Frequently Asked Questions (HTML version)

Letter b) of article 3.1 of the Financial Transaction Tax Law provides that the following will be exempt from tax: “acquisitions derived from a public offer for the sale of shares as defined in article 35.1 of the revised text of the Securities Market Law, approved by Royal Legislative Decree 4/2015, of October 23, in their initial placement among investors” .

The reference to section 1 of article 35 of the consolidated text of the Securities Market Law is made for definition purposes, 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 on the terms of the offer and the securities offered, so that it allows an investor to decide to acquire or subscribe to 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 revised 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 does not apply to subsequent acquisitions of shares by employees, even if they originate from a remuneration 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 contain any provisions to cover market-making activities by clients of market members who use a direct electronic access service provided by the member. Rather, such clients are subject to control and supervision by the investment services company, a member of the market, which provides such service.

Accordingly, the exemption relating to market-making activities does not apply to clients of market members solely on the basis that they use a direct electronic market access service provided by the member.

In compliance with the requirements set forth in the second paragraph of letter g) of section 1 of article 3 of the Tax Law, the exemption includes purchases made by financial intermediaries to cover positions held as a result of the activity of “market making” in derivative instruments, including over-the-counter derivatives, the underlying assets of which are shares subject to the tax.

Acquisitions made by financial intermediaries corresponding to the exercise or liquidation of positions in derivatives for 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 taxpayer who acts on behalf of third parties, in addition to the factual assumptions that give rise to its application, the following information: the identification of the entities affected by the corporate 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 should 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 regulatory regulations. The competent authority will be the CNMV in the case of Spanish collective investment institutions.

The purpose of the purchaser's communication to the taxpayer of the factual situation determining the exemption and of the information provided for in section 2 of article 3 of the Tax Law is to inform the taxpayer of the existence of an exemption situation and to justify its application.

However, the absence of such communication will not prevent the application of the exemption by the taxpayer, who may use any means of proof admissible in law to prove the facts constituting the exemption.

Letter g) of article 3.1 of the Tax Law establishes with respect to the exemption provided for acquisitions made within the framework of market-making activities that, for these purposes, those activities carried out by an investment services company, a credit institution, or an equivalent entity from a third country, which are members of a trading centre or a market in a third country whose legal and supervisory framework the European Commission has declared equivalent, and which meet the rest of the requirements established in said provision, are considered as such activities.

In accordance with the above, the credit institution, investment services firm or equivalent entity from a third country must only be a member of a trading centre or a market in a third country whose legal and supervisory framework has been declared equivalent by the European Commission, without the securities whose acquisition gives rise to the right to apply the exemption for market making necessarily having to be traded on 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 Atomic Energy Community (Official Journal of the European Union of 31 January 2020), Article 126 of which provides for a transitional or implementation period, which ended on 31 December 2020. As of 1 January 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-making activities be carried out by an investment services firm, a credit institution, or an equivalent entity from a third country, which are members of a trading centre or a market in a third country whose legal and supervisory framework has been declared equivalent by the European Commission.

Consequently, until the European Commission adopts the corresponding equivalence decision, the mere condition of being a member of a UK market will not be sufficient to be able to apply the exemption provided for acquisitions made in the framework of market-making activities.

The first paragraph of letter i) of article 3.1 of the Tax Law establishes the exemption from tax for acquisitions to which the special regime for mergers, spin-offs, contributions of assets, exchange of securities and change of registered office of a European Company or a European Cooperative Company from one Member State to another of the European Union regulated in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Tax, is applicable.

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 classified as mergers, spin-offs, 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 Transaction Tax Law provides that the following will be exempt from tax: “acquisitions derived from a public offer for the sale of shares as defined in article 35.1 of the revised text of the Securities Market Law, approved by Royal Legislative Decree 4/2015, of October 23, in their 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 indicated in these FAQs, the definition contained in said provision will first be applied to determine whether the offer of securities can be considered as 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 on the terms of the offer and the securities being offered so as to allow an investor to decide to acquire or subscribe to said securities, will be considered as a public offer of securities.

Furthermore, it is a necessary requirement that the public offering for the sale of shares consists 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 on a regulated market, not having acquired the shares after the admission to trading of the securities.

For these purposes, the aforementioned exemption is not applicable to acquisitions resulting from a subsequent resale of the shares, even if such 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 offering for sale, the time element provided for in letter b) of article 2.1 of the Tax Law would not be met (the company would have no market capitalisation on 1 December of the year prior to the acquisition), so the acquisitions derived from that public offering for sale will not be subject to tax.

Letter h) of article 3.1 of the Financial Transactions Tax Law provides that the following will be exempt from tax: “acquisitions of shares between entities that form part of the same group in accordance with the terms of article 42 of the Commercial Code” .

According to this regulation, 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 Act and representing the share capital of companies of Spanish nationality, when it is carried out between entities that form 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 in the Tax, adding a 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 Societies or Voluntary Social Security Entities without profit motive.»

Also, in relation to the form of accreditation of the exemption, a 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 specificity in the scope of this exemption, it is necessary to define it precisely in accordance with an integrative interpretation, taking into account the legislative history, in particular the amendment that caused it, the justification of which takes as a reference the existing exemptions in the financial transaction tax of France and Italy, the scope of which is limited to social security instruments at the corporate level; the regulatory context in which this exemption is approved, which is none other than a regulation whose main purpose is to promote occupational pension plans; and finally, the principle of non-discrimination applicable in the field of Community law.

In accordance with the criteria set out, it must be understood that the exemption provided for in letter m) section 1 of article 3 of the Tax Law is applicable to the acquisition of shares subject to tax made by:

1. 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;
2. Mutual societies for social security that, in accordance with the provisions of article 43.1 of Law 20/2015, of July 14, on the regulation, supervision and solvency of insurance and reinsurance entities, act as an instrument of corporate social security; or
3. 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 noted that the requirement that mutual social welfare societies and voluntary social welfare entities be non-profit entities is already enforceable under the regulations applicable to them.

For the declaration of these acquisitions, key 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).