Spain 2019 9264622861, 9789264622869

Table of contents :
Table of contents
Reader’s guide
Abbreviations and acronyms
Executive summary
Overview of Spain
Part A: Availability of information
A.1. Legal and beneficial ownership and identity information
A.2. Accounting records
A.3. Banking information
Part B: Access to information
B.1. Competent authority’s ability to obtain and provide information
B.2. Notification requirements, rights, and safeguards
Part C: Exchanging information
C.1. Exchange of information mechanisms
C.2. Exchange of information mechanisms with all relevant partners
C.3. Confidentiality
C.4. Rights and safeguards of taxpayers and third parties
C.5. Requesting and providing information in an effective manner
Annex 1: List of in-text recommendations
Annex 2: List of Spain’s EOI mechanisms
Annex 3: Methodology for the review
Annex 4: Jurisdiction’s response to the review report

Citation preview

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report on the Exchange of Information on Request

SPAIN

2019 (Second Round)

Global Forum on Transparency and Exchange of Information for Tax Purposes: Spain 2019 (Second Round) PEER REVIEW REPORT ON THE EXCHANGE OF INFORMATION ON REQUEST

March 2019 (reflecting the legal and regulatory framework as at December 2018)

This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2019), Global Forum on Transparency and Exchange of Information for Tax Purposes: Spain 2019 (Second Round): Peer Review Report on the Exchange of Information on Request , Global Forum on Transparency and Exchange of Information for Tax Purposes, OECD Publishing, Paris. https://doi.org/10.1787/997a7b23-en

ISBN 978-92-64-62286-9 (print) ISBN 978-92-64-74532-2 (pdf) Global Forum on Transparency and Exchange of Information for Tax Purposes ISSN 2219-4681 (print) ISSN 2219-469X (online)

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TABLE OF CONTENTS – 3

Table of contents

Reader’s guide����������������������������������������������������������������������������������������������������������� 5 Abbreviations and acronyms����������������������������������������������������������������������������������� 9 Executive summary��������������������������������������������������������������������������������������������������11 Overview of Spain��������������������������������������������������������������������������������������������������� 15 Part A: Availability of information����������������������������������������������������������������������� 23 A.1. Legal and beneficial ownership and identity information����������������������������� 23 A.2. Accounting records��������������������������������������������������������������������������������������� 50 A.3. Banking information������������������������������������������������������������������������������������� 58 Part B: Access to information������������������������������������������������������������������������������� 63 B.1. Competent authority’s ability to obtain and provide information����������������� 63 B.2. Notification requirements, rights, and safeguards ��������������������������������������� 68 Part C: Exchanging information��������������������������������������������������������������������������� 71 C.1. Exchange of information mechanisms����������������������������������������������������������� 71 C.2. Exchange of information mechanisms with all relevant partners����������������� 77 C.3. Confidentiality����������������������������������������������������������������������������������������������� 78 C.4. Rights and safeguards of taxpayers and third parties����������������������������������� 80 C.5. Requesting and providing information in an effective manner��������������������� 82 Annex 1: List of in-text recommendations����������������������������������������������������������� 89 Annex 2: List of Spain’s EOI mechanisms����������������������������������������������������������� 90 Annex 3: Methodology for the review������������������������������������������������������������������� 97 Annex 4: Jurisdiction’s response to the review report ��������������������������������������� 99

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Reader’s guide– 5

Reader’s guide The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 150 jurisdictions that participate in the Global Forum on an equal footing. The Global Forum is charged with the in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes (both on request and automatic).

Sources of the Exchange of Information on Request standards and Methodology for the peer reviews The international standard of exchange of information on request (EOIR) is primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary and Article 26 of the United Nations Model Double Taxation Convention between Developed and Developing Countries and its commentary. The EOIR standard provides for exchange on request of information foreseeably relevant for carrying out the provisions of the applicable instrument or to the administration or enforcement of the domestic tax laws of a requesting jurisdiction. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including ownership, accounting and banking information. All Global Forum members, as well as non-members that are relevant to the Global Forum’s work, are assessed through a peer review process for their implementation of the EOIR standard as set out in the 2016 Terms of Reference (ToR), which break down the standard into 10 essential elements under three categories: (A) availability of ownership, accounting and banking information; (B) access to information by the competent authority; and (C) exchanging information.

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6 – Reader’s guide The assessment results in recommendations for improvements where appropriate and an overall rating of the jurisdiction’s compliance with the EOIR standard based on: 1. The implementation of the EOIR standard in the legal and regulatory framework, with each of the element of the standard determined to be either (i) in place, (ii) in place but certain aspects need improvement, or (iii) not in place. 2. The implementation of that framework in practice with each element being rated (i) compliant, (ii) largely compliant, (iii) partially compliant, or (iv) non-compliant. The response of the assessed jurisdiction to the report is available in an annex. Reviewed jurisdictions are expected to address any recommendations made, and progress is monitored by the Global Forum. A first round of reviews was conducted over 2010-16. The Global Forum started a second round of reviews in 2016 based on enhanced Terms of Reference, which notably include new principles agreed in the 2012 update to Article 26 of the OECD Model Tax Convention and its commentary, the availability of and access to beneficial ownership information, and completeness and quality of outgoing EOI requests. Clarifications were also made on a few other aspects of the pre-existing Terms of Reference (on foreign companies, record keeping periods, etc.). Whereas the first round of reviews was generally conducted in two phases for assessing the legal and regulatory framework (Phase 1) and EOIR in practice (Phase 2), the second round of reviews combine both assessment phases into a single review. For the sake of brevity, on those topics where there has not been any material change in the assessed jurisdictions or in the requirements of the Terms of Reference since the first round, the second round review does not repeat the analysis already conducted. Instead, it summarises the conclusions and includes cross-references to the analysis in the previous report(s). Information on the Methodology used for this review is set out in Annex 3 to this report.

Consideration of the Financial Action Task Force Evaluations and Ratings The Financial Action Task Force (FATF) evaluates jurisdictions for compliance with anti-money laundering and combating terrorist financing (AML/CFT) standards. Its reviews are based on a jurisdiction’s compliance with 40 different technical recommendations and the effectiveness regarding 11 immediate outcomes, which cover a broad array of money-laundering issues.

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Reader’s guide– 7

The definition of beneficial owner included in the 2012 FATF standards has been incorporated into elements A.1, A.3 and B.1 of the 2016 ToR. The 2016 ToR also recognises that FATF materials can be relevant for carrying out EOIR assessments to the extent they deal with the definition of beneficial ownership, as the FATF definition is used in the 2016 ToR (see 2016 ToR, annex 1, part I.D). It is also noted that the purpose for which the FATF materials have been produced (combating money-laundering and terrorist financing) is different from the purpose of the EOIR standard (ensuring effective exchange of information for tax purposes), and care should be taken to ensure that assessments under the ToR do not evaluate issues that are outside the scope of the Global Forum’s mandate. While on a case-by-case basis an EOIR assessment may take into account some of the findings made by the FATF, the Global Forum recognises that the evaluations of the FATF cover issues that are not relevant for the purposes of ensuring effective exchange of information on beneficial ownership for tax purposes. In addition, EOIR assessments may find that deficiencies identified by the FATF do not have an impact on the availability of beneficial ownership information for tax purposes; for example, because mechanisms other than those that are relevant for AML/CFT purposes exist within that jurisdiction to ensure that beneficial ownership information is available for tax purposes. These differences in the scope of reviews and in the approach used may result in differing conclusions and ratings.

More information All reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published reports, please refer to www.oecd.org/tax/transparency and http://dx.doi. org/10.1787/2219469x.

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Abbreviations and acronyms– 9

Abbreviations and acronyms 2010 Terms of Reference

Terms of Reference related to EOIR, as approved by the Global Forum in 2010.

2016 Assessment Criteria Note

Assessment Criteria Note, as approved by the Global Forum on 29-30 October 2015.

2016 Methodology

2016 Methodology for peer reviews and non-member reviews, as approved by the Global Forum on 29-30 October 2015.

2016 Terms of Reference

Terms of Reference related to EOIR, as approved by the Global Forum on 29-30 October 2015.

AML

Anti-Money Laundering

AML/CFT

Anti-Money Laundering/Countering the Financing of Terrorism

AML/CTF Act

Law 10 of 2010

CDD

Customer Due Diligence

CPA

Certified Public Accountant

DNFBP

Designated Non-Financial Businesses and Professionals

DTC

Double Tax Convention

EOI

Exchange of Information

EOIR

Exchange Of Information on Request

FATF

Financial Action Task Force

Global Forum

Global Forum on Transparency and Exchange of Information for Tax Purposes

KYC

Know Your Customer

Multilateral Convention on Mutual Administrative Assistance in Convention (MAAC) Tax Matters, as amended in 2010

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10 – Abbreviations and acronyms OCP

Notaries’ Centralised Prevention Unit

PRG

Peer Review Group of the Global Forum

SEPBLAC

The Spanish AML/CFT Supervisor and Financial Intelligence Unit

TIEA

Tax Information Exchange Agreement

TIN

Taxpayer Identification Number

VAT

Value Added Tax

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Executive summary– 11

Executive summary 1. This second round report analyses implementation by Spain of the standard of transparency and EOIR for tax purposes against the 2016 Terms of Reference. This includes an assessment of its legal framework as at 21 December 2018, as well as its operation in practice as it concerns the handling of EOI requests received during the period of 1 January 2015 to 31 December 2017. This second round report concludes that Spain is rated Largely Compliant overall. In 2011, the Global Forum similarly evaluated Spain against the 2010 Terms of Reference and reached an overall rating of Compliant. 2. The following table shows the comparison of results from the first and the second round review of Spain’s implementation of the EOIR standard: Element A.1 A.2 A.3 B.1 B.2 C.1 C.2 C.3 C.4 C.5

First Round Report Second Round (2011) EOIR Report (2018)

Availability of ownership and identity information Availability of accounting information Availability of banking information Access to information Rights and Safeguards EOIR Mechanisms Network of EOIR Mechanisms Confidentiality Rights and safeguards Quality and timeliness of responses

C C C C C C LC C C C

LC LC C C C C C C C C

OVERALL RATING

C

LC

C = Compliant; LC = Largely Compliant; PC = Partially Compliant; NC = Non-Compliant

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12 – Executive summary

Progress made since previous review 3. In 2011, Spain was found to be Compliant with the international standard of transparency and exchange of information on request. In particular, the legal and regulatory framework was fully in place to ensure the availability and access to information on legal ownership of relevant entities, accounting information and banking information. The only issues identified in the 2011 Report related to exchange of information mechanisms with all relevant partners (element C.2 which was rated Largely Compliant). The negotiation of some exchange of information agreements was stalled for reasons not linked to exchange of information for tax purposes and Spain was recommended to continue to develop its EOI network to the standard with all relevant partners. 4. Since the first round review Spain has implemented these recommendations. 5. During the review period, Spain received 1 775 EOI requests from 58 treaty partners and sent 2 014 EOI requests to 74 treaty partners. Spain provided complete responses to partner EOI requests in 69% of cases within 90 days of receipt and 93% of cases within 180 days of receipt, while 0.1% of cases took more than one year to provide a complete response.

Key recommendations 6. The main area where improvement is recommended relates to Spanish system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry, as this may affect the availability of beneficial ownership and accounting records for these entities.

Overall rating 7. Spain has achieved a rating of Compliant for eight elements (A.3, B.1, B.2, C.1, C.2, C.3, C.4, C.5), and Largely Compliant for two elements (A.1, A.2). Spain’s overall rating is Largely Compliant based on a global consideration of Spain’s compliance with the individual elements. 8. This report was approved at the PRG meeting on 14 February 2019 and was adopted by the Global Forum on 15 March. A follow-up report on the steps undertaken by Spain to address the recommendations in this report should be sent to the PRG no later than 30 June 2020 and thereafter in accordance with the procedure set out under the 2016 Methodology.

