Our partners Natàlia Martí and Xavier Costa have collaborated in the guide "The International Comparative Legal Guide" writing the section related to Mergers and Acquisitions in Spain.

You can access the guide in the attached pdf.

The Wealth Tax may imply, in certain circumstances, a violation of the principle of economic capacity, recognized in article 31 of the Spanish Constitution because it could have confiscatory scope.

Our partners Manuel Silva and Jordi Guarch, together with the lawyer Susana Patricia Rodríguez, analyse in this report whether the Wealth Tax could violate or not the principle of economic capacity.

You can access the full report in the attached pdf (only available in Spanish).

Miquel Roca participates in this Decalogue about the protection of human rights in pandemics, which has been prepared by the Spanish Lawyers Foundation, taking part, specifically, in the Justice section.

You can access the full decalogue in the attached document.

On 23 October 2020, the Draft Law on measures to prevent and combat tax fraud was published in the Official Gazette of the Spanish Parliament, transposing Council Directive (EU) 2016/1164 of 12 July 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market, modifying various tax regulations and in matters concerning gambling regulations, hereinafter Draft Law on Measures to combat fraud.

Days later, on 30 October, the text of the National Draft Budget Law for 2021 was published, hereinafter the 2021 Draft Budget Law.

Although these are draft laws currently being processed in the Congress of Deputies (Lower House of Spanish Parliament) and therefore, we will have to wait for said laws and the final text thereof to be approved, and which may be amended, we believe that both draft laws contain relevant tax amendments that are worth knowing in order to be able to carry out prudent tax planning and, where applicable, anticipate decision-making regarding certain operations prior to their entry into force.

It should be emphasised that the series of amendments introduced by both regulations will entail an increase in the tax burden for individuals and legal entities alike. Therefore, knowledge of these regulations prior to their entry into force is essential in order to assess whether any planned decision or action can be brought forward or modified.

To make it easier to understand, we have grouped the new developments according to the tax they affect, without distinguishing their origin, i.e., whether they refer to the 2021 Draft Budget Law or to the Draft Law on Measures to combat fraud.

Likewise, and in order to facilitate reading by the recipients of our News Alerts, we have processed the amendments in three blocks, preparing a News Alert for each of them.

Thus, this block contains amendments relating to the General Tax Law and Law 7/2012 on the modification of tax and budgetary regulations and the adaptation of financial regulations for the intensification of actions in the prevention of and fight against fraud.

You can read the news alert in the attached document. 

On 23 October 2020, the Draft Law on measures to prevent and combat tax fraud was published in the Official Gazette of the Spanish Parliament, transposing Council Directive (EU) 2016/1164 of 12 July 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market, modifying various tax regulations and in matters concerning gambling regulations, hereinafter Draft Law on Measures to combat fraud.

Days later, on 30 October, the text of the National Draft Budget Law for 2021 was published, hereinafter the 2021 Draft Budget Law.

Although these are draft laws currently being processed in the Congress of Deputies (Lower House of Spanish Parliament) and therefore, we will have to wait for said laws and the final text thereof to be approved, and which may be amended, we believe that both draft laws contain relevant tax amendments that are worth knowing in order to be able to carry out prudent tax planning and, where applicable, anticipate decision-making regarding certain operations prior to their entry into force.

It should be emphasised that the series of amendments introduced by both regulations will entail an increase in the tax burden for individuals and legal entities alike. Therefore, knowledge of these regulations prior to their entry into force is essential in order to assess whether any planned decision or action can be brought forward or modified.

To make it easier to understand, we have grouped the new developments according to the tax they affect, without distinguishing their origin, i.e., whether they refer to the 2021 Draft Budget Law or to the Draft Law on Measures to combat fraud.

Likewise, and in order to facilitate reading by the recipients of our News Alerts, we have processed the amendments in three blocks, preparing a News Alert for each of them.

