Spain: Impact of RD 1145/2011 on debt securities - update

Further to our Announcements A11117 and D11039, dated 26 August 2011, and our Taxflash T11045, dated 2 August 2011, we hereby inform you that, after a meeting involving the Asociación Española de Banca (AEB), Confederación de Cajas de Ahorros (CECA), the Bank of Spain, the Spanish Treasury and the Spanish Tax Authorities (STA) to discuss the impacts of Royal Decree 1145/2011 ("RD 1145/2011") on debt securities issued by Spanish issuers and to define the appropriate tax procedures, especially for private debt securities, no concrete decision was reached and no feedback is expected from the STA for the time being. The “old” procedure for private debt securities remains applicable.

We take this opportunity to summarise the tax procedures currently in place for the following categories of debt securities issued by Spanish issuers.

Public debt securities issued by the Spanish Treasury and by Autonomous Communities and paid by Bank of Spain

The procedures described below have been confirmed by the Bank of Spain.

The following beneficial owners are entitled to exemption from withholding tax:

• All non-Spanish residents; and
• Spanish legal entities subject to Spanish corporate tax.

Important note: All Spanish beneficial owners (legal entities and individuals) must disclose their identity and holdings as per the Spanish tax legislation requirements. It is the responsibility of Clearstream Banking¹ customers 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 Clearstream Banking nor its local depository has any direct or indirect liabilities towards the Spanish Tax Authorities in this regard.

Immediate refund

For obtaining an immediate full refund, the tax certificates provided in the past are no longer valid and must be replaced with the following tax documentation:

A One-Time Certificate for Spanish Government Bonds (attached below) is mandatory for interest paid as of 1 November 2011.

Important note: One single tax certificate for Spanish government bonds cannot be used for both CBL and CBF accounts. If you hold securities on both platforms, you must provide a One-Time Certificate for your accounts in Creation and another one for your accounts in CASCADE. Any tax certificate indicating the accounts in both platforms will be rejected.

The One-Time Certificate must be submitted before the first applicable interest payment date and must state that you hold the securities, either:

• Exclusively for yourself 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 you are or the beneficial owner is a Spanish bank, you must complete your company or beneficial owner’s Tax Identification Number (“CIF”) and authorise Clearstream Banking to forward your company’s or the beneficial owner’s details and holdings to the Spanish authorities for each interest payment to your account, in order to comply with the reporting obligations.

Or

• Exclusively on behalf of several beneficial owners, including yourself 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

• Exclusively on behalf of several beneficial owners, including yourself if applicable, being Spanish legal entities subject to Spanish corporate tax. 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 beneficial owners is required per interest payment, as explained below.

Or

• On behalf of beneficial owners being eligible for tax exemption as per 2 and 3 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, you are required to submit, before each interest payment, a Breakdown of Holdings and the List of Spanish Beneficial Owners as explained below.

A Breakdown of Holdings via SWIFT MT599 or CreationOnline free-format message must indicate:

• Your total holding;
• The total position held on behalf of beneficial owners that are non-residents of Spain or Spanish corporations;
• The total position held on behalf of Spanish individuals or by undisclosed beneficial owners.

All these declared positions must be accurate on the relevant record date (that is, one business day before payment date) at 19:00 CET. If there is a discrepancy between the declared positions and your total holding visible in Clearstream Banking’s books, your application for tax exemption will be rejected and, consequently, the maximum standard tax rate of 19% will be applied.

Furthermore, if no breakdown is received by Clearstream Banking by the prescribed deadline, your total holding will be considered as being held by Spanish individuals and, as a consequence, the maximum standard tax rate of 19% will be applied.

A List of Spanish Beneficial Owners must contain the ISIN, name of security, payment date, full name of the Spanish beneficial owner, full fiscal address, tax identification number (CIF/NIF), nominal amount, total gross coupon proceeds and total tax withheld.

The List of Spanish Beneficial Owners must be uploaded through the Clearstream website at:

https://www.clearstream.com/ci/dispatch/en/eforms/bol/_t_/eForms/beneficialOwnerList.do

The information included in the list must be accurate on the relevant record date at 19:00 CET.

Deadline for immediate refund

The deadline for the receipt of documents at Clearstream Banking is 10:00 CET one business day before the relevant interest payment date.

Important note: Any instruction, tax certification or amendments received after this deadline will have as result the rejection of your entire application for immediate refund 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 Clearstream Banking 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 within 25 calendar days after the applicable interest payment date.

Debt Securities issued by Autonomous Communities and paid by Bolsa de Barcelona, Bolsa de Bilbao

The Autonomous governments are still defining the tax procedures to be published. The “old” procedures currently in place remain applicable.

Private debt securities registered with Interbolsa

The STA, issuers and market participants are still analysing the impacts of the RD 1145/2011. The “old” procedure currently in place remains applicable.

Internationally issued debt securities (ISINs XS, US, DE)

The transition period explained in our Announcements A11117 and D11039, dated 26 August 2011, continues to apply. However, we have received confirmation from several Spanish issuers that interest from their securities will be paid gross without any certification requirements.

Based on such information, we will notify you before each applicable income event and confirm that no action is required from you and/or the final beneficial owner to receive full interest without deduction of withholding tax.

Income events where no confirmation of gross payment has been received from the issuers will be treated as taxable and you should continue to provide certification in line with the “old” procedure.

We highlight the fact that above tax procedures may be subject to further changes.
We continue to closely monitor the market and will update you when we have more information on further clarifications provided by the STA and/or changes to the tax procedures currently in place.

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 collectively 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) and 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).