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Executive summary– 13

Summary of determinations, ratings and recommendations Determinations and Ratings

Factors underlying Recommendations

Recommendations

Jurisdictions should ensure that ownership and identity information, including information on legal and beneficial owners, for all relevant entities and arrangements is available to their competent authorities (ToR A.1) The legal and regulatory framework is in place Largely Compliant

The large number of inactive companies that maintain legal personality and do not comply with their filing obligations raises concerns that beneficial ownership information might not be available in all cases.

Spain should review its system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry.

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) The legal and regulatory framework is in place Largely Compliant

The large number of inactive companies that maintain legal personality and do not comply with their filing obligations raises concerns that accounting records might not be available in all cases.

Spain should review its system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry.

Banking information and beneficial ownership information should be available for all accountholders (ToR A.3) The legal and regulatory framework is in place Compliant

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14 – Executive summary Determinations and Ratings

Factors underlying Recommendations

Recommendations

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) The legal and regulatory framework is in place Compliant The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) The legal and regulatory framework is in place Compliant Exchange of information mechanisms should provide for effective exchange of information (ToR C.1) The legal and regulatory framework is in place Compliant The jurisdictions’ network of information exchange mechanisms should cover all relevant partners (ToR C.2) The legal and regulatory framework is in place Compliant The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) The legal and regulatory framework is in place Compliant The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) The legal and regulatory framework is in place Compliant The jurisdiction should request and provide information under its network of agreements in an effective manner (ToR C.5) The legal and regulatory This element involves issues of practice. Accordingly no framework is in place determination on the legal and regulatory framework has been made. Compliant

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Overview of Spain– 15

Overview of Spain 9. This overview provides some basic information about Spain that serves as context for understanding the analysis in the main body of the report. It is not intended to be a comprehensive overview of Spain’s legal, commercial or regulatory systems.

Legal system 10. The Kingdom of Spain is a parliamentary monarchy. The Constitution, issued in 1978, is the supreme law and provides for the administrative and political system as well as for the fundamental rights of the Spanish People. The Constitution is the supreme law against which the validity of all laws and regulations may be measured. Spain has a civil law system. 11. While the King is the Head of State and the symbol of its unity, the division of powers is at the core of the Spanish political system. The government is comprised of the President of the Government (the head of government) and the Council of Ministers designated by the President. The legislative power lies with the Parliament (Las Cortes Generales), composed of the Senate and the Congress of Deputies. Parliamentarians are elected by universal suffrage; they choose the President of the Government and control the action of the executive, thus making Spain a parliamentary political system. Judges and courts are independent of the legislative and executive branches. The Constitutional Court ensures that the laws and the regulations of the government are in line with the Constitution. 12. From the political and administrative perspective, Spain is divided into seventeen Comunidades Autónomas (Autonomous Regions), in addition to Ceuta and Melilla, which are considered Autonomous Cities. The Constitution sets the organisational framework of the State. Autonomous Communities are further regulated through an “autonomy statute” (Estatuto de Autonomía), which sets out the distribution of powers and responsibilities between the State and each Community. Each community has wide legislative and executive autonomy, with their own parliaments and regional governments. The central government of Spain retains exclusive

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16 – Overview of Spain responsibility for nationality, international relations, external trade, defence, justice, criminal and commercial law, etc. Autonomous Communities may assume competencies over matters like the organisation of their institutions of self/government, health, social assistance. The Spanish Constitutional Court is the body responsible for resolving conflicts between the State and the Autonomous Communities regarding their powers.

Tax system 13. There are three tax subsystems in Spain: the state, regional and local systems. Taxes are accordingly levied by the central Government, the Autonomous Community governments, and local authorities. There are special regimes applicable in the Basque Country and Navarra, which are two Autonomous Communities with special rights recognised in the Spanish Constitution, but these special regimes have no impact on the availability and access to tax information. 14. The main state taxes are classified as direct taxes: corporate income tax, personal income tax, non-residents income tax, capital, and inheritance and gift tax; and indirect taxes: value added tax (VAT), transfer tax, stamp duty, excise taxes, and customs duties. 15. The Spanish Tax Agency (AEAT) is the relevant public body at the Ministry of Economy and Finance, responsible for managing, auditing and collection of central government taxes. The Spanish system is predominantly one of self-assessment, with the taxpayer completing a tax return and making the appropriate payment or receiving the appropriate refund, subject to review by the tax authorities. 16. Any act performed by the Tax Administration in applying taxes, or sanctions in case of non-compliance, may be subject to review by an economic-administrative tribunal, and the decisions thereof barring new administrative procedures may be subject to review by specialised courts, on condition that the corresponding appeal is filed. 17. Resident companies and other entities without legal personality such as pension funds are subject to corporate income tax. The general rate of corporate income tax is 25%, but there are other rates applicable, e.g. according to section 29 of the Corporate Enterprises Act, investment funds with at least 100 investors are subject to a 1% tax rate and pension funds are taxed at a rate of 0%. Resident companies are companies incorporated under Spanish law, companies domiciled in Spain and companies whose place of effective management is located in Spain. Corporate income tax is levied on the net aggregate taxable income from all sources of the entities. However, income from permanent establishments located abroad is exempt, provided that

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Overview of Spain– 17

certain conditions are met. Foreign source dividends are exempt according to participation exemption provisions. There is a classic double taxation system, under which corporate income is first taxed in the hands of the company and dividends are subsequently taxed in the hands of the shareholders at the appropriate rates. Distributions by resident holding companies “Entidades de Tenencia de Valores Extranjeros” to non-resident persons, which are attributable to income obtained by such companies from sources outside Spain (exempt from tax in Spain), are deemed to be foreign source income and are also exempt from tax. 18. Domestic or foreign source income derived by non-residents that is attributable to a permanent establishment situated in Spain is subject to nonresident income tax. Such income is computed according to the rules of the Corporate Income Tax Act. A non-resident is deemed to have a permanent establishment in Spain if, either directly or through a representative with power of attorney, it maintains premises or places of work where the enterprise, either wholly or partly, carries on its business. Non-residents deriving income that is not attributable to a permanent establishment in Spain are subject to non-resident income tax on their Spanish-source income. 19. The General Tax Law was amended in December 2011, taking effect on 1 January 2012, in order to transpose into Spanish national law the EU 2010/24/EU Directive concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures and the EU 2011/16/Directive. These amendments cover all assistance actions that the Tax Administration may request or provide to other States or international entities, including the exchange of information, simultaneous tax examinations, the presence of tax representatives, assistance in notification and the recovery of tax claims.

Financial sector 20. Spain has a large financial sector: according to the non-consolidated national accounts, the total amount of financial assets held by the financial sector was EUR 4 676 billions at the end of 2017. The activities of the financial sector in Spain amounted to 3.63% of GDP at market prices in 2017. 21. The following table shows the numbers of the various types of financial institutions in Spain. Banks (banks and savings banks) National banks Subsidiaries of foreign banks: Branches of EU credit institutions Subsidiaries of foreign banks: Branches of non EU credit institutions Securities (broker-dealers, dealers and portfolio managers)

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61 1 78 4 314

18 – Overview of Spain Insurers (life insurance) Credit co-operatives Credit finance institutions Collective investment Pension funds Payment entities (MVT) E-money Private equity Bureaux de change Entities licensed to buy and sell foreign currency Entities licensed to buy foreign currency

227 63 39 4 698 2 661 42 5 415 See below 14 2 700

22. The Bank of Spain (Banco de España) is the national central bank and, within the framework of the Single Supervisory Mechanism (SSM), in force since 4 November 2014 (established by Council Regulation (UE) 1024 of 15 October 2013), it is in charge of the prudential supervision of the Spanish banking system along with the European Central Bank (ECB). It is also the supervisor of other financial institutions. These functions are exercised either independently or within the SSM. The legal basis governing the supervisory functions of the European Central Bank (ECB) are the SSM Regulation and the SSM Framework Regulation. 23. The ECB is directly responsible for the prudential supervision of significant credit institutions, 1 while the Bank of Spain directly supervises those considered less significant. On 31 December 2017, the number of Spanish significant entities groups was 13 and the number of Spanish less significant entities groups was 69.

AML framework 24. Spain’s AML/CFT Regulatory Framework is contained in the AML/ CFT Act, of 28 April 2010, and its Regulation approved by Royal Decree 304/2014, of 5 May 2014 as amended by Royal Decree Law 11/2018. The AML/CFT supervisory functions are exercised by SEPBLAC (the AML/CFT Supervisor and the Spanish FIU). SEPBLAC depends on the Commission for the Prevention of Money Laundering and Monetary Offences, which is a 1.

The status of “significant credit institution” is set out in Article 6(4) or Article 6(5) (b) of European Council Regulation (EU) No. 1024/2013 of 15 October 2013. “Significance” is determined on the following criteria: (i) size of the financial institution; (ii) importance for the economy of the European Union or any participating Member State; and (iii) significance of its cross-border activities.

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Overview of Spain– 19

collegiate body 2 responsible for directing and promoting activities in order to prevent the use of the financial system and other sectors of economic activity for the purpose of money laundering and terrorist financing. SEPBLAC’s supervision covers a wide range of obliged persons; in addition, it co-ordinates its supervisory functions with the prudential supervisors in each sector in order to ensure effective compliance with obligations imposed under the AML/CTF Act. To date, three prudential financial supervisors have signed agreements with the Commission for the Prevention of Money Laundering and Monetary Offences with the aim to work in collaboration with SEPBLAC on AML supervision: the Bank of Spain (mainly for banks and payment institutions), CNMV (for investment institutions) and DGSFP (for life insurance firms and pension funds). 25. Notaries are obliged persons pursuant to the AML/CFT Act. Notaries play a central role in the process of incorporation of legal persons, as well as other transactions, including those related to changes in property, increase of capital, etc. A notary must obtain information on the ownership structure of the company and its beneficial owners when acting for it. This information must be updated on a systematic basis and included in the Notarial centralised database called Notaries Sole Index. The Notaries Sole Index is managed by the Central Prevention Unit (the OCP) of the General Council of Notaries. According to the AML/CFT Act (Article 27), the OCP is a centralised prevention body with the objective to strengthen and channel the co-operation of Notaries with the AML/CFT bodies and enforcement forces. 26. The Notaries Sole Index aggregates the information that has been submitted by notaries. Notaries must ensure that such information corresponds truthfully and exactly to the public documents issued or authorised by them and this information must be submitted within the dates statutorily defined by law. The notaries are liable for any discrepancies, as well as for non-compliance with the deadlines for the submission of the information. 27. The AML/CFT Act transposes to a national level the III Directive AML/CFT (Directive 2005/60/CE of the European Parliament and of the Council of 26 October 2005), that inserted into EU law the Recommendations of the Financial Action Task Force upon their revision in 2003. 28. The adoption of the new FATF Recommendations, in February 2012, lead Spain to issue Royal Decree 304/2014 to incorporate the new 2.

The Commission for the Prevention of Money Laundering and Monetary Offences is composed by Spain’s Secretary of State, who presides over it, and by representatives of: the Prosecutor’s Office, Ministries and institutions competent in this matter (Police, Civil Guard, Customs, financial and tax Inspection, Data Protection, National Intelligence Center), supervisory bodies of financial institutions and Autonomous Regions.