Therefore, this block of regulatory amendments mainly affects taxes levied on legal entities (Corporation Tax, Value Added Tax, Non-Resident Income Tax, Business Activities Tax, etc.)

You can read the alert in the attached document.

On 23 October 2020, the Draft Law on measures to prevent and combat tax fraud was published in the Official Gazette of the Spanish Parliament, transposing Council Directive (EU) 2016/1164 of 12 July 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market, modifying various tax regulations and in matters concerning gambling regulations, hereinafter Draft Law on Measures to combat fraud.

Days later, on 30 October, the text of the National Draft Budget Law for 2021 was published, hereinafter the 2021 Draft Budget Law.

Although these are draft laws currently being processed in the Congress of Deputies (Lower House of Spanish Parliament) and therefore, we will have to wait for said laws and the final text thereof to be approved, and which may be amended, we believe that both draft laws contain relevant tax amendments that are worth knowing in order to be able to carry out prudent tax planning and, where applicable, anticipate decision-making regarding certain operations prior to their entry into force.

It should be emphasised that the series of amendments introduced by both regulations will entail an increase in the tax burden for individuals and legal entities alike. Therefore, knowledge of these regulations prior to their entry into force is essential in order to assess whether any planned decision or action can be brought forward or modified.

To make it easier to understand, we have grouped the new developments according to the tax they affect, without distinguishing their origin, i.e., whether they refer to the Draft Budget Law or to the Draft Law on Measures to combat fraud.

Likewise, and in order to facilitate reading by the recipients of our News Alerts, we have processed the amendments in three blocks, preparing a News Alert for each of them.

You can read the alert in the attached document.

The Spanish National Securities Market Commission Circular 2/2020, of 28 October, on advertising of investment products and services (“Circular 2/2020”)

On 13 November 2020, the Spanish National Securities Market Commission (CNMV) Circular 2/2020 was published in the BOE (Boletín Oficial del Estado [Official State Gazette)], implementing Order EHA/1717/2010, of 11 June, on the regulation and control of advertising investment products and services (the “Order”), with respect to both the scope of application and the content and format that advertising messages must respect.

It should be noted that Circular 2/2020 will enter into force three months after its publication in the BOE (that is, on 13 February 2021), except with regard to the characteristics of the internal registration of advertising activities, which shall come into force six months after the publication by the Bank of Spain of the technical specifications provided for in the second final provision of the Bank of Spain’s Circular 4/2020, of 26 June, on the advertising of banking products and services.

1. Scope of Application of Circular 2/2020

Circular 2/2020 applies to any advertising activities aimed at investors or potential investors residing in Spain related to the offering of specific investment products or services (objective scope) carried out by the following entities (subjective scope):

• Objective scope: financial instruments, investment services and activities and auxiliary investment services, activities involving the management of CIS, private equity entities and securitisation trusts, structured deposits, Participatory Financing Platform (PFP) services and any other financial products, services or activities subject to the supervision of the CNMV.
   
• Subjective scope: investment services companies, credit institutions, companies managing collective investment institutions (SGIIC) and companies managing closed-ended collective investment undertakings (SGEIC), including Spanish branches of foreign entities or entities that operate in Spain with freedom to provide services or, in the case of EU entities, through an agent. Additionally, PFP, any party interested in public offerings for the acquisition of securities or public offerings for the sale or subscription of securities and any other entity that carries out advertising activities related to the offering of products or services referred to in the objective scope.

However, the following are expressly excluded from the scope of application of Circular 2/2020, since they are not considered advertising activities:

a) Corporateve advertising campaigns.

b) Documentation or information provided in presentations to analysts or institutional investors, conducted by representatives of entities, issuers or insurers during the placement period with the aim of establishing institutional investors’ interest in an offer.

c) Periodic publications issued by the analysts and experts defined in the Commission Delegated Regulation (EU) 2016/958 on financial instruments or services, including, among others, analysis reports and investment recommendations.

d) Pre-contractual and contractual information or information or warnings regarding the characteristics and risks of the products or services offered and provided to investors in compliance with reporting obligations, as well as information regarding the objective data of a financial instrument or explanatory information about the situation of the markets and the entity’s management decisions in a market context.

e) Documentation or information about investment strategies or investment ideas by an SGIIC, an SGEIC or an EU alternative funds manager or, on behalf of the latter, for potential professional investors domiciled or registered in the EU.

