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Tax system Updated: 30 May 2018

BBVA moves ahead of fiscal transparency regulations

The European Commission has presented today, January 28, a package of measures to fight tax fraud and evasion by companies in the EU.

European Commission

BBVA has moved ahead of European regulations in this area. On July 1, 2015, the Board of Directors of BBVA approved its fiscal strategy in accordance with the new requirements of the Corporations Act by incorporating in advance the goals and measures approved by BEPS in an attempt to set as an overriding aim the prevention and control of fiscal risks and the improvement of fiscal transparency and corporate social responsibility.

Moreover, since 2013, BBVA publishes every year the Total Tax Contribution analysis, following the proven methodology developed by PWC, which analyzes the Bank's tax contribution of both direct and third-party taxes collected. This pioneering report in Spain aims to boost corporate social responsibility by measuring the impact of BBVA's activity on the collaboration with the tax authorities. It should be stressed that this report somehow constitutes an advance of the obligations of reporting information broken down by countries set out in Act 10/2014, dated June 26, on the Regulation, Supervision and Solvency of Credit Institutions and Royal Decree 634/2015, which approves the new Corporation Tax Regulations.

What does the European Commission propose on fiscal transparency?

The program is part of the Action Plan presented by the European Commission on June 17, 2015 for a fairer and more efficient corporation tax in the EU based on the principle that all companies must pay taxes wherever they make their profits.

The measures presented follow the OECD's recommendations for avoiding the erosion of the tax bases and the transfer of profits (BEPS), as well as in the area of fiscal transparency and exchange of information. The measures include two specific legislative proposals, a recommendation and a communication:

- A proposed directive with measures to prevent practices of tax fraud and fiscal engineering that affect the operation of the internal market. It would basically address six points: the limitation of the deductibility of financial expenses, the introduction of an exit tax for latent earnings in the event of changing residence or the location of the good, hybrid instruments, a general anti-abuse clause, effective taxation of the dividends that are repatriated using switch-over clauses and international fiscal transparency.

- A recommendation for Member States to review their double taxation agreements, introducing measures to prevent their abusive use (treaty shopping).

- A proposal for reviewing the Administrative Cooperation Directive by implementing the obligation for multinational companies operating in the European Union to submit a country-by-country report, reflecting the profits obtained and the taxes paid in each jurisdiction, that will be exchanged by the tax authorities of the 28 Member States.

- And a series of measures for promoting good international fiscal governance.

The proposal relating to the implementation of the common, consolidated, corporation tax base (BICCIS) as a comprehensive solution for reforming the Corporation Tax is postponed until the end of 2016.

These four measures aim to incorporate into European law what are nothing more than mere recommendations with a regulatory effectiveness that depends on the good will of the States (or softlaw). We should remember that the OECD has developed since 2013 an Action Plan to address the erosion of the tax bases of many States and the shifting of profits to jurisdictions with little or no taxation. 15 measures were approved on October 5, 2015 for the development of the BEPS Plan (Base Erosion and Profit Shifting) with the aim of fighting the problem of tax evasion, harmful fiscal practices and aggressive fiscal engineering by multinational companies.

This initiative by the OECD has had a huge impact and has changed the focus for tackling international fiscal relations.

Specifically, the Spanish government signed an agreement yesterday whereby it undertakes, along with another 30 OECD jurisdictions, to exchange information “country by country”, an aspect that was envisaged in the OECD's recommendations and is now also announced in the European Union. In fact, Spain has already incorporated this obligation for multinational companies through the Corporation Tax Regulations, which will become effective starting in 2016.