Spain: Consolidated tax procedure for Spanish debt securities

Effective

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.

Background

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:

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.

Important note:

The new procedure applies to all interest from impacted securities as of 16 April 2012; customers should ignore the tax notifications already sent by CBL 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.

Reporting requirements

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 CBL in the List of Spanish Entities and must include details as follows:

• For final beneficial owners:

If CBL’s direct customer is a Spanish resident and is the owner of the securities, or if all intermediaries between CBL and the final Spanish beneficial owner are non-Spanish financial institutions, the disclosure of the Spanish beneficial owner must be provided to CBL 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 CBL (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 CBL 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 CBL nor its local depository has any direct or indirect liabilities towards the Spanish Tax Authorities in this regard.

Immediate refund

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.

Important note:

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:

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 CBL’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 CBL 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.

Important note:

Due to the extremely short deadline, the List of Spanish Entities cannot currently be uploaded via the Clearstream website. Consequently, we attach below a zip file containing an Excel spreadsheet to be completed and submitted to CBL by the prescribed deadlines. As soon as the upload facility is available, we will inform you.

Deadlines for immediate refund

The deadlines for the receipt of the required tax documentation by CBL are different for different paying agents:

Public debt:

Corporate bonds:

Important note:

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.

Quick refund

A quick refund of the full amount of withholding tax is available through CBL 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 CBL are different for different paying agents:

Public debt:

Corporate bonds:

One-Time Certificate

The One-Time Certificate for Spanish debt securities must be submitted (see the PDF file attachment).

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

1. Clearstream Banking refers to Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
2. A11153 (17 October 2011), A11164 (28 October 2011), A11178 (21 November 2011) and A11196 (21 December 2011).