Measures of good fiscal governance

• The Spanish Tax Agency will have at its disposal early information of companies on their presence in tax havens, fulfilment of ‘BEPS’, financing structure and tax risks which they consider most significant
• A catalogue is established of 11 indicators of good practices, so that, if the Agency considers that a company is not complying, it will be able to demand from the Board of Directors specific commitments in regard to the code
• This advance in the cooperative relationship will allow greater agility in tax control, which will reduce conflict and lead to the establishment of a standard of good governance for the companies involved

 

November 3, 2015.- The Plenary Session of the Large Business Tax Forum has agreed to introduce an annex to the Code of Good Tax Practices to strengthen the cooperative relationship between the Tax Agency and companies adhering to this instrument of good tax governance through a series of actions that will promote transparency and legal certainty in compliance with tax obligations.

The execution of these actions will be voluntary and open to all companies which subscribe to the Code, regardless of their size and whether or not they are represented in the Large Companies Forum, and they will serve as a reputational thermometer for the companies involved, which will also be able to benefit from greater agility in tax control and a consequent reduction of conflict in their relations with the Tax Administration. This contributes to the establishment of a standard of good governance for the companies involved

The annex to the code includes two essential sections, referring to the monitoring of compliance with the code and the reinforcement of good fiscal transparency practices. The first section sets out a catalogue of indicators of good practices which will make it possible to verify actual compliance with the code, both by the Tax Agency and by the companies subscribed to it.

Similarly, a specific procedure is defined for the permanent evaluation of the degree of compliance with the recommendations included in the Code of Good Practices, and the possibility is specified of making a record of the result of that evaluation for cases of both compliance and non-compliance with the Code.

At the same time, and with the purpose of reinforcing good tax practices in the business field, a list of activities and decisions is established in fiscal matters on which the companies associated with the Code will be able to report to the Tax Agency. Companies will be able to publicise this information in any way they may feel appropriate.

Indicators of compliance with the Code

The annex to the Code passed today includes a total of 22 indicators of compliance with the Code of Good Practices, eleven for the Tax Agency and another eleven for companies. Among the commitments established tor the Agency is that of accelerating the reporting of facts which may be subject to tax regularisation and the associated inspection action, establishing for this the suitable channels of communication with the company.

Similarly, the Agency undertakes to announce with sufficient advance notice the general administrative and jurisprudential criteria that guide its actions, to reduce as far as possible the conflicts deriving from the interpretation of the applicable regulations and to seek a reduction of the times of the inspection procedure.
In the case of companies, a practical indicator of compliance with the Code will be considered that the company's board of directors, or an equivalent body, has established or has been informed of the company's tax policies and has approved the operations and investments incurring special tax risk.

In addition, among other good practices, value will be given to the fact that the company's tax strategy is known by its top management, that the Tax Agency can verify the existence of internal rules in the company to mitigate tax risks, that no opaque structures are used for tax purposes and that the company collaborates in the detection of fraudulent fiscal practices in the markets in which it operates.

Cases of non-compliance

On the basis of the evaluation of these indicators, and in the event of confirming non-compliance by the company, the Tax Agency may report its evaluation to the company's board of directors, demanding specific commitments with the Code of Good Practices. In turn, the companies may demand the rectification of any practices which, in their view, constitute non-compliance with the Code by the Agency.

Previously, the Tax Agency and companies may leave a record of compliance or non-compliance with the Code in the field of the tax procedures themselves. In addition, the annex passed today enables the Agency to state in its Annual Activity Report the degree of compliance with the Code in general statistical terms.

Measures of fiscal transparency

The Annex to the code also stipulates that companies may place at the Tax Agency's disposal, preferably prior to filing the Corporation Tax return, a report providing information and explanations of a series of actions and decisions in tax matters.

This information will provide the Agency with early knowledge of companies' fiscal tax and tax risk management policies, which in turn will lead to a closer analysis in time of the inspections and regularisations which it is considered necessary to carry out. The aim of this streamlining process is to contribute to reducing conflicts and improving legal security.

The actions and decisions to be reported and explained to the Agency include presence in tax havens, compliance with the principles established in the OECD's 'BEPS Package' (‘Base Erosion and Profit Shifting’), the financing structure of business groups and the tax risks that the companies themselves consider most significant, in addition to information on the most important operations from the fiscal perspective approved by the board of directors.
 
This section also includes the explanation of the most significant corporate operations, the fiscal strategy of the group approved by its governing bodies and the catalogue of operations submitted to the company's board of directors. Companies which provide this information may publicise it in any manner they consider appropriate via their internal and external communication channels.