Strategizing Multinational Tax Risks

Spain has introduced new tax reforms that will be effective 1/1/2015.  A Deloitte International Tax Alert provides details of the new rules, with a link provided for reference:

Click to access dttl-tax-alert-spain-021214.pdf

Key Observations:

• OECD BEPS incentivized anti-hybrid rule; Disallowed deductions where no income is generated (Deduction/No-Inclusion), income will not be subject to tax, or income will be subject to a nominal tax rate of less than 10%.
• Impairment losses will be limited.
• The 30% corporate income tax rate will be reduced to 28% for 2015, and 25% in subsequent years.
• NOL’s will be available for indefinite carryover, although subject to taxable income limitations.
• The Statute of Limitations to review NOL’s is extended from 4 to 10 years.
• Participation exemption rules are revised, including a anti-hybrid measure to prevent a benefit where a dividend represents a deductible expense for the payer (in alignment with the EU Parent-Subsidiary Directive).
• New consolidated tax regimes are included, including horizontal tax consolidation.
• Goodwill and asset step-ups of a merger after 2014 will not be recognized for tax purposes.
• CFC rules are modified.  Spanish taxable income will include a CFC’s income from a transfer of assets or rights, or service income of the CFC where there are no material and personnel resources at the level of the CFC.  Additionally, certain passive income will be subject to the CFC rules.

The EU Parent-Subsidiary Directive (EU PSD) rules were anticipated to be effective by the end of 2015, whereas the anti-hybrid rules represent a proactive legislative response to the OECD BEPS initiatives for which this rule may not match the final guidelines that the OECD will provide in 2015.

Accordingly, the OECD BEPS Guidelines should be closely followed, knowing that proposed guidelines and actions are being legislatively enacted in various countries that provide a complex puzzle of different actions for identical transactions.