Clearstream Banking¹ would like to remind customers that the Spanish Financial Transaction Tax (FTT) Law 5/2020 of 15 October 2020 entered into force on 16 January 2021.

The information below complements our Announcement C20064 and provides additional clarifications that will enable Clearstream Banking customers to report both taxable and exempted acquisitions and to fulfil their payment obligations towards the Spanish Tax Authorities.

Introduction

The Spanish FTT is an indirect tax on acquisitions of the shares of large listed Spanish companies, which applies independent of the residence of the purchaser participating in the transaction or the place where the acquisition takes place.

Impacted transactions and securities

The Spanish FTT is applicable on the acquisitions of financial instruments traded on a regulated market issued by a Spanish entity with a market capitalisation of more than EUR 1 billion on 1 of the previous year. Only acquisitions are taxed, while sales are not in the scope. The list of Spanish companies with a market capitalisation value on 1 December of each year greater than EUR 1 billion will be published before 31 December of the same year in the electronic headquarters of the State Tax Administration Agency (AEAT).

The SFTT concerns shares as defined in Article 92 of the Capital Corporation Law:

• In-scope examples: shares, depositary certificates, bonds exchangeable or convertible into shares (only at conversion);
• Out-of-scope examples: debt instruments, units of Collective Investment Vehicles, units in Exchange-Traded Funds, derivatives, voting rights.

Derivatives are not themselves in the scope of the Spanish FTT. However, the physical settlement of a derivative over in-scope shares is regarded as a taxable acquisition.

Exemptions

The numerous exemptions provided by the law can be summarised as follows:

Primary market and issues

• Issuance of shares: Acquisition during the primary issuance;
• Initial Public Offerings: Acquisitions from initial public offerings (IPOs);
• Instrumental acquisitions: Instrumental acquisitions related to IPOs and primary issuance of shares. These acquisitions are finalised before the above, with the aim of distribution of the shares to final investors;
• Stabilisation agreements: Acquisitions by financial intermediaries aiming to stabilise the prices, as part of an agreement, in the context of admission of shares to the stock market.

Appropriate functioning of secondary market

• Purchase or loan by CCP or CSD: Acquisitions deriving from purchase or loan transactions by a central counterparties (CCP) or a central securities depository (CSD);
• Liquidity agreements: Purchase by financial intermediaries as liquidity suppliers;
• Market Making: Acquisitions performed during market-making activities

Others

• Intragroup transaction: Purchase of shares between entities of the same group on the terms of article 42 of the Commercial Code. Specifically, the acquisition of own shares or shares of the parent company of the group, made in the context of a repurchase program with the sole purpose of: decreasing the share capital of the issuer, complying with obligations inherent to convertible financial instruments or complying of obligations derived from stock options or share plans of employees or directors of the group.
• Some business restructuring transactions: Purchase qualified for the special tax regime mentioned in Corporate Income Tax Law 27/2014 for mergers, spinoffs, contributions of assets, exchanges of securities and change of registered office; Purchase as a result of merger or spin-off transactions involving CIVs, or compartments or sub-funds;
• Securities financing: Repurchase, lending & borrowing, buy-sell back & sell-buy back, margin lending;
• Collateral transactions: Collateral transactions involving change of title;
• Resolution measures: Purchase as a result of the application of resolution measures adopted by the Single Resolution Board.

Tax base and Tax due date

The tax base comprises the amount of the consideration of the transactions subject to the tax, not including:

• Transaction costs derived from the prices of market infrastructures;
• Intermediation trading fees;
• Other expenses linked to the transaction.

If the amount of the transaction price is not mentioned, the tax base will be the value corresponding to the closing value on the most relevant regulated market, on the last trading day prior to that of the transaction.

However, the following special rules are established to settle the tax base when the acquisition derives from:

• Convertible or exchangeable bonds or other marketable securities, the tax base will be the amount mentioned in the document of their issue;
• The execution or settlement of options or other derivative financial instruments that give a right to acquire or transfer the taxable securities, the tax base will be the strike price mentioned in the contract;
• Forward transactions, the tax base will be the agreed price, however, if the derivative is traded on a regulated market it will be the delivery price at which such acquisition must be made on maturity;
• The settlement of financial contracts the tax base will be the value corresponding to the closing price of the most relevant regulated market on the last trading day of the transaction.

If acquisitions and transfers of the same taxable value are made in the same day, ordered and executed by the same taxable person, for the same purchaser and which are also settled on the same date, the tax base for such acquisitions shall be calculated by multiplying the positive difference resulting from subtracting the number of securities acquired from those transferred on the same day, by the quotient resulting from dividing the sum of the consideration for the said acquisitions by the number of securities acquired.

The tax is occurring when the registration of the securities is made for the purchaser in their account or register, either with an entity providing custody service or in the system of a CSD.

Deadlines and postponement

Spain has postponed the deadlines for filing the FTT returns, as well as for payment of the relevant taxes.

