Spain: Consolidated tax procedure for Spanish debt securities
16 April 2012
the new tax procedure explained below must be used in order to obtain tax exemption on interest from Spanish domestic public debt and corporate debt subject to Royal Decree 1145/2011 (RD 1145/2011) and held with Clearstream Banking1.
On 30 March 2012, in order to comply with the provisions of RD 1145/2011, the Tax Reclaim Procedure for Spanish Corporate Debt (AIAF market), issued under the scope of Law 19/2003 and Royal Decree 1065/2007, was published through Circular 1751.
Spanish debt securities not impacted by the consolidated tax procedure
Spanish corporate debt that is not within the scope of Law 19/2003 and Royal Decree 1065/2007 is not currently affected by the provisions of RD 1145/2011. Therefore, current documentation requirements remain applicable until further notice.
The following Spanish securities are not affected by the new consolidated tax procedure:
|Instrument type||Issue date of securities|
|Preferred shares||Before 6 July 2003|
|Debt instruments issued by SPVs||Before 6 July 2003|
|Debt instruments issued by listed financial entities||Before 6 July 2003|
|Debt instruments of listed non-financial entities||Before 20 November 2005|
For all the above, the disclosure of all beneficial owners applying for immediate/quick refund and a Certificate of Residence is required.
Furthermore, the new procedure does not apply to interest/redemption paid from the following types of security:
- Public debts issued by Institut Catala de Finances for which no confirmation has been received yet regarding the applicability of RD1145/2011;
- International bonds (that is, XS, US, DE ISINs) for which the transition period explained in our Announcement A11153 still applies; and
- Treasury Bills for which the procedure explained in our Announcement A11180 of 28 November 2011 remains unchanged.
Impact on customers
The new tax procedure replaces the procedures for public debt indicated in our previous Announcements2.
The new procedure applies to all interest from impacted securities as of 16 April 2012; customers should ignore the tax notifications already sent by CBF for payments on/after that date. New notifications including the new applicable procedure will be sent as soon as possible.
Eligibility for tax exemption
Beneficial owners who are non-Spanish residents or Spanish legal entities subject to domestic corporate tax (“Spanish corporations”) are entitled to exemption from withholding tax.
According to Spanish tax legislation, all Spanish beneficial owners (both corporations and individuals) must disclose their identity and holdings.
This disclosure must be submitted to CBF in the List of Spanish Entities and must include details as follows:
- For final beneficial owners:
If CBF’s direct customer is a Spanish resident and is the owner of the securities, or if all intermediaries between CBF and the final Spanish beneficial owner are non-Spanish financial institutions, the disclosure of the Spanish beneficial owner must be provided to CBF and the word “final beneficial owner” should be entered in the “Final BO or Intermediary” column.
- For intermediaries that are Spanish financial institutions:
The disclosure of the Spanish financial institution must be provided to CBF (instead of the final beneficial owner details) and the word “intermediary” should be entered in the “Final BO or Intermediary” column.
It is the responsibility of the CBF customer to comply with all legal and regulatory requirements imposed by Spanish tax law in respect to missing or incorrect information related to Spanish beneficial owners. Neither CBF nor its local depository has any direct or indirect liabilities towards the Spanish Tax Authorities in this regard.
The tax certificates provided in the past (Power of Attorney and Letter of Indemnity for Corporate Bonds subject to Law 19/2003) are no longer valid for obtaining an immediate full refund and must be replaced with the following required documentation:
1. One-Time Certificate for Domestic Spanish Debt Securities (attached below) - mandatory for interest paid as of 16 April 2012.
The new One-Time Certificate must be submitted for all categories of debt securities (private and public) falling under the application of RD 1145/2011.
The “One-Time Certificate for Spanish Government Bonds, Generalitat de Catalunya Bonds, Generalitat Valenciana Bonds and Basque Bonds” submitted in the past must also be replaced with the new One-Time Certificate for Domestic Spanish Debt Securities at the latest by Wednesday 2 May 2012. After this date, all One-time certificates submitted for public debt in the past will lose their validity.