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20 – Overview of Spain Recommendations into the Spanish AML/CFT framework. Spain also implemented several regulatory initiatives, such as the development of the Financial Ownership File on savings and securities accounts and fixed term deposits, which is a unified registry of financial accounts information. Further, since January 2016, credit institutions must report to SEPBLAC the opening and cancellation by any individual or legal person of current accounts, savings accounts, securities accounts and term deposits. Information reported to SEPBLAC includes the legal and beneficial owner(s) of the account or deposit. 29. On 31 August 2018, the AML/CFT Act was modified by Royal Decree Law 11/2018 with the purpose to fully incorporate EU Directive 2015/849 into Spanish law. This modification consisted, among others, (i) on modifying the definition of Beneficial Ownership for trusts (establishing that obliged entities should identify as beneficial owners of trusts and similar arrangements the settlor, the trustee(s), the protector(s), the beneficiary or class of beneficiaries), in order to directly include in the law what was previously only mentioned in Royal Decree 304/2014, (ii) on increasing the amount of the sanctions for non compliance with the AML/CTF regime and (iii) on introducing special registration obligations for TCSPs.

AML evaluation 30. The Fourth Round of Mutual Evaluation of Spain’s compliance with the AML/CFT standard was conducted in 2014 by FATF. The report provides a summary of the AML/CFT measures in place in Spain as at the date of the onsite visit on 21 April to 7 May 2014. The complete assessment report has been published and is available at www.fatf-gafi.org/media/fatf/documents/ reports/mer4/Mutual-Evaluation-Report-Spain-2014.pdf. 31. The outcomes of the report were positive and resulted in an overall rating of “largely compliant”. The FATF report concluded that Spain has upto-date laws and regulations, which implement the revised FATF Standards, and is compliant or largely compliant with most of the Recommendations. Immediate Outcome 5, concerning the implementation rules ensuring availability of beneficial ownership information in respect to legal entities and arrangements, was rated as substantial. Spain’s technical compliance with FATF’s recommendations 10, 24 and 25 was rated as Largely Compliant. 32. At the FATF plenary session of February 2018, “Follow Up of the 2014 MER” was examined and approved. The follow-up report reviewed the actions taken by Spain to address the deficiencies identified in the 2014 MER and resulted in an upgrade in the rating of three Recommendations, namely Recommendations 5 (Targeted financial sanctions related to terrorism and TF), 16 (Wire transfers), and 39 (Extradition).

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Overview of Spain– 21

Recent developments 33. The General Tax Law was also amended in 2015 to introduce reporting and due diligence requirements for: (i) the automatic exchange of information on financial accounts at the Community level (Council Directive (EU) 2015/2376 of 8 December 2015 – DAC 2-); and (ii) implementing Spain’s commitment to exchange of information by signing the Multilateral Competent Authority Agreement (CRS MCAA). These new obligations came into effect on 1 January 2016. According to these amendments, financial institutions must identify the place of tax residence of account holders of certain financial accounts and provide specified information to the Spanish Tax Authorities. As well, account holders must inform the financial institutions of their tax residence. 34. On 21 March 2018, Order JUS/319/2018 was issued, requiring all companies to annually submit a form, identifying their beneficial owners, to the Commercial Registry when fulfilling the obligation to file annual accounts. 35. As mentioned in paragraph 29, on 31 August 2018, Royal Decree Law 11/2018 was issued modifying the AML/CTF act with the purpose to fully incorporate EU Directive 2015/849 into Spanish law.

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Part A: Availability of information A.1. Legal and beneficial ownership and identity information Jurisdictions should ensure that legal and beneficial ownership and identity information for all relevant entities and arrangements is available to their competent authorities.

36. The 2011 Report concluded that Spain’s legal and regulatory framework ensured the availability of legal ownership information at any time either from the public authorities (e.g. tax administration, Commercial Register) or directly from the entities (register of shareholders) or regulated third parties (banks, public notaries), and some information is also publicly available. Element A.1 was thus considered to be “in place”. 37. In practice, the 2011 Report did not identify any shortfall in the implementation of the legal framework relating to the availability of legal ownership information of entities and arrangements. Accordingly, element A.1 was rated compliant. 38. Since the evaluation report was published in 2011, there has not been any major change in the legal framework examined. In practice, Spain’s partners are satisfied with the Spanish responses to their legal and beneficial ownership information requests. Nevertheless, around two thirds of Spanish companies do not comply with their account filing obligations with the company registry raising concerns about the availability of up to date beneficial ownership information in all cases. According to Spain, the reason why these entities do not comply with filing obligations is that a large number of the companies that still exist are in fact completely inactive and the Tax Administration supervises the absence of economic activity on these inactive entities, on a continuous basis. 39. The tax administration possesses a very comprehensive database that contains extensive information on taxpayers, thanks to the annual tax returns filed by the taxpayers themselves, but also periodic tax information returns sent by third parties like the Commercial Register, public notaries, banks and other financial entities, business partners (goods and services suppliers), insurance companies, CIVs, the Dirección General de Transacciones Exteriores, treaty

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24 – Part A: Availability of information partners, Dirección General del Catastro (inmovable property). The tax administration knows the identity of the founding partners of commercial companies and it annually receives information on the identity of shareholders holding 5% or more of shares in the capital of commercial companies (1% for listed companies). It may also obtain the identity of all the shareholders of a SA (public limited companies) either from the company itself (registry of shareholders) or from the financial institution that manages its shares. 40. However, companies and partnerships’ compliance with their annual account filing obligation is low. The CIT return filing rate is also low compared with the number of registered entities; although many of these have reported their total cessation of business or have their TIN removed. 41. Beneficial ownership information is a new aspect of the 2016 ToR and had not been assessed in 2011. The legal framework in Spain contains a number of measures relating to the identification of beneficial owners of legal entities and arrangements. The availability of information on the beneficial owners of commercial entities is secured in Spain by Notaries, Financial institutions and the Commercial Registry, among other sources. 42. The main requirements for ensuring availability of beneficial ownership information are contained in the AML Framework. All relevant entities are required to engage a notary in order to obtain a legal status and, in most cases, any subsequent change in their ownership has to be done with an engagement of a notary. Notaries are required to identify beneficial owners and this information is compiled in a national notarial index. However, the index does not contain information on all relevant entities. In addition, companies and partnerships have to engage in a business relationship with financial institution (which are AML obliged persons), as one of the essential documents for the registration of any entity is the funds deposit certificate showing that company’s capital has been deposited in a financial institution. These already existing obligations have been recently accompanied by the obligation of entities themselves to keep beneficial ownership information and, since 31 July 2018, entities have to annually submit beneficial ownership information to the Commercial Registry when submitting their annual accounts. 43. Supervision of AML obligations is generally adequate to ensure availability of beneficial ownership information in practice. The responsible supervisory authorities undertake a range of supervisory measures including risk based off-site and on-site inspections and rigorously apply a variety of enforcement measures in cases of failure to identify and keep beneficial ownership information. However, supervisory activities in the case of notaries, TCSPs and lawyers should be strengthened. Also, the large number of inactive companies that maintain legal personality and do not comply with their filing obligations raises concerns that beneficial ownership information might not be available in all cases.

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44. Spanish law allows public limited companies to issue bearer shares. There may be a few cases in which the tax administration may not be aware of the owners of these shares, but their issuance and transfer has been strictly regulated for more than 75 years (except from the period 1989-98), and currently no one can derive income or capital gains from bearer shares without being identified by the tax administration. 45.

The table of determinations and ratings is as follows: Legal and Regulatory Framework Underlying Factor

Deficiencies identified in the implementation of the legal and regulatory framework

Recommendations

Determination: In place Practical Implementation of the standard Deficiencies identified in the implementation of EOIR in practice

Underlying Factor The large number of inactive companies that maintain legal personality and do not comply with their filing obligations raises concerns that beneficial ownership information might not be available in all cases.

Recommendations Spain should review its system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry.

Rating: Largely Compliant

A.1.1. Availability of legal and beneficial ownership information for companies 46. As already described in the 2011 Report, Spanish law provides for three types of companies: •

Sociedad de responsabilidad limitada (SRL or SL for sociedad limitada, Limited Liability Company) is a commercial company formed by one or several members not personally liable for the company’s debts; they only bear losses up to the amount of their contribution. The minimum capital of these companies is EUR 3 000 (articles 1, 4 and 12 of the Corporate Enterprises Act). This is the most common type of entity in Spain.

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26 – Part A: Availability of information •

Sociedad anónima (SA, Joint Stock Company or Public Limited Company) is constituted between one or more shareholders not personally liable for the company’s debts; they only bear losses up to the amount of their contribution. Shares are represented by certificates or book entries, and where share certificates are issued, by-laws must specify whether they represent registered or bearer shares and whether the issue of multiple share certificates is envisaged. The minimum capital is EUR 60 100 (articles 1, 4, 12 and 23 of the Corporate Enterprises Act). The shares of an SA can be listed on an official securities market (section 495).

•

Sociedad comanditaria por acciones (S.Com. por A. or SCA, Partnership Limited by Shares) is formed by one or more general partners, who are traders and are indefinitely and jointly liable for the partnership’s debts, and limited partners, who are shareholders and bear losses only up to the amount of their contributions (article 1 of the Corporate Enterprises Act). This type of company is scarcely used (none have been created over the last four years).

47. The following table provides statistics on the number of companies registered with the Commercial Registry: Company statistics Type of company

Governing law

Limited liability companies (SRL) Corporate Enterprises Act Joint stock companies (SA) Corporate Enterprises Act Partnership Limited by Shares (SCA) Corporate Enterprises Act

Statistics as at Statistics as at Statistics as at December 2015 December 2016 December 2017 2 693 082 321 128 119

2 768 738 319 277 123

2 836 759 317 222 130

48. According to the information provided by the Registrars Professional Association, at the end of calendar year 2017, SRLs corresponded to 87.8% of all Spanish companies and partnerships and SA to 9.6% of all Spanish companies and partnerships. 49. Foreign corporations can carry out business activities in Spain as a branch. At the end of calendar year 2017, there was a total of 1 423 branches of foreign companies registered in Spain. Branches of foreign companies and permanent establishments must comply with the same tax obligations as Spanish companies, including filing CIT returns and obtaining a TIN. Additionally, branches of foreign companies must annually deposit annual accounts with the Commercial Registry. Finally, the administrator of the branch and of the permanent establishment must obtain beneficial ownership information in accordance with 9.1 of the Royal Decree 304/2014.

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50. The 2011 Report concluded that ownership information in respect of companies, including foreign companies with a sufficient nexus, was required to be available in line with the standard and that these rules are properly implemented to ensure availability of ownership information in practice. There are no changes in the relevant rules or practices since the first round review. 51. Under the 2016 ToR, beneficial ownership on companies should be available. Availability of beneficial ownership information is required in line with the standard under the AML framework supported by obligations under the tax law and commercial law. The main source of information on beneficial owners are AML obliged service providers and in particular notaries along with banks and other financial institutions. Notaries must be engaged upon incorporation of a company in Spain and for the majority of subsequent changes in ownership. Further, companies are now also required to keep information on beneficial owners and file it annually with the Commercial Register. Supervision of AML obligations is generally adequate to ensure availability of beneficial ownership in practice (see below). 52. Companies have to be incorporated through a public deed granted by a notary. The incorporation public deed has to be registered in the Commercial Registry within two months following the issuance of the public deed. Companies only acquire legal personality when the incorporation public deed is registered on the commercial registry. 53. In addition, tax regulations impose the obligation on any new entity to request a Tax Identification Number (TIN) and to register on the Tax Census with the Tax Administration. Normally, the Notary in charge of the incorporation public deed will request directly from the Tax Administration, by electronic means, a provisional TIN for the entity. This TIN will be provisional until the entity files with the tax administration the public deed of incorporation and the certificate of registration before the Commercial Registry. If six months elapse from the time the provisional TIN was assigned and no proof of registration is provided, the Tax Administration may notify the company requesting that proof of registration and unattended requirements may lead to the revocation of the TIN. 54. For a TIN to be assigned, the company must communicate its corporate name, registered office, legal form, date of incorporation, capital stock and complete data of its fiscal representatives. 55. The following table shows the numbers of companies and partnerships registered in the Tax Census held by the Tax Administration at the end of 2017.

