19 January 2012
International Tax Alert
Spain reduces its tax haven “blacklist” Get the world to go! You can access corporate income tax rates of over 65 countries for multiple years using your mobile device: • Type into your web browser: www.ey.mobi/ITS/rates
Summary The Spanish Government is putting significant efforts into expanding its tax treaty and tax information exchange agreement network, particularly with countries and territories included on the Spanish tax haven “blacklist.” By way of example, a tax treaty with Singapore will enter into effect on 1 January 2013. States that enter into a tax treaty or tax information exchange agreement are excluded from the Spanish tax haven “blacklist” and, consequently, from the restrictive provisions in Spanish tax legislation that apply to tax havens. Below is a review of recent developments on this matter and an update of the situation relating to the Spanish tax haven “blacklist.”
Detailed analysis Spanish domestic legislation provides a number of anti-avoidance rules for transactions with entities that reside in tax havens, ranging from disallowing Spanish participation exemption benefits for dividends or income from tax haven resident subsidiaries, to the need to evidence the effectiveness of services rendered by tax haven residents. Countries and territories that qualify as Spanish tax havens are those included on the tax haven “blacklist,” which was approved by article 1 of Royal Decree 1080/1991, of 5 July 1991. It is, however, provided that countries and territories are automatically excluded from the “blacklist” when they sign a tax exchange of Information agreement or a tax Treaty containing an exchange of information clause with Spain. The exclusion is effective on the date the agreement or treaty enters into force. Thirteen out of the forty-eight countries and territories included on the initial list have concluded a tax treaty or an exchange of information agreement with Spain and are consequently no longer deemed as tax havens for Spanish tax purposes (see chart on the next page).
Countries or Territories with Tax Treaty or EIA (no longer deemed tax havens)
(*) Barbados; Jamaica; Luxembourg;1 Malta; Panama; Singapore, Trinidad and Tobago; United Arab Emirates (**)
Andorra; Dutch Antilles;2 Aruba; Bahamas; San Marino
Countries or Territories with Tax (*) Hong-Kong Treaty or EIA signed but not in force (**) Bermuda, Cayman Islands, Cook Islands, Saint Lucia, and Saint Vincent and the Grenadines Countries or Territories still included on the Spanish tax haven “blacklist”
Anguilla; Antigua and Barbuda; Emirate of the State of Bahrain; Sultanate of Brunei; Cyprus;3 Dominique; Fiji; Gibraltar Grenada; Guernsey and Jersey (Channel Islands); Jordan; Lebanon; Liberia; Liechtenstein; Macao; Malvinas Islands; Isle of Man; Marian Islands; Mauritius; Monaco; Montserrat; Nauru Republic; The Sultanate of Oman; Solomon Islands; Seychelles; Turks and Caicos Islands; Vanuatu; British Virgin Islands; US Virgin Islands
Notes
(*) There is a tax treaty in place (**) There is a tax information exchange agreement in place 1.
Luxembourg was regarded as tax haven only with respect to companies referred to under paragraph 1 of the Tax Treaty for the Avoidance of Double Taxation Protocol, dated on June 3rd, 1986 (the so-called “1929 Holdings”)
2.
Curaçao, Saint Marteen, Bonaire, Saint Eustaquio and Saba
3.
Cyprus became a member of the EU on 1 May2004, but the tax treaty with Spain is still under negotiation. The Spanish tax authorities have recognized that the anti-tax haven provisions should not be automatically applied to Cyprus in connection with the participation exemption rules. A case-by-case analysis is required.
Spain has also signed tax treaties and tax exchange of information agreements with six other countries or territories that, however, are not yet effective. These countries or territories are, therefore, still considered as tax havens, but will leave the list once the relevant agreement or treaty is formally published in the Spanish Official Gazette. See the chart below for further reference of tax treaties and exchange of information agreements signed by Spain but not yet effective. The remaining twenty nine countries or territories which have not yet concluded a tax treaty or an
2
exchange of information agreement and continue to qualify as tax havens for Spanish tax purposes are also included in the below chart for ease of reference.
Conclusions and recommendations The reduction of the Spanish tax haven “blacklist” is an enhancement to the Spanish participation exemption regime, as gains and dividends from entities that reside in the countries or territories that no longer qualify as tax havens may now profit from the participation exemption benefits.
International Tax Alert
Multinationals with presence in jurisdictions that are removed from the “blacklist” are no longer subject to the Spanish tax haven anti-avoidance provisions and can therefore expect to receive a more beneficial tax treatment in Spain. It is advisable to review the date when exclusion from the “blacklist” is effective and to seek confirmation of the practical significance of the exclusion in a case-by-case basis.
For additional information with respect to this Alert, please contact the following: Ernst & Young Abogados, International Tax Services, Madrid • Laura Ezquerra +34 91 572 7570
[email protected] • Federico Linares +34 91 572 7482
[email protected] Ernst & Young LLP, Spanish Tax Desk, New York • Inigo Alonso Salcedo +1 212 773 8692
[email protected]
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