The new One-Time Certificate must be submitted before the first applicable interest payment date and must state that the customer holds the securities, either:
|a.||Exclusively for itself or for one single beneficial owner eligible for tax exemption. By ticking the first box, tax exemption is applied by default at source on all further interest payments and no further certificates are required. If the CBF customer is a Spanish financial institution, the details of the CBF customer are required (even if the securities are held on behalf of a single beneficial owner that is a Spanish corporation). If the CBF customer is non-Spanish resident but holds the securities on behalf of a single beneficial owner that is a Spanish corporation, the final beneficial owner’s details must be provided. By ticking and completing the first section, the customer authorises CBF to forward its own or the beneficial owner’s details and holdings to the Spanish authorities for each interest payment to the customer’s account, in order to comply with the reporting obligations.|
|OR||b.||Exclusively on behalf of several beneficial owners, including itself if applicable, being non-residents of Spain for tax purposes. By ticking the second box, tax exemption is applied by default at source on all further interest payments and no further certificates are required.|
|OR||c.||Exclusively on behalf of several beneficial owners, including itself if applicable, being Spanish corporations. By ticking the third box, tax exemption is applied by default at source on all further interest payments. In addition to the One-Time Certificate, the List of Spanish Entities is required per interest payment, as explained below. Furthermore, if the CBF customer or another intermediary in the chain is a Spanish financial institution, the details of the CBF customer/Spanish intermediary are required (even if it holds the securities on behalf of beneficial owners who are Spanish corporations). If the CBF customer and the rest of intermediaries are non-Spanish residents but hold the securities on behalf of beneficial owners who are Spanish corporations, the details of the final beneficial owners must be provided in the List of Spanish Entities.|
|OR||d.||On behalf of beneficial owners who are eligible for tax exemption as per b. and c. above but also on behalf of beneficial owners that are Spanish individuals or are not willing to disclose their positions. In addition to the One-Time Certificate, the customer is required to submit, before each interest payment, a Breakdown of Holdings and the List of Spanish Entities as explained below. Furthermore, if the CBF customer or another intermediary in the chain is a Spanish financial institution, the details of the CBF customer/Spanish intermediary are required (even if it holds the securities on behalf of beneficial owners who are residents of Spain). If the CBF customer and the rest of intermediaries are non-Spanish residents but hold the securities on behalf of beneficial owners who are residents of Spain, the details of the final beneficial owners must be provided in the List of Spanish Entities.|
2. Breakdown of Holdings
A Breakdown of Holdings must be submitted, via SWIFT MT599 or CreationOnline free-format message, if the customer ticked the fourth box in the One-Time Certificate (that is, the securities are held on behalf of both exempt and non-exempt beneficial owners) and must indicate:
- The customer’s total holding;
- The total position held on behalf of beneficial owners who are non-residents of Spain or Spanish corporations;
- The total position held on behalf of Spanish individuals (a new requirement);
- The total position of undisclosed beneficial owners.
All these declared positions must be accurate at 19:00 CET on the relevant record date (that is, one business day before payment date). If there is a discrepancy between the declared positions and the customer’s total holding visible in CBF’s books, the customer’s application for tax exemption will be rejected and, consequently, the maximum standard tax rate of 21% will be applied.
Furthermore, if no Breakdown of Holdings is received by CBF by the prescribed deadline, the customer’s total holding will be considered as uncertified and, as a consequence, the maximum standard tax rate of 21% will be applied.
3. List of Spanish Entities
A List of Spanish Entities must contain, per entity, the ISIN, name of security, payment date, full name of the Spanish beneficial owner or of the Spanish intermediary, full fiscal address, tax identification number (CIF/NIF), status (corporation/individual – a new requirement), nominal amount, total gross coupon proceeds and total tax withheld and should specify whether the disclosed entity is the final beneficial owner or a Spanish intermediary.
If a Spanish intermediary holds Securities for both Spanish individuals and Spanish corporations, two lines must be completed under its name: the first for the cumulated taxable amount and the second for the cumulated tax exempt amount.
The information included in the List of Spanish Entities must be accurate at 19:00 CET on the relevant record date.
Deadlines for immediate refund
The deadlines for the receipt of the required tax documentation by CBF are as followss:
|Government bonds and public debt income paid by Bank of Spain:||At least one business day before the respective payment, by 10:00 CET;|
|Income processed by IBC:||At least one business day before the respective payment, by 10:00 CET.|
If any instruction, tax certification or amendments is received after these deadlines, the customer’s entire application for immediate refund will be rejected, with the possibility to be processed via the quick refund.
A quick refund of the full amount of withholding tax is available through CBF if the required tax information has not been provided before the exemption at source deadline. The same documents as for immediate refund must be submitted.
Deadlines for quick refund
The deadlines for the receipt of the required tax documentation by CBF are as follows:
|Government bonds and public debt income paid by Bank of Spain:||At the latest 25 calendar days (or the first business day before that if the 25th calendar day is not a business day) after the applicable interest payment date, by 10:00 CET;|
|Income processed by IBC:||At the latest four business days before the 10th calendar day of the month following the month when the interest payment took place.|
The One-Time Certificate for Spanish debt securities must be submitted (see the PDF file attachment).
For further information, please contact the Clearstream Banking Tax Help Desk on:
|Telephone:||+352-243-32835||+49-(0) 69-2 11-1 3821|
|Fax:||+352-243-632835||+49-(0) 69-2 11-61 3821|
or Clearstream Banking Customer Service or your Relationship Officer.
1. Clearstream Banking refers to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF).
2. D11039, dated 26 August 2011.