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28 – Part A: Availability of information Tax census statistics Type of entity Public Limited Company (SA) Limited Liability Company (SRL) General Partnership Limited Partnership and Limited Partnership with a share capital (SCA)

Entities registered on the Tax Census 358 222 2 502 534 2 427 423

56. In order to ensure that all companies have a TIN and are registered in the Tax Census, the notaries and the Commercial Registry have to provide monthly reports to the Tax Administration detailing information in relation to companies’ incorporation and liquidation. The difference in number of companies registered (SRL and SA) in the Commercial Registry and in the Tax Census is due, among others reasons, to: (i) entities that were assigned a provisional TIN during its incorporation process, but the definitive TIN is never assigned, (ii) entities that had their TIN removed and therefore are not included in the tax census, (iii) entities that are dissolved and liquidated but this information is not communicated to the Tax Administration. According to the Spanish authorities, the following actions are being taken in order to resolve the discrepancies: •

In the case of entities with a provisional TIN, that do not obtain a permanent TIN: Compulsory documentation is requested by the Tax Administration in order to obtain a permanent TIN. If the entity does not provide the documentation, the provisional TIN would be removed. When there is a provisional TIN, communication would be sent to financial institutions in order to block the entity’s accounts.

•

In the case of entities with a removed TIN: This kind of entity is included in the Tax Census in the category of “deregistered in the Entities Index and with TIN removed”. In case that these entities carry out or intend to carry out any operation, information should be gathered due to the connection with the TIN number, allowing the detection of any economic indicia.

•

In the case of entities dissolved and liquidated where this information has not been communicated to the Tax Administration: There is ongoing co-operation between the Tax Agency and the Mercantile Registry in order to address these cases.

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57. The following table 3 shows a summary of the legal requirements to maintain legal and beneficial ownership information in respect of companies: Type

Company law

Tax law

AML law

Limited Liability Company

Legal – all Beneficial – none

Legal – some Beneficial – none

Legal – all Beneficial – all

Public Limited Company

Legal – all Beneficial – none

Legal – some Beneficial – none

Legal – all Beneficial – all

Partnership Limited by Shares

Legal – all Beneficial – none

Legal – some Beneficial – none

Legal – all Beneficial – all

Legal ownership 58. As discussed in the 2011 Report, legal ownership information is available through a number of existing mechanisms in Spain’s laws. 59. The identity of all the founding members of a company is disclosed in the deed of incorporation that has to be submitted to the Commercial Register within two months of its creation. The deed must also include the contributions made by each of the founders (whether individuals or corporations), and their respective number of shares. 60. The issuance of the public deed of incorporation requires the intervention of a Spanish public notary, who usually takes care of registering the company with the Commercial Register and the tax administration, even though that obligation remains on the founders and managers who are jointly liable for damages caused by them for breach of this obligation. 61. Public notaries must periodically (monthly and annually) inform the tax administration the number of new incorporated companies. 62. The public deed of incorporation does not have to be amended on a change of shareholders except in the case of a SCA, whose managing partners, as members indefinitely and jointly liable for the SCA’s debts, must always be identified (section 23 of the Corporate Enterprises Act). In the case of SRL, the transfer of its property (“stakes”) has to be done through a public deed before a notary.

3.

The table shows each type of company and whether the various rules applicable require availability of information for “all” such entities, “some” or “none”. “All” in this context means that every company of this type is required to maintain ownership information in line with the standard and that there are sanctions and appropriate retention periods. “Some” in this context means that a company will be required to maintain a portion of this information under applicable law.

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30 – Part A: Availability of information 63. Notaries have to report to the Tax administration changes on the deed of incorporation of a company, changes of general partners of an SCA or a change of an SRL member. Section 42(1) of the General Regulation on Tax Auditing requires that public notaries report annually the transfer of SRL shares, specifying the full name, domicile and TIN of buyers and sellers, shares involved in the transaction, date and amount of the transaction and income derived. 64. Additionally, all companies are required to register with the Tax Administration to obtain a TIN when companies are created. To obtain a TIN, the company shall provide to the Tax Administration the name and the TIN of all the founders of the company (section 7 and 12 of Royal Decree 1065/2007). There is no obligation to report to the Tax Administration a change in the company’s legal owners, but companies are required to report annually to the Tax Administration (on the Corporate Income Tax return) the identity of persons owning at least 5% of their capital (1% if it is publicly traded company). 65. Regarding the information required to be kept by the company, the rules are different for shares of SRLs, and shares of SA and SCA. 66. An SRL must keep a shareholders ledger that contains records of the original shareholders and subsequent share transfers, as well as the creation of rights ad rem or other encumbrances thereon. Only the parties entered in such ledger are acknowledged by the company to be shareholders. The ledger must indicate their identity and address (section 104 of the Corporate Enterprises Act). The ledger must be kept throughout the lifetime of the company, and the ledger of liquidated companies is sent to the Commercial Register. SRLs cannot issue bearer shares. 67. SA (joint-stock companies) and SCA (partnerships limited by shares) shares are represented by certificates of title or book entries (i.e. dematerialised or immobilised), and where share certificates are issued, by-laws must specify whether they represent registered or bearer shares. Registered shares must be entered in a ledger, which records subsequent share transfers, including the name, surname, company name, nationality and address of subsequent holders (section 116 of the Corporate Enterprises Act). The managers of the company must enter the transfer of shares in the ledger immediately (section 120 Corporate Enterprises Act). 68. The shares of an SA and SCA can also be represented in the form of book entries (i.e. dematerialised) maintained by financial intermediaries, in which case they are governed by the provisions of the securities market regulations. The financial intermediary must maintain the identity of the account owners (sections 118 and 497 of the Corporate Enterprises Act). In addition, shareholders of SAs and SCAs that are listed on the Stock Exchange

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Part A: Availability of information– 31

are obliged to communicate the acquisition or transfer of significant amounts of shares to the issuer and the National Securities Market Commission (CNMV), i.e. when the percentage of shares reaches, exceeds or goes below certain thresholds, starting from 3%. 69. Sanctions apply for failure to register deeds of incorporation with the registry. The Commercial Registry verifies the form of the deeds registered (i.e. they check whether the documents are complete). If the documents are not compliant, they are not registered, and the company does not acquire legal personality. New companies have 2 months to register the deed of incorporation with the registry; any late registration of documents incurs a fine. (section 32 and 33 of the Corporate Enterprises Act). The Spanish authorities report that in practice registrations are usually made within the deadlines, as it is this formality that confers rights and protection on the company and on partners. 70. The Registrars assess the legality of the documents to be registered, the capacity of the persons subscribing them and the validity of the content. The Notaries, as part of their public function, assess the accuracy and certainty of the data included in the Public document (obtain, verify and record the data concerning every act or contract to be authorised by them). In practice, notaries collate the information and check it against official databases. The quality of the work of notaries is audited by OCP (the Central Prevention Unit of the General Council of Notaries), notably with regard to the conservation of proofs of identity. During the review period, all the registered Notaries (there are 2 758 registered in Spain) were supervised by the OCP on the fulfilment of their AML/CFT obligations and, following a risked based approach, 82 notaries were selected to undergo in situ inspections by the OCP. On the in situ inspection, the OCP inspectors check the notary’s compliance with AML/CFT obligations and the accurate uploading of information to Notaries database. Once the process has ended a final report is drafted in order to be approved and afterwards sent to SEPBLAC, for its follow-up. There is no comprehensive public information available regarding disciplinary sanctions by the OCP, nor on formal warnings, but the Spanish authorities indicate that ethical rules are well respected by the notaries. 71. With regard to the shareholders ledger held by the company itself, the directors of the company are liable for its accuracy. The Commercial Framework does not specify any deadlines for recording transfers of shares in the register, although their ownership is established by being entered in the register. Hence, being registered in the ledger is a requirement to receive dividends and to exercise voting rights. Checking whether the registers of shareholders or partners are properly kept is one of the elements that are checked in the course of a tax audit.

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32 – Part A: Availability of information 72. Additionally, since 2014, companies and partnerships have to send an electronic copy of the ledger to the Commercial Registry in order for it to be considered as legalised (section 18 of Act 14/2013 and section 5 of Instrucción of 12 February 2015). If there was any change in the legal ownership during a financial year, the companies and partnerships have to send telemetrically, within the four months after the end of any financial year, the updated copy of the ledger. Entries in this record ledger shall include complete identification of the shareholders, their nationality and address. If the ledger is not legalised, it does not have public trust and can be refused as evidence in a trial before a judge. There are no statistics on the compliance of companies and partnerships with this obligation. 73. Compliance with annual accounts filing requirements at the corporate registry, consisting of accounts with additional forms covering non-financial matters, is very low with around two thirds of companies systematically failing to file their annual returns. 74. The Tax Administration monitors compliance with the filing of Corporate Income Tax returns and record keeping. During the review period, control actions were undertaken by the Tax Administration to ensure compliance, including the removal of TINs. Nevertheless as explained further in the section on inactive entities the compliance rate with CIT return filing obligations is low, at approximately 57%; although many of these have reported their total cessation of business (740 290 SRL and 23 643 SA) or have their TIN removed (289 654 entities) (see paragraphs 116 and 118). 75. During the current review period, Spain received a significant number of requests for legal ownership information and, in general, Spain was able to obtain the requested information and exchanged it with the requesting partner. The input provided by the peers was positive and no concerns were raised regarding Spain’s ability to exchange legal ownership information.

Beneficial ownership 76. The 2016 Terms of Reference introduced the obligation to ensure that information about beneficial owners is available. This element was not specifically assessed in the 2011 Report, even though it was addressed (see in particular paragraphs 72-73). In Spain, the main requirements on availability of information on beneficial owners are set out in the anti-money laundering legislation. 77. The definition of beneficial owner (section 4 AML/CFT Act and section 8 of Royal Decree 304/2014) is in line with the beneficial ownership definition under the 2016 ToR. According to Spain’s AML/CFT Act, a beneficial owner is: “the natural person(s): (a) on whose behalf the relationship is to be established or the transaction conducted; (b) who ultimately owns

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or controls (direct or indirect) 25% or more of the capital or voting rights or who, by other means exercises control, directly or indirectly controls, over the management of a legal person; or (c) who owns or controls 25% or more of the property of a legal arrangement, or, where the beneficiaries have yet to be determined, the class of persons in whose interest the legal arrangement is set up”. Royal Decree 304/2014 includes additional detail, such as section 8, which contains the obligation to identify the senior managing official in cases where no natural person is identified under the definition of beneficial owner set out above. In the case of trusts (and similar arrangements), there is a specific provision in section 9.5 of Royal Decree 304/2014, 4 which requires obliged persons to identify, as beneficial owners, the settlor, the trustee(s), the protector(s), the beneficiary or class of beneficiaries, and any other natural person exercising control over the trust. For other relevant legal arrangements (including fiducias), the person(s) holding equivalent or similar positions in the case of trusts must be identified. 78. According to section 9.1 of the Royal Decree 304/2014, in order to allow the correct determination of the beneficial owner of an entity, the administrators of all entities shall “obtain and maintain appropriate, accurate and updated information on the beneficial ownership thereof”. 79. The scope of obliged persons, subject to know-your-customer and record-keeping requirements, in Spain is listed in article 2 of the AML/CTF Act. It includes: “a) Credit institutions. b) Insurance companies authorised to operate in the field of life insurance and insurance brokers acting in connection with life insurance or other investment related-services, with the exceptions laid down in the regulations. c) Investment services firms. 4.