In any event, Circular 2/2020 prohibits any advertising activities aimed at retail investors or the general public relating to any product or service, when the sale or provision of such product or service is prohibited for this type of customer.

2. Principles and Criteria Applicable to the Advertising of Investment Products and Services

The information contained in commercial communications must be consistent with the informative contents, including warnings established by Law, or at the request of the CNMV.

Advertising must also comply with the following general principles regarding the content and format:

• Be clear, unbiased and not misleading, using simple language that is easy to understand.
• Refer to the product’s mandatory legal documentation, indicating where this can be obtained.
• Clearly identify that it is an advertising communication.
• Communicate the value or benefits of the product or service.
• Allow the advertising piece to be properly understood by the intended target audience.
• Prevent secondary messages from contradicting the content of the main message.
• Ensure that any relevant information or warnings about the product or service are appropriately highlighted.
• Not include limitations or exclusions of liability for the advertising content.

3. Commercial communication policy and internal advertising records

Entities that advertise their investment products and services must establish a commercial communication policy that includes appropriate internal procedures and controls to ensure compliance with the provisions of Circular 2/2020.

In particular, said policy, which must be reviewed periodically, must include a description of the advertising activities, the general principles and criteria set forth above, the functional areas responsible for the internal review of advertising pieces and a description of the internal procedures and controls in place for the protection of customers’ interests and the management of the risks derived from the advertising activity.

The body responsible for the approval of the commercial communication policy will be the governing body, which may approve a simplified policy in smaller entities with more limited advertising activities and which do not relate mainly to complex products.

Entities belonging to the same group may structure the commercial policy at a group level.

Entities shall be required to keep updated internal records of their advertising activities, which shall comply with the conditions of truthfulness, completeness, accessibility and traceability required to enable the CNMV to carry out its supervisory functions.

Each of the advertising campaigns shall be recorded separately by calendar years, identifying them by consecutive numbers and commercial name, and the information must be kept for a period of five years from the start of the campaign.

4. On the Supervisory Function of the CNMV

Advertising shall not, under any circumstances, require prior authorisation from the CNMV, with the CNMV having an ex-post supervisory function.

In this regard, the CNMV may request, at any time, all the specific information about the advertising campaigns in order to assess the degree of compliance with the provisions established in the Order and in Circular 2/2020, which must be addressed within a maximum period of three business days.

The CNMV may report any discrepancies identified in the advertising activities, and may even order the discontinuance or rectification thereof. If such order is issued, the entity will have a period of three business days to demonstrate its compliance with the requirements or object to the decision based on duly justified reasons.

The purpose of the Law is twofold. On the one hand, to facilitate the innovative process in order to improve financing opportunities, ensure the protection of consumers of financial services and guarantee financial stability and market integrity. On the other hand, to provide regulators and supervisors with greater knowledge of the developments and potential effects of digital transformation in the provision of financial services.

In addition to the regulatory sandbox, Law 7/2020 introduces the following new aspects of interest:

1. Application of the principle of proportionality in terms of the requirements for the development of a financial activity that are susceptible to consideration.
2. Possibility of engaging with supervisory authorities to raise questions relating a case of use of technology in financial services. Queries will be submitted by electronic means and shall be answered within two months, without the responses being binding.
3. Preparation of an annual report on digital transformation and the result of the tests.