The filing of the FTT return and payment of the relevant tax is required during the period between the 10th and 20th day of the month following the monthly settlement period. The deadline for filing the return and paying the tax for January and February 2021 has been postponed until the period for filing the return and paying the tax for March 2021, which means the period between 10 and 20 April 2021.

Taxpayers and taxable persons

The taxpayer is the acquirer of the securities. The taxable person is the entity obliged to file the relevant tax return and pay the FTT due vis-à-vis the AEAT.

The taxable person is the Investment Service Firm (ISF) or credit institution making the acquisition on its own account, regardless of the establishment country.

Where the acquisition is not made by an ISF or credit institution acting on its own account, the taxable persons, as substitutes for the taxpayer, will be the following entities:

• Acquisitions in a trading venue, the taxable person will be the market member which executes the purchase order. However, if one or more financial intermediaries are involved in transmitting the order to the market member on behalf of the purchaser, the taxable person will be the entity which receives the order directly from the purchaser;
• If the acquisition is executed outside a trading venue within the scope of the activity of a systematic internaliser, the taxable person will be the systematic internaliser itself. However, if one or more financial intermediaries are involved acting on behalf of the purchaser, the taxable person will be the entity which receives the order directly from the purchaser;
• If the acquisition is executed outside a trading venue and outside the activity of a systematic internaliser, the taxable person will be the financial intermediary which receives the order from the purchaser of the securities or delivers them to the latter by virtue of the execution or settlement of a financial instrument or contract;
• If the acquisition is executed outside a trading venue and none of the previous persons or entities are involved, the taxable person will be the entity providing the securities custody service on behalf of the acquirer. For these purposes, the acquirer shall inform the entity providing the custody service of the circumstances which determine the obligation to pay the tax and its quantification.

The purchaser of the securities who has communicated to the taxpayer wrong or inaccurate information determining the improper application of the exemptions provided for, or a lower tax base resulting from the incorrect application of the special rules for determining the tax base, shall be jointly and severally liable for the tax debt. The liability will extend to the tax debt arising from the lack of wrong or inaccurate communication or disclosure.

The FTT will have to be assessed and paid by taxable persons on a monthly basis.

Tax rate

The tax rate is set at 0.2 percent.

Submission and payment obligation

The taxable persons must submit and pay taxes through a CSD based in Spain under the following circumstances:

• Where the purchase of securities is recorded in the accounts linked to a registration system operated by a CSD based in Spanish territory:
  • Where taxable persons, whether acting on their own account or on behalf of third parties, have an account in the CSD registry established in Spanish territory or have an account in the second-tier registers of any of the participants in that CSD;
  • If a taxable person is not covered by the above, it shall choose a participant in the CSD for the purpose of filing information and paying the tax debt. Such participant shall be the institution whose accounts in the CSD are part of the chain of custody of the securities subject to acquisition.
• If the securities are recorded in the accounts of different participants, the taxable person can choose all or one of those participant;
• If the securities are in the accounts of a CSD established outside Spain, the taxable persons may choose to submit and enter self-assessment of the tax through a CSD established in Spanish territory in the following cases:
  • Partnership agreement between a CSD established in Spanish territory and a CSD established outside Spanish territory is applicable;
  • Where there is no partnership agreement as referred above, when the CSD established outside Spanish territory is included in the third party account of a participating institution in a CSD established in Spanish territory designated by the issuing institution to keep the book-entry register of the securities, and there is a prior agreement for the submission and payment of self-assessments of the tax through the CSD established in Spanish territory concluded between the CSD established outside Spanish territory and the aforementioned participant. The designated participant must be the one in which the CSD established outside Spanish territory holds the account;
  • When the taxable person has concluded an agreement with a participant in a CSD established in Spanish territory to file and pay the self-assessments on his behalf.
• Taxable persons who are not participants in the CSD shall pay the amount of the tax debt to the participant in whose second-tier register they have an account or to which they have designated, prior to the start of the deadline for the submission of the self-settlement and tax revenue. The tax debt may not be deferred or paid in instalments and the period for payment shall coincide with the calendar month;
• The CSD must submit a self-assessment of the tax within the period between the 10^th and 12^th day of the month following the corresponding monthly settlement period, on behalf of each taxable person who made the notification and payment;
• If the taxable person does not have a tax identification number (TIN), the self-assessment will include the individual identification code assigned to him by the tax authorities for the sole purpose of filing the self-assessment, and the date on which the taxable person has communicated the information to the CSD and on which the amount of the tax debt has been paid to the participant. For this purpose, the participant shall inform the CSD of the dates mentioned above at the time that it reports the information;
• In cases where a CSD established in Spain is not responsible for submitting and paying the self- assessment in the name and on behalf of the taxable person, the taxable person must submit a self-assessment of the tax and pay the tax debt in the manner determined by the Minister of Finance within the 10^th and 12^th day of the month following the corresponding monthly settlement period.