“Article 9. Identification of the beneficial owner: (…) 5. In relation to AngloSaxon trusts, obliged subjects shall identify and take appropriate measures to verify the identity of the settler, the trustees, the protector, the beneficiaries or types of beneficiaries and of any other individual who exercises ultimate effective control over the trust, even through a chain of control or ownership. For beneficiaries designated based on features or types, the required information must be obtained to establish the beneficiary’s identity at the time of payment or when the beneficiary intends to exercise rights conferred.



In the event of legal instruments which are similar to Anglo-Saxon trusts, obliged subjects shall identify and take appropriate measures to verify the identity of persons holding equivalent or similar positions to those specified in the preceding paragraph.”

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34 – Part A: Availability of information d) Management companies of investment funds and investment companies whose management is not assigned to a management company. e) Pension fund management entities. f) Management companies of venture capital entities and venture capital companies whose management is not assigned to a management company. g) Mutual guarantee companies. h) Payment institutions and electronic payment institutions. i) Persons whose business activity includes currency exchange. j) Postal services in respect of giro or transfer activities. k) Persons professionally involved in brokering loans or credits, as well as persons who, without being licensed as credit institutions, carry out professionally any of the activities covered by the First additional provision of Law 3/1994, of 14 April 1994, adapting Spanish legislation on credit institutions to the Second Banking Co-ordination Directive and introducing other changes relative to the financial system. l) Property developers and persons whose business activities include those of agency, commission or brokerage in real state trading. m) Auditors, external accountants and tax advisers. n) Notaries and land, commercial and moveable property registrars. ñ) Lawyers, barristers and other independent professionals when they participate in the design, implementation or advice on activities on behalf of clients relating to the buying and selling of real estate or business entities, the management of funds, securities or other assets, the opening or management of current, savings or securities accounts, the organisation of contributions necessary for the creation, operation or management of companies or the creation, operation or management of trusts, companies or similar structures, or when acting on behalf of clients in any financial or real estate transaction. o) Persons who on a professional basis and in accordance with the specific rules applicable in each case provide the following services to third parties: forming companies or other legal

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persons; acting as or arranging for another person to act as a director or secretary of a company, a partner of a partnership or a similar position in relation to other legal persons; providing a registered office, business address, correspondence or administrative address and other related services for a company, a partnership or any other legal person or arrangement; acting as or arranging for another person to act as a trustee of an express trust or similar legal arrangement, or acting as or arranging for another person to act as a shareholder for another person, other than a company listed on a regulated market that is subject to disclosure requirements in conformity with EU Community legislation or subject to equivalent international standards. p) Casinos. q) Professional dealers in jewels, precious stones or precious metals. r) Professional dealers in works of art or antiques. s) Persons whose business activity includes those set down in article 1 of Consumer Protection in the Procurement of Goods with a Price Refund Offer Law 43/2007, of 13 December. t) Persons engaged in the deposit, custody or professional transfer of funds or means of payment. u) Persons responsible for the management, operation and marketing of lotteries or other gambling activities in respect of prize payment transactions. v) Natural persons engaged in the movement of means of payment, under the terms laid down in article 34. w) Professional dealers in goods, under the terms set out in article 38. x) Foundations and associations, under the terms provided for in article 39. y) Managers of payment systems, clearing systems and those for the settlement of securities and financial derivatives, as well as managers of credit cards or debit cards issued by other entities.” 80. The key categories of obliged persons in the identification of companies’ beneficial owners and maintenance of updated information were notaries, financial institutions and, since 2018, the Commercial Registry. In addition, under article 9.1 of Royal Decree 304/2014, administrators of entities have to “obtain and maintain appropriate, accurate and updated information

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36 – Part A: Availability of information of the beneficial ownership thereof”. In addition, the Tax Administration has sufficient powers to collect and request information regarding legal and beneficial ownership, either by direct access to the Commercial Registry or by request to any database or to the administrators of companies, whose identification is publicly available at the Commercial Registry itself and in the Tax Administration´s database. 81. Notaries are the primary source of beneficial ownership information. As previously mentioned, the incorporation process of a company is through a public deed of incorporation that must be executed before a notary. The notary, according to section 2 (n) of the AML/CTF Act is an obliged person who must conduct CDD on company owners and directors as part the incorporation process. According to section 4 of the AML/CTF Act, an obliged person must identify the beneficial owner of the company when it is establishing a business relationship. 82. In addition, in each notarised transaction performed by a company (which includes the transmission of SRL’s stakes, a modification in the bylaws, an increase in the company’s capital, etc.) the notary must undertake beneficial ownership identification. 83. Beneficial ownership information obtained by notaries is transmitted to the General Notary Council and is held in a centralised database called the Notaries Sole Index. Notaries must ensure that the transmitted information corresponds truthfully and exactly to the public documents issued or authorised by them. The Notaries Sole Index records separately the information obtained through customer declarations at the time of notarised transactions and the verified, aggregated information compiled by notaries. 84. Currently the Notaries Sole Index contains information on all acts authorised by notaries since 2004, and is available to competent authorities (including the Tax Administration). According to the General Notary Council, the Notaries Sole Index contains, overall, beneficial ownership information on approximately 2 200 000 entities. This includes the beneficial ownership information of 1 975 715 companies and partnerships, which is equivalent to around 63% of the total number of companies and partnerships registered in the Commercial Registry at the end of 2017. According to the information provided by Spain, the companies and partnerships that do not have beneficial ownership information in the Notaries Sole Index are entities that have not had a transaction with a notary since 2004. However, all changes of legal ownership for SRLs (which are approximately 93% of the registered legal entities) must be executed before a Public Notary through a public deed and the notary, as an AML obliged person, should identify the beneficial ownership in accordance with the AML/CTF Law.

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85. The second source of beneficial ownership information are financial institutions. Even though there is not an explicit obligation for companies to have a bank account, one of the essential documents for the registration of companies and partnerships is the funds deposit certificate showing that company’s capital has been deposited in full. The commercial legal framework stipulates that funds from the share capital should be paid by the persons who receive them, and in the name of the company being created, into a credit institution (section 62 of the Corporate Enterprises Act, sections 132 and 189 of Royal Decree 1784/1996). There is an exception for SRL’s incorporated after 1 January 2018 according to which the certificate showing that company’s capital has been deposited is not mandatory if the shareholders, in the public deed of incorporation, assume a joint and personal liability visa-vis the company and third parties for the amount of the company’s capital (section 62 of the Corporate Enterprises Act). 86. Financial institutions, as further described in A.3, have to identify beneficial owners when establishing a business relationship or performing an occasional wire transfer for an amount exceeding EUR 1 000 or performing other occasional transaction over a EUR 15 000 threshold (section 9.1 of Royal Decree 304/2014). 87. Since January 2016, financial institutions are required to submit a financial ownership file (which includes beneficial ownership information) to the SEPBLAC on the opening, modification or cancellation of financial accounts (section 43 of the AML/CFT Act and sections 50-57 of the Royal Decree 304/2014). The Tax Administration has access to this information (section 52 of the Royal Decree 304/2014). 88. Furthermore, on 21 March 2018, Order JUS/319/2018 was issued which requires all companies and partnerships to annually submit to the Commercial Registry a form identifying their beneficial owners (as defined in the Spanish AML/CFT Framework) as on 31 December of the previous year, when complying with the obligation to file their annual accounts. This new obligation was introduced in order to comply with the European Directive 2015/849, establishing a beneficial ownership central register within in each Member State. The dateline for reporting this information for first time was 31 July 2018. The sanctions for not complying with this requirement are the same as those applicable for the non-compliance with the obligation to file the annual accounts with the Commercial Registry, which are described below in paragraphs 178 and 181. 89. In conclusion, there is a network of overlapping mechanisms: Notaries, Financial institutions and the Commercial Registry (from 31 July 2018) which together should secure the availability of information on the beneficial owners of commercial entities in Spain. According to Article 25 of AML Law, obliged subjects must keep documentation (including ownership

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38 – Part A: Availability of information information) for a period of ten years. Additionally, with regard to notaries, they must keep public documents for 25 years in the notary’s office and for 75 years in the Notarial College to which the notary belongs. 90. Nonetheless, as already indicated, there is a large number of companies for which beneficial ownership information is not available in the Notaries Sole index, around 30% of all companies which were operating before 2004, and a much larger number, 65%, that do not comply with the obligation to file their annual accounts with the Commercial Registry. In year 2017, 1 137 097 out of the 3 156 095 entities registered with the Commercial Registry at the end of 2017 filed annual accounts for 2016 taxable year and other taxable years (approximately 35% of all registered companies and partnerships). The 1 906 658 entities that do not comply with this obligation have their Commercial Registry closed. Spain should monitor and enforce the effective compliance of the new obligation – established under Order JUS/319/2018 – of companies and partnerships to annually submit to the Commercial Registry a form identifying their beneficial owners. Effective enforcement of this obligation would close the gaps in information that currently exist in the Notaries Sole index. 91. During the current review period, Spain received approximately 9 requests for beneficial ownership information from 7 different jurisdictions; it was able to obtain the requested information in each case. No concerns were raised by the peers regarding Spain’s ability to exchange beneficial ownership information.

Beneficial ownership information – enforcement measures and oversight 92. AML/CFT supervisory functions are mainly exercised by SEPBLAC and cover a wide range of obliged persons. In addition, SEPBLAC coordinates its supervisory actions with the financial prudential supervisors in each sector in order to ensure compliance with obligations imposed under the AML Act. To date, the three financial supervisors have signed agreements with the Commission for the Prevention of Money Laundering and Monetary Offences with the aim to work in collaboration with SEPBLAC on AML supervision: Banco of Spain (mainly for banks and payment institutions), CNMV (for investment institutions) and DGSFP (for life insurance firms and pension funds). 93. SEPBLAC monitors using a mix of off-site and on-site tools. Off-site analysis is systematic, carried out at set intervals, and based on analysis of a comprehensive set of data and information of different origins. The off-site activities includes such supervisory actions as requests for information to the obliged entities and consultations with the obliged entities. Based on the off-site analysis results, inspections are planned and carried out choosing the most appropriate on-site visiting format. During on-site visits, the auditors

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must check the documents kept to identify beneficial owners as well as the measures and methods used by the obliged person to identify the beneficial owner. Between 2013 and 2017, SEPBLAC did around 300 in situ inspections: 166 to financial entities and 134 to non-financial entities. 94. SEPBLAC, adopts a risk-based supervision model (Article 47.3 of AML/CFT Act), concentrating its supervisory actions on the sector and activities that pose more ML/FT risks. The AML/CFT reviews (on site and off site activities) are based on an annual plan approved by the Commission for the Prevention of Money Laundering and Monetary Offences. 95. The table below gives an overview of the total number of AML onsite inspections carried out by the different supervisory authorities during the last years for which the statistics are available. AML on-site inspections SEPBLAC Bank of Spain CNMV DGSFP

2012

2013

2014

2015

2016

3 5 3 0

20 12 5 0

91 6 2 5

71 3 7 5

65 3 8 3

96. The table below sets out the number of on-site inspections performed on relevant AML obliged persons. AML on-site inspections on relevant AML obliged persons Credit institutions Credit finance institutions Mutual guarantee E-money Payment entities Broker-dealers, dealers, portfolio managers and insurers (life insurance) Auditing, accountants and tax advisors Notaries and registrars a Lawyers TCSP

2014

2015

2016

2017

23 3 4 0 4 7

22 2 0 0 4 0

13 0 0 3 2 4

14 5 1 2 1 4

6 2 10 2

7 1 5 4

1 0 15 0

1 2 9 0

Note: a. The on-site inspections of notaries and registrars mentioned in this table are those carried out by SEPBLAC with the OCP. Paragraph 104 specifies the number of individual inspections of notaries carried out by the OCP.