In terms of the regulatory sandbox, the main aspects to be taken into account are outlined below:

1. What projects can access the regulatory sandbox?

Any technology-based innovation project applicable in the financial system, understood as one that may lead to new applications, processes, products or business models with an impact on financial markets, the provision of financial services and ancillary services or the performance of public functions in the financial field.

In any event, projects must be sufficiently advanced in order to be tested, which shall be deemed to apply if there is a prototype that offers at least the minimal functionality needed to verify its usefulness and thus enables its future feasibility, even if such functionality is incomplete with respect to subsequent versions thereof.

In addition, the project must provide a potential value or added value with respect to existing uses in at least one of the following aspects:

1. Facilitate regulatory compliance by improving or homogenising processes or other instruments;
2. Represent a potential benefit to users of financial services in terms of reducing costs, improving the quality or terms of access and availability of financial services, or increasing customer protection;
3. Increase the efficiency of entities or markets; or,
4. Provide mechanisms for improving the regulation or the implementation of financial supervision.

This pilot project will form the basis of the limited scope trials that will be conducted in the controlled testing environment, with or without users.

2. Who can apply to initiate a pilot project as an innovator?

Any individual or company, including technology companies, financial institutions, credit administrators, associations representing business interests, public or private research centres, and any other interested party.

3. How does one apply for access to the regulatory sandbox?

Applications must be submitted within thirty days of the application admission deadline which shall be established twice yearly. A standardised model, together with a supporting report, must be submitted through the Electronic Office of the General Secretariat of the Treasury and International Finance.

The application may also be submitted in English, however, the file shall always be processed in Spanish.

4. When will innovators know if a project has been accepted?

Upon completion of the pre-assessment, within 45-75 days from the aforementioned deadline, the list of accepted projects will be published together with the supervisory authority responsible for supervising it, which may be the Bank of Spain, the National Securities Market Commission or the Directorate General of Insurance and Pension Funds (or several of them), based on the field of activity of the pilot project.

5. What steps need to be followed in order to begin the tests?

The promoter must sign a test protocol with the designated competent authority. This protocol will establish the rules and conditions pursuant to which the tests shall be carried out.

If the test is with users, participants must sign a unique information document (which must be approved in advance by the supervisory authority). Users may withdraw from the test at any given time.

6. Who is responsible for any loss suffered by participants in the test?

The promoter is exclusively responsible. The authorities shall not, be liable in any case. Participants shall be entitled to compensation for any losses suffered pursuant to the provisions established in the protocol.

Accordingly, the promoter must provide financial guarantees to cover liability for loss or damages (e.g. insurance, bank guarantee or bond).

7. What happens if there is a breach by the Innovator during the tests?

If the promoter fails to comply with the provisions established in Law 7/2020 or in the protocol, or its duty of good faith, the authorities may decide to interrupt the tests and, if there has also been a breach of the guiding principles or disciplinary rules, the developer may also receive an administrative penalty.

8. What happens when the tests are completed?

The promoter must draw up a report assessing the results of the tests and the overall pilot project. Based on this report, the supervisory authority shall draw up its own document of conclusions regarding the development and result of the tests, which shall be published.

9. What are the implications of performing the tests in terms of regulatory authorisations?

The fact that a pilot project is accepted into the controlled testing environment does not confer any form of authorisation. It simply allows promoters to test their project with real users without having to obtain such authorisation while the tests are being conducted.

Upon completion of the pilot project or during its development, as provided in the protocol, the promoter may request authorisation to start the activity, if this has not already been obtained, or to extend it.

The advantage of participating in the regulatory sandbox is that supervisory authorities can reduce the authorisation procedure periods based on the knowledge acquired about the project.

10. Is the project’s confidentiality and industrial or intellectual property guaranteed?

The legal framework of the tests (both Law 7/2020 itself and the protocol) is intended to protect confidentiality, trade secrecy and intellectual property.

You can consult tax news Alert at the attached .pdf.

You can consult the news alert in the attached .pdf.