided for in letter m) section 1 of article 3 of the Tax Law is applicable to acquisitions of shares subject to tax carried out by:
- Employment pension funds regulated in the consolidated text of the Law on the Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29, as well as by employment pension funds regulated in the Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of occupational pension funds;
- Social security mutual societies that, in accordance with the provisions of article 43.1 of Law 20/2015, of July 14, on the organization, supervision and solvency of insurance and reinsurance entities, act as an instrument of corporate social security; or
- Voluntary social security entities of employment type, defined in article 7 of Law 5/2012, of February 23, on Voluntary Social Security Entities, of the Autonomous Community of the Basque Country;
Finally, it should be stressed that the requirement that social security mutual societies and voluntary social security entities be non-profit entities is already enforceable under the regulations that apply to them.
To declare these acquisitions, the code M will be used (position 272 record type 2 of the informative annex) and “3.1.M” will be indicated in the description field (positions 406-449 record type 2 of the informative annex).