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40 – Part A: Availability of information 97. The frequency of AML/CFT inspections on those obliged persons that are sources of beneficial ownership information for companies and partnerships seems adequate to ensure compliance with the AML obligations as required under the standard, with the exception of notaries which is dealt with further below. 98. Where deficiencies are identified, supervisory authorities take measures to ensure that the deficiencies are remedied. These measures include warning letters, removal of the senior management or of the representative board, monetary sanctions and criminal sanctions. 99. The following table shows the numbers of warnings actions performed during the review period by SEPBLAC. Number of warning actions on AML obliged persons 2015

2016

2017

11

9

23

Financial institutions

4

8

20

Non-financial institutions

7

1

3

Total number of warning actions

100. Sanctions can be applied also in respect of individuals responsible for the failure In the case of severe infringements of the AML framework, pecuniary sanctions may be applied, and in some cases, non-pecuniary sanctions can be used, including the revocation of the financial institution’s license. Non-compliance with identification of beneficial owner(s) or record keeping obligations is considered to be a severe infringement, which can be sanctioned with, a fine between a minimum of EUR 60 001 and a maximum amount that may be imposed up to the highest of these figures: 1% of the net worth of the obliged persons, the sum of the economic substance of the transaction, plus 50% or EUR 150 000. In addition, that sanction would be accompanied by an individual sanction of a minimum of EUR 3 000 and a maximum of EUR 60 000, and it could be accompanied by (i) a private warning, (ii) a public warning; or (iii) temporary suspension from office. Royal Decree Law 11/2018 amended article 57 of the AML/CFT Act, establishing new sanctions in case of non-compliance with identification of beneficial owner(s) or record keeping obligations. 5 5.

Under amended article 57 of AML/CFT Act it is considered to be a severe infringement, which can be sanctioned with a fine between a minimum of EUR 60 001 and a maximum amount that may be imposed up to the highest of these figures: 10% of the net worth of the obliged persons, the sum of the economic substance of the transaction, plus 50% or EUR 150 000, the triple of the profits derived from the infringement, or EUR 5 000 000. In addition, that

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101. Under Section 54 of the AML/CFT Act, holders of administrative or management posts in or for an obliged person, whether individually or in professional associations, may be liable for any infraction attributable to their wilful or negligent misconduct. 102. Monetary sanctions in the amount of EUR 6 005 137 were imposed in 2014, EUR 5 605 690 of fines were imposed in 2015 and EUR 10 037 159 of fines were imposed in 2016 against obliged persons for the non-compliance with AML obligations. 103. The AML supervisors have opened an investigation and applied sanctions on the following types of AML obliged persons during 2014 to 2017: Number of monetary sanctions imposed by AML supervisors by type of obliged person 2014

2015

2016

2017

Financial institutions

5

6

8

3

DNFBP

0

2

5

10

Administrators

0

0

0

0

104. In addition to SEPBLAC, the OCP supervises notaries to ensure compliance with their AML/CFT obligations. The OCP has the legal duty to supervise the individual Notaries according to guidelines and a specific and approved inspection plan –Article 44.2.i) of AML/CFT Regulation. The results of the inspections performed by the OCP are sent to SEPBLAC. The OCP approved its methodology on November 2015. On April 2018, the OCP sent to SEPBLAC the results of its 82 individual inspections to notaries between 2015 and 2017 –“OCP inspection report”. SEPBLAC has reviewed the OCP’s inspection report and in addition has performed three on-site inspections to the OCP since 2014 in order to verify its compliance of the AML/CFT obligations. In particular, SEPBLAC has focused on internal control issues –as the obligation to have an AML/CFT external review or the fulfilment of the training obligations – of the centralised prevention body (OCP) which has relevant duties over the individual Notaries according to the Spanish legal framework. 105. While acknowledging that properly assessing the effectiveness of enforcement and inspection agencies is difficult, the proportion of notaries subject to AML/CFT inspections is low despite the fact that notaries have an important role in the establishment and operation of legal entities and are, therefore, an important source of beneficial ownership information. Spain sanction could be accompanied by (i) a private warning, (ii) a public warning; or (iii) temporary suspension from office.

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42 – Part A: Availability of information should further strengthen measures to ensure that notaries obtain adequate, accurate and up to date beneficial ownership information in all cases.

Inactive entities 106. According to the statistics provided by Spain, there are a significant number of companies that do not comply with the annual obligation to file CIT returns with the tax administration; although many of these have reported their total cessation of business or have their TIN removed. Additionally, as mentioned above in paragraph 90, for 2017, approximately 65% of the companies and partnerships registered in the Commercial Registry did not comply with the obligation to file the annual financial accounts. 107. During the onsite it was explained that the reason these entities do not comply with filing obligations was that a large number of companies that still exist are in fact completely inactive. 108. Entities that (i) do not submit their annual accounts to the Commercial Registry; or (ii) do not file their CIT returns for three consecutive years; are automatically subject to the closure of the Commercial Registry. The closure of the Commercial Registry prevents the company or partnerships from registering acts before the Commercial Registry. 6 The closure of the Registry is public information and the general public (including EOI partners) have access to this information online. In addition, the administrators of the entity could be liable for economic damages caused to entity due to the entity’s non-compliance and could be personally liable for the company’s debts in the case of bankruptcy. 109. According to Spain, the closure of the Commercial Registry impedes the entity from running a business in a normal way and limits the participation of the entity in commercial activities (including the possibility to obtain a loan from a financial institution or to transfer or acquire an asset subject to public registry, among many other transactions). 110. Nonetheless, an entity that has its Commercial Registry closed remains in legal existence, does not have an express legal prohibition from performing commercial operations and continues to have the legal obligation to comply with commercial and tax filing requirements. 6.

The only acts that can be registered when the registry is closed are: (i) removal or resignation of liquidators, (ii) revocation of powers of representation, (iii) liquidation of the company, (iv) appointment of liquidators, and (v) files that should be registered by judicial or administrative order. In the event that a company or partnership has its registry closed due to the non-compliance with CIT returns filing obligation, it can only register files if there is a judicial order that mandates that it has to be registered.

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111. There are 1 906 658 (approximately 60% of the companies and partnerships registered in Spain) that have their Commercial Registry closed. 112. From the Commercial Law perspective, the Institute of Accounting and Audit of Accounts (ICAC) is the body in charge of supervising the statutory auditors and imposing sanctions on companies and partnerships for not filing their annual accounts with the Commercial Register. 113. Annually, the ICAC receives from the Commercial Registry, the list of companies that were non-compliant with the obligation to deposit their annual accounts with the Commercial Register. Based on this list (and according to its institutional capabilities), the ICAC initiates infringement proceedings in relation to the non-compliant companies and partnerships and can impose monetary sanctions ranging between EUR 1 200 to EUR 60 000 and when the company’s annual turnover exceeds EUR 6 000 000, the fine can be increased up to EUR 300 000 (section 283 Corporate Enterprises Act). 114. The table below sets out the number of infringement proceedings conducted by the ICAC during the review period and the total amount of monetary sanctions levied. Sanctions Applied by ICAC for non-compliance with annual account filing requirement Years

Infringement proceedings conducted by the ICAC

Total amount of fines levied

2017

159

EUR 769 469

2016

179

EUR 1 037 437

2015

151

EUR 938 240

115. Another mechanism to address non-compliance with filing obligations, is the possibility for the Tax Administration to remove an entity’s TIN if the entity has not filed income tax returns in three consecutive taxable periods (section 147 of the Royal Decree 1065/2007). 116. Up to February 2019, the Tax Administration had removed 289 654 TINs. The table below shows the number of TINs removed by the Tax Administration during the review period. TINs removed by the Tax Administration Year

Number of TINs removed by the Tax Administration

2017

76 240

2016

88 826

2015

101 073

PEER REVIEW REPORT – SECOND ROUND – SPAIN © OECD 2019

44 – Part A: Availability of information 117. The removal of a TIN will greatly impede an entity from operating in domestic and cross-border transactions but until a company has been dissolved the obligation to file the company’s annual financial statements as well as the annual corporation tax declarations remains. The consequences of having the TIN removed are, among others: • the impossibility to register any document within the Commercial Registry until the TIN is reinstated or a new TIN assigned • the inability for the entity to make or receive payments in accounts or deposits held in credit institutions • inability to obtain a certificate of up-to-date tax and social security payments • third parties doing business with the entity whose TIN has been removed can be sanctioned with a fixed fine of EUR 150 per transaction or in the case of credit institutions the fine would be 5% of the amount of the transaction with a minimum of EUR 1 000 per transactions (section 202 General Tax Law). 118. In addition, up to 31 December 2017, 740 290 SRL and 23 643 SA had voluntarily reported to the Tax Administration their total cessation of business via a tax census’ status update. By checking box 140 of Form 036, an entity has declared that is has ceased to perform business activities but has not been dissolved and liquidated. 119. Nevertheless, these entities continue to have legal personality are obliged to file CIT returns annually and must comply with commercial obligations, such as maintaining accounting records and filing annual accounts with the Commercial Registry. 120. In practice, there could be cases in which a non-compliant entity continues to hold assets or conduct transactions entirely abroad without the need to engage with the Spanish financial system, a Spanish notary, other Spanish entities or with Spanish authorities, and does not maintain or file up to date ownership and accounting information. The availability of adequate, accurate and up to date beneficial ownership information for these entities might not be assured. Spain indicated that in practice it could be alerted by a treaty partner that this entity is operating abroad. 121. In view of the number of non-complying inactive entities, Spain should review its system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry.

A.1.2. Bearer shares 122. As discussed in the 2011 Report, shares of SA (joint-stock companies) and SCA may be represented by bearer shares (sections 23 and 113 of

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Part A: Availability of information– 45

the Corporate Enterprises Act). 7 Although bearer shares might be issued according to the 2010 Corporate Enterprise Act, and there is no amendment envisaged in this regard, since 1936 their issuance and transfer is strictly regulated (except during the period 1989-98). First, the names of all founders of companies must be included in the deed of the company, even in the case of bearer shares. Second, the subscription or transfer of bearer shares cannot be made by the mere transfer of the paper-share but requires the intervention of a public notary. Finally, if a company distributes dividends to the shareholder, it must identify its shareholders and inform the tax administration on an annual basis, in the same way as for registered shares. Information regarding the distributions of dividends is reported to the Tax Authority through Tax Administration Form 193. The Tax Administration uses this information to carry out supervisory activities and to prepare the prepopulated form of individual’s personal income tax. 123. Since 1998, the transfer of bearer shares of unlisted companies has to be performed through (1) a notary, (2) a securities company, or (3) a credit institution, for the ownership transfer to be valid (Additional Provision Three of Act 24/1988 on the Securities Market). Notaries, securities companies and credit institutions must keep records of the transaction and supply this information annually to the tax administration. They must supply the complete identification of the buyers and sellers (their name or business name, address and tax identification number), as well as the type and number of shares, and the amount, date and, if any, earnings for each transaction (section 42 of the General Regulation on Tax Auditing). Notaries also send this information to a centralised database of the Council of Public Notaries every month. If a transfer is not valid, then the purported transferee would have no rights as a shareholder, e.g. to receive dividends or vote. 124. Similarly, since 1998, the transfer of bearer shares of a publicly traded company is possible only after they have been dematerialised in book entries (as they cannot be traded on the stock market, section 496 of the Corporate Enterprises Act). 125. In addition, the AML law prohibits the institutions and persons covered by this Act to enter into, or continue, business relations with companies whose shares are represented by bearer securities, unless they determine by other means their structure of ownership and control. This prohibition does not apply to the conversion of bearer shares into registered securities or book‑entry securities (section 4(4) of AML/CFT Act).