Information to be provided by the taxable person

In cases where a CSD established in Spain is responsible for submitting and paying the self-assessment, the taxable person will provide the CSD, either directly, if it is a participant, or through the participant in whose second-tier register they have an account or have designated, with the information regarding the acquisitions subject to the tax that they have made, before the start of the period for filing the self-assessment and paying the tax.

The taxable persons must submit the following information for each transaction regardless it is not exempt or exempt:

• Name and surname or company name or full name, tax ID number, if available, and LEI code or, failing that, BIC (provide the BIC declaring entity as the BIC of CBF participant), and tax residence of the taxable person. Additionally, if the taxable person does not have a tax identification number, the date of incorporation must be submitted if the taxable person is an entity, and the date of birth if the taxable person is an individual; in both cases, the foreign tax identification number must also be submitted;

• Settlement period and year referred to;

• Declaration reference in the format /xxxxx/yyyyyy, where xxxxx is the CBL account number where the customer will be debited for the Tax amount declared and the yyyyy is the customer reference which must be unique (no 2 tax declarations can share the same reference);
• Case where the taxable person presents the self-assessment through CSD;
• Indication whether the taxable person acts on his own account or on behalf of others in the acquisition;
• Determination of whether the transaction is subject and not exempt or subject and exempt;
• Number of securities purchased, their ISIN code and the tax identification number or, failing that, the LEI code of the issuer of the securities. If acquisitions and transfers of the same taxable value, ordered or executed by the same taxable person, are made on the same day in respect of the same purchaser and are also settled on the same date; These data shall refer to securities acquired net and shall also indicate the date of execution of the transactions;
• Settlement date or for transactions outside a trading venue, the date of the registration entry;
• For subject and non-exempt transactions, the rule for determining the applicable tax base;
• Tax base of the subject and non-exempt acquisition, and for cases in which the tax base of the acquisition is calculated in accordance with Article 5(3) of the Tax Law, indication of the number of securities acquired and sold and the total consideration for the corresponding acquisitions;
• For each exempt acquisition, the amount of the acquisition and the applicable exemption case(s);
• Tax due for the transaction.

Declaration processing and communications media

Customers will have the possibility to send a monthly declaration before the deadline and validation checks will be performed by Clearstream Banking. Please note that neither the content nor the accuracy will be assessed.

Each valid declaration will be immediately released to Iberclear who, in turn, will report to Clearstream Banking the acceptance or rejection of the declaration. Any tax declaration rejected by Iberclear will have to be re-submitted to Clearstream Banking.

In order to submit FTT declarations in format required by Iberclear, customers will have the choice to upload their declaration through Xact Web Portal or Xact File Transfer.

Further information on the format, the uploading channels and access to the feedbacks from Iberclear will be publish with a new announcement in due course.

Role of Clearstream Banking

In general, the payment and reporting of the FTT will be done via Iberclear, as a CSD, and through its participants. To this extent, the taxable person should provide the participants with the information required to file the relevant tax return and with the amount of the FTT due. In turn, this information and the amount of the tax will be subsequently provided to Iberclear, which will file the tax return on behalf of the taxable person and pay the FTT due.

Where Clearstream Banking AG (CBF), in its role as participant of Iberclear, is not the taxable person of a transaction, taxable persons might in certain conditions appoint CBF for the payment and the reporting upon providing the relevant information and tax due. CBF, in turn, will provide the information to Iberclear, which will file the relevant FTT returns and pay the tax due on behalf of the taxable person. This will not trigger any specific tax liability for CBF.

In the very rare case that Clearstream Banking is the taxable person to a transaction, the acquirer of the shares must inform Clearstream Banking of the circumstances that determine the obligation to pay the tax and its quantification. Clearstream Banking will provide Iberclear with the information and the tax amount required for the latter to fulfil the tax obligations on its behalf. The acquirer of the securities who has not made the notification referred to or who has made it in an erroneous or inaccurate manner, shall be jointly and severally liable. Liability shall extend to the tax liability arising from failure to report or erroneous or inaccurate reporting.

Note: This Announcement as well as the attached reporting template are provided for information purposes only and do not aim to give any legal or tax advice. Clearstream Banking strongly recommends that customers assess whether and how their business is impacted by the new Spanish FTT. The reporting template shared aims to give only an overview of the information to be filed to the Spanish Tax authorities and is subject to changes. If any, an updated version will be shared with a new announcement.

Clearstream Banking therefore makes no guarantees, representations or warranties and accepts no responsibility or liability whatsoever as to the veracity, accuracy or completeness of these documents and under no circumstances will be liable for any loss or damage caused by reliance on any opinion, advice, statement made or any information provided in this document.

It is the responsibility of the Clearstream Banking customer to fulfil all requirements and obligations that result from the introduction of the Spanish FTT and customers acting on behalf of their clients should analyse whether and how to support the processing of the FTT for their clients.

In order to comply with all the requirements of the new law, customers are requested, before instructing an actual transaction, to secure the advice and guidance of a professional tax advisor who is familiar with the relevant facts.

Further information

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.

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1. Cearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.