7.

SRL cannot issue bearer shares because their shares (participaciones sociales) may not take the form of bonds or accounting entries. Therefore, the statutory provisions governing bearer shares cannot be applied to shares in a SRL.

PEER REVIEW REPORT – SECOND ROUND – SPAIN © OECD 2019

46 – Part A: Availability of information 126. As concluded in the 2011 Report, the issuance and transfer of bearer shares has been strictly regulated since 1936 (except the period 1989-98), and currently no one can derive income or capital gains from bearer shares without being identified by the tax administration. The only legacy issue relates to bearer shares issued before 1936 or from 1989 to 1998, that have not been transferred or for which the owners have not received any dividends since then. 127. In practice, Spain’s public officials express the view that bearer shares are very rarely used. During the current review period, Spain has not received any requests regarding bearer shares and no concerns were raised by the peers regarding this issue.

A.1.3. Partnerships 128. As already described in the 2011 Report, Spanish law provides for two types of partnerships: • Compañía Colectiva (general partnership) is a commercial entity with at least two members (who are traders) who are jointly, personally and severally liable for the partnership’s debts (sections 125-144 of the Commercial Code). • Compañía en Comandita Simple (limited partnership) is a commercial entity that only partly fulfils the criteria for unlimited liability entities since it comprises two classes of members: general partners, who are jointly and severally liable for the partnership’s debts, and limited partners, who incur no liability for the partnership’s debts and whose risk is limited to the amount of their contribution (they are essentially financial backers). Limited partners may not carry out any external act of management, even by virtue of a power of attorney (sections 145-150 of the Commercial Code). 129. According to the information provided by the Registrars Professional Association, at the end of calendar year 2017, there were 2 427 general partnerships and 423 limited partnerships.

Legal ownership and Identity Information Requirements 130. The 2011 Report concluded that the rules regarding the availability of legal ownership information in respect of partnerships were in compliance with the standard. There has been no change in the legal framework since the first round review. 131. The Commercial Register and tax administration have in their files the names of all the partners of general and limited partnerships. The names of all the partners of a general partnership and limited partnership must appear in the deed of incorporation of partnerships, which must be amended

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every time a partner changes. The deed must also include the contributions made by each of the founding partners (whether individuals or corporations), and their respective interests in the partnership (sections 125 and 145 of the Commercial Code). 132. All commercial entities, including general and limited partnerships, must register with the Commercial Register and provide their deeds of incorporation within a month of their creation and once they have been allocated a tax identification number. The same rules applicable to companies apply to partnerships. The tax obligations of commercial partnerships are the same as those of companies (see above). 133. In the case of limited and general partnerships it is not possible to transfer stakes without the consent of all the partners (section 143 of the Commercial Code). As a result, all partners know the identity of the other partners.

Beneficial ownership 134. As in the case of companies, information on the beneficial owners of partnerships is mainly available in application of AML/CTF Law. Identification of the beneficial owner(s) of a partnership is required to be available with the AML service provider engaged by the partnership. The public deed to create a partnership has to be executed before a notary and any change in the partnership deed (including change on partners) has to be performed before a notary. As notaries are obliged persons, it is ensured that a partnership will always engage an AML obliged person and therefore identification of beneficial owner(s) of partnership is required to be available in line with the standard. Identification of beneficial owners of partnerships may also be available with other AML obliged persons such as banks upon opening a bank account, accountants, auditors or lawyers who will typically be engaged by a partnership conducting business in Spain. 135. Sanctions, enforcement measures and oversight with regard to registration and tax declaration requirements of partnerships are generally the same as those for companies with share capital examined above. In addition, the rules for foreign partnerships are the same as those for foreign companies already mentioned in paragraph 49. 136. In practice, Spain has not had any difficulty in obtaining partnership ownership information for its EOI partners and no concerns in respect of availability of this information were reported by the peers.

A.1.4. Trusts 137. As concluded in the 2011 Report, the concept of “trust” does not exist under Spanish Law, and Spain is not a signatory of The Hague Convention

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48 – Part A: Availability of information of 1 July 1985 on the Law Applicable to Trusts and on their Recognition. However, Spanish domestic law does not have obstacles that prevents a Spanish resident from acting as a trustee, or a trustee of a foreign trust to invest or acquire assets in Spain.

Legal requirements 138. The 2011 Report concluded that information about settlors, trustees, and beneficiaries of foreign trusts operated by trustees resident in Spain is required to be available based on tax and AML obligations. These obligations are adequately supported by sanctions in case of non-compliance and the information is required to be kept for at least five years since the end of the period to which it relates as required under the standard. There has been no change in these legal requirements since the first round review. 139. As stated in the 2011 Report, the Spanish tax framework does not contain specific provisions on the taxation of the assets or income derived from foreign trusts with a link to Spain. These assets and income are subject to tax as any other assets or incomes of the trustee and any benefit distributed to beneficiaries must be declared in their tax returns. 140. The tax administration can use all the procedures at its disposal to seek and request any information from the trustees that are residents in Spain. Trustees resident in Spain (professional or not) are subject to record-keeping requirements for the determination of their income, as is any person resident in Spain. Thus, all records that are necessary for determining his/her income must be kept (section 29 of the General Tax Law). This typically includes the trust deeds and therefore the names of the settlors and named beneficiaries of the trust, and the nature of the assets in the trust that have generated the income. 141. Therefore, due to general tax requirements in Spain applicable to all taxpayers, a trustee resident in Spain must be able to provide the tax authorities with information on the settlors and beneficiaries of trusts that he/she administers. 142. Regarding the AML/CTF framework, there is an explicit requirement for obliged persons to take measures to identify beneficial owners of a trust (i.e. obligation to identify any natural person exercising ultimate effective control over the trust in addition to identification of settlors, trustees, protectors and all beneficiaries of a trust) contained in the AML Regulation (section 9.5 of Decree 304/2014). Any natural or legal person providing services of administering or managing a trust or corresponding legal arrangement is considered a trust and company service provider under the AML framework and covered by CDD obligations which include obligation to identify the beneficial owner in line with the standard (Section 2 of the AML/

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CFT Act). The CDD information has to be retained by the obliged person for a period of at least 10 years after the business relation has ended. In the case of breach of AML obligations criminal and administrative sanctions apply. 143. Non-professional trustees are not covered by the AML obligation. However, cases where a Spanish resident other than a lawyer, accountant or other AML obliged service provider would act as a trustee seem rather rare given that trust arrangements cannot be created under Spanish law and do not a have a tradition in Spain.

Implementation in practice 144. As trustees resident in Spain are subject to general tax law obligations, supervision and enforcement of trustees’ obligations under the tax law is the same as in respect of other persons as described in section A.1.1. There are no statistics within the tax administration regarding how many trustees have been audited during the review period. 145. As the concept of trusts is not recognised in Spain, there is no register of trusts. However, professional trustees are subject to AML/CFT obligations, and according to the new Single Additional Provision of AML/ CFT Law – as drafted by Royal Decree Law 11/2018-, TCSP should be registered in the competent Commercial Register. 146. Professional trustees operating in Spain are obliged to conduct CDD in respect to their clients and are subject to AML supervision by SEPBLAC. Trust and company services are also provided by lawyers who are also obliged persons. At 31 December 2017 there were 46 trust and company service providers (TCSPs) listed with SEPBLAC. There are no statistics of how many foreign trusts are administered by Spanish resident lawyers or TSCPs. According to the modification of the AML/CFT Act mentioned in paragraph 29, from April 2019 TSCPs will have special registration requirements and there will be more information available from then. During the review period the number of onsite inspections performed on TCSPs and lawyers was: SEPBLAC on-site inspections on TCSP and lawyers 2015

2016

2017

Lawyers

SEPBLAC on-site inspections

5

15

9

TCSP

4

0

0

TOTAL

9

15

9

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50 – Part A: Availability of information 147. While acknowledging that properly assessing the effectiveness of enforcement and inspection agencies is difficult, in the absence of information on the number of trusts for which they act, the number of on-site inspections of lawyers and TCSPs seems low given their potential importance in assuring the availability of legal and beneficial ownership information on foreign trusts and similar arrangements. It is recommended that supervisory activities in the case of lawyers and TCSPs should be strengthened in view of the limited number of on-site inspections undertaken and their potential role in the operation and management of trusts. 148. Spain did not receive any information request relating to a trust ownership information during the review period.

A.1.5. Foundations 149. Jurisdictions that allow for the establishment of foundations should ensure that information is available identifying the founders, members of the foundation council, beneficiaries, as well as any beneficial owners of the foundation or persons with the authority to represent the foundation. 150. As already concluded in the 2011 Report, there is no provision for private-interest foundations in Spanish law. Foundations in Spain are nonprofit entities established by individuals, legal entities or State public sector entities, exclusively for listed public-interest purposes. Foundations are not allowed to make distributions or return assets to the founders. 151. Foundations are regulated by the Foundations Act (Act 50/2002 of 26 December 2002). Article 3.3 of the Foundations Act expressly prohibits the creation of foundations whose main aim is to provide benefits to the founder, board members, and their relatives down to the fourth degree of kinship. Foundations are strictly regulated, have to register in the public Registry of Foundations and are supervised by a “protectorate” of the General State Administration. 152. In practice, Spain has not received any information request relating to a Spanish foundation during the review period.

A.2. Accounting records Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.

153. The 2011 Report found that Spain’s legal and regulatory framework for the maintenance of accounting records, including underlying documentation, for a minimum period of five years and its implementation in practice generally ensured the availability of accounting information in line with the

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Part A: Availability of information– 51

standard. Accordingly, Element A.2 was determined to be in place and rated Compliant. 154. Since the first round review there has been no change in the relevant legal obligations. Entities are obliged to keep accounting records by both the commercial and the tax law framework. 155. Around one third of the companies and partnerships registered in the Commercial Registry comply with the obligation to file annual accounts with the Commercial Registry and the oversight body, ICAC, imposes a very low number of sanctions, compared to the total number of non-compliant entities. In addition, under the tax law framework, there are a significant number of companies and partnerships that do not file annual CIT returns; although many of these have reported their total cessation of business or have their TIN removed. 156. According to Spain, the reason why these entities do not comply with filing obligations is that a large number of the companies that exist are in fact completely inactive. Nevertheless, the scale of non-compliance gives raise to concerns that accounting documents might not be kept by all entities. 157. Spain received a significant number of requests for accounting information and the information was available and had been accessed and exchanged with the EOIR partner requesting that information. Peers were, in general, satisfied with the responses and did not raise major concerns. 158.

The table of determinations and ratings is as follows: Legal and Regulatory Framework Underlying Factor

Deficiencies identified in the implementation of the legal and regulatory framework

Recommendations

Determination: In place Practical Implementation of the standard Deficiencies identified in the implementation of EOIR in practice

Underlying Factor

Recommendations

The large number of inactive companies that maintain legal personality and do not comply with their filing obligations raises concerns that accounting records information might not be available in all cases.

Spain should review its system whereby a significant number of non-complying inactive companies remain with legal personality on the Commercial Registry.

Rating: Largely Compliant

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52 – Part A: Availability of information

A.2.1. Obligations to maintain accounting records 159. The 2011 Report concluded that the legal and regulatory framework requires the availability of accounting records in line with the standard. Since then there has been no change in the relevant obligations. 160. Section 25 of the Commercial Code requires that all businesses (sole traders and commercial companies) keep orderly accounts, appropriate to the business’s activities, that allow chronological monitoring of all their operations, as well as periodic preparation of balance sheets and inventories. Trustees are covered by these obligations including in respect of trust income on which they are taxable. Notwithstanding the terms set forth in the laws or special provisions, a Book of Inventories and Annual Accounts and a Journal must be maintained (sections 25 and 28 of the Commercial Code): •

The Book of Inventories and Annual Accounts opens with a detailed initial balance for the company. The totals and trial balances are entered at least every three months. The inventory at year-end closing and the annual accounts are also entered in this book. Annual accounts must include the balance sheet, profit and loss account, a statement of changes in equity, a cash-flow statement (unless otherwise regulated), and the notes. These documents form a single unit (sections 34 to 37 of the Commercial Code).

•

The Journal records on a daily basis all the operations related to the activities of the company. Joint entry of the totals of operations for periods no longer than one month can be recorded, with the condition that the detail appears in other concordant books or registers.

161. All the accounting books and documents must be kept with clarity, by order of dates, without blank spaces, interpolations, crossings out or erasures (section 29 of the Commercial Code). The Book of Inventories and Annual Accounts and the Journal must be submitted to the Commercial Register for certification (section 27). Therefore, SAs, SRLs and SCAs must deposit their annual accounts to the Commercial Register, and companies that omit doing so are reminded of their duties and ultimately sanctioned with a monetary fine (Section 283 Corporate Enterprises Act) and no document pertaining to the company can be filed with the Commercial Registry whilst the non-compliance persists (Section 282 Corporate Enterprises Act). 162. Branches of foreign companies are subject to the accounting requirements as Spanish companies. For tax purposes, if a non-resident company carries on business in Spain through a permanent establishment (a wider category that that of branches applied under commercial law) it is required to keep its accounts under the provisions of the Code of Commerce.

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163. Spain’s General Accounting Plan was adopted by Royal Decree 1514/2007, of 16 November 2007 and applies to all companies, irrespective of their legal form. The Plan establishes the accounting principles and criteria, as well as the guidelines for registry and evaluation and production of accounts for all the companies in general. Additionally, Royal Decree1515/2007, of 16 November 2007 contains the General Accounting Plan for Small and Medium Enterprises (GAP for SMEs), with reduced and simplified contents in terms of the criteria for registry, evaluation and information. 164. In addition to the above-mentioned commercial law rules, all taxpayers have a general obligation to keep and maintain accounting books, tax records, and any document or information with tax relevance, related to the compliance with its own and third-party tax obligations, for purposes of an eventual request for information by the Tax Administration. (section 29 of the General Tax Law). 165. Regarding the retention period, the Commercial Code establishes a six years retention period counted from the date of the last entry recorded in the books. In addition, the Tax Law provides that the records must be kept for the longest period between: (i) the period provided for by the Commercial Code or (ii) the statute of limitations for tax purposes period. The obligation to keep the documentation corresponding for a certain period may extend beyond its limitation period if such documentation is necessary for the verification of a tax liability not yet barred under the statute of limitation (section 70.3 General Tax Law). 166. In the case of individual entrepreneurs terminating their activity, they are still bound to keep the accounting books and underlying documents for a period of six years. In the case of death, the responsibility for the safekeeping of the accounting books and underlying documents passes on to the entrepreneur’s heirs. For dissolved entities, the liquidators of the entity are obligated to maintain the accounting books and underlying documents for 6 years.

A.2.2. Underlying documentation 167. The 2011 Report indicated that in both commercial law and tax law, underlying documentation must be maintained in Spain for the same amount of time as the accounting documents that go with it. This continues to be the case. 168. The Commercial Code specifies that businesses must keep not only the books, but also correspondence, documentation and receipts related to their business, duly ordered (section 30). 169. In addition, if tax returns are filed electronically, the taxpayer must keep copies of the original data underlying the accounting statements filed.

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54 – Part A: Availability of information Taxpayers also have an obligation to preserve invoices, documents and evidence related to tax obligations. Not doing so is an offence punishable by a fine (sections 29 and 200 of the General Tax Law).

Oversight and enforcement of requirements to maintain accounting records 170. There are two frameworks for the oversight and enforcement of requirements to maintain accounting records: tax law and commercial law. 171. Under the tax law, the Tax Administration takes actions to verify the compliance of formal tax obligations. Specific statistics for sanctions imposed by the Tax Administration for the failure to keep proper account records are not available. However, during the review period, the total number of sanctions applied by the Tax Administration for non-compliance with tax obligations was as follows: Sanctions imposed by the Tax Administration for non-compliance with tax formal obligations Years

Sanctions imposed by the Tax Administration for non-compliance with formal and substantial tax obligations

2017

213 988

2016

294 206

2015

351 754

172. The Tax Administration also receives invoices in real time from 60 000 operators that cover 80% of the business transactions, thus allowing the Tax Administration to detect indicia of business activity in real time. In addition, the Spanish Tax Administration has a powerful information system which is fed by the large number of information returns that a wide number of economic business operators are obliged to submit. This allows an effective supervision of the economic transactions realised by entities and includes: •

information regarding the economic and professional transactions carried out with other operators (information on income and payments related to sale of goods and services)

•

financial information (financial account movements in amounts above EUR 3 000, interest, dividends, sale of financial assets, loans, balance at year end)

•

immovable property information (rentals, Land registry)

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• •

electric energy supply companies’ information sent to the Tax Administration in order to identify contract consumers, immovable land references and addresses international information (CbCR, CRS, FATCA).

173. Spain indicates that under its tax law, the Tax Administration takes actions to verify the compliance of formal and substantive fulfilment of tax obligations. In this regard, supervision is either partial –comprising a large number of CIT taxpayers, or general – supervision on a taxpayer for several taxes and periods, which allows for detection of more complex infringements. Verifications that taxpayers developing economic activities fulfil their obligations of keeping annual accounts, accounting records and the content of sent and received invoices are undertaken through these programmes. Supervision checks of non-filing taxpayers are carried out by automated crosschecking of information returns, referred to in paragraph 174 above. In addition, all CIT returns filed at the Tax Administration are subject of a validation and contrast process with information already in disposal of the Tax Administration, and checked and verified considering risk indicators or infringements detected. In this way, the Tax Administration’s information system allows for the detection of taxpayers carrying out unreported economic activities, which are then requested to file the pertinent tax return. 174. In cases where tax returns are not filed for three consecutive years, notwithstanding the applicable sanctions, the entity is deregistered in the Tax Administration Index of Entities. This fact is communicated to the Commercial Registry, closing the registry file with all of the consequences that implies and it could also lead to revocation of the TIN. In addition, for high risk sectors, supervision checks are done on the informal economy by onsite tax inspectors’ audits, co-ordinated entry and search operations, supported by IT audit units in order to verify information on the census of taxpayers carrying out economic activities. The number of CIT Control supervisions conducted was 563 318 in 2015, 582 148 in 2016 and 546 720 in 2017. 175. In addition to the verification checks, when conducting a tax audit, the auditor verifies the accounting records and registry books. If there are no accounting records or the records contain errors that results in an incorrect assessment of the tax liability sanctions may be applied (sections 191 to 197 of General Tax Law). Also, section 200 of the General Tax Law sets out a sanction specifically for non-compliance with accounting and record-keeping requirements, which applies if the above-mentioned sections do not apply. 176. As mentioned in element A.1, for 2017, a large number of entities did not file CIT returns despite having the legal obligation to do so. A significant number of the entities that did not file the CIT return were entities that by 2016 already had their commercial registration closed (preventing the deposit of new instruments as explained in paragraphs 108 to 111). These entities do

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56 – Part A: Availability of information not appear to have any economic activity, when the Tax Administration performs verification cross-checks with the information that is provided by other governmental bodies, third parties and treaty partners, as described above. However, that does not exempt them from return filing obligations. 177. Under the Commercial Law, the ICAC is the body in charge of supervising statutory auditors and imposing sanctions on companies and partnerships for not filing their annual accounts with the Commercial Register. Inactivity does not exempt a company from submitting financial statements to the Register. The company is required to continue all of the procedures directed when it is active. 178. Annually, the ICAC receives from the Commercial Registry, the list of companies that were non-compliant with the obligation to deposit their annual accounts with the Commercial Register. Based on this list (and according to its institutional capabilities) the ICAC may impose monetary sanctions ranging between EUR 1 200 to EUR 60 000 and when the company’s annual turnover exceeds EUR 6 000 000, the fine can be increased up to EUR 300 000 (section 283 Corporate Enterprises Act). 179. The table below sets out the number of monetary sanctions imposed by the ICAC during the review period; this suggests that proceedings are taken against less than one in every ten thousand non-compliers. Sanctions applied by ICAC for non-compliance with annual account filing requirement Years

Infringement proceedings conducted by the ICAC

2015

151

Total amount of fines levied EUR 938 240

2016

179

EUR 1 037 437

2017

159

EUR 769 469

180. As mentioned in element A.1, for 2017, 1 137 097 companies and partnerships filed their annual accounts with the Commercial Registry out of the 3 156 095 entities registered with the Commercial Registry. Therefore, around 35% of the companies and partnerships are complying with this filing obligation. 181. As previously mentioned, entities that do not submit their annual accounts to the Commercial Registry face closure of the Commercial Registry preventing the company or partnership to register acts. The closure of the Registry is public information and the general public (including EOI partners) have open access to this information online. In addition, the administrators of the entity could be personally liable for economic damages caused to an entity by noncomplying with the filing obligations of the entity and could be personally liable for the companies’ debts in the case of bankruptcy.

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182. According to Spain, the closure of the Commercial Registry impedes the entity to run business on a normal way and limits the participation of the entity in the commercial traffic (including the possibility to obtain a loan from a financial institution or to transfer or acquire an asset subject to public registration, among other transactions). Nonetheless, an entity that has its Commercial Registry closed continues to have legal existence, does not have an express legal prohibition to perform commercial operations and continues to have the legal obligation to comply with its commercial and tax filing requirements. 183. As mentioned in A.1., there are 1 906 658 (approximately 60% of the companies and partnerships registered in Spain) that have their Commercial Registry closed. 184. Additionally, under the Commercial Law, certain types of commercial entities are required to name an auditor for the certification of their accounts. For example, publicly traded entities and entities that reach a certain size measured by the turnover, the size of the balance sheet or the number of employees are required to have an auditor. The auditor will certify that an entity’s accounts are kept according to the applicable legal obligations and accurately reflect the situation of the entity. Auditors are independent professionals and are regulated by the ICAC. For the fiscal year 2016-17, 60 495 legal entities reported their audited accounts to the ICAC. 185. In summary, a low percentage of companies and partnerships comply with the obligation to file annual accounts with the Commercial Registry and the number of sanctions imposed by ICAC is small. Further, a significant number of companies and partnerships do not file CIT returns, although many of these have reported their total cessation of business (740 290 SRL and 23 643 SA) or have their TIN removed (289 654 entities) (see paragraphs 116 and 118). 186. According to Spain, the reason why many entities did not comply with these two important filing obligations is that a large number of the companies that exist are in fact inactive and do not perform economic activity, hence there are no transactions to be recorded in the accounting records. However, such entities may continue to hold assets. 187. During the current review period, Spain received a significant number of requests for accounting records information and was able to respond to the received requests. In general, the peers reported that they did obtain the requested information from Spain and where satisfied with Spain’s responses. 188. The closure of the registry is an obstacle for non-complying entities to perform economic activity in Spain but it does not prohibit them from doing so. Furthermore, there could be cases in which these entities could

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58 – Part A: Availability of information hold assets or conduct transactions entirely abroad without the need to engage with the Spanish financial system or being reported by third parties. While the negative risk or impact is difficult to assess, and Spain has been able to respond to requests for accounting information from treaty partners, it cannot be assured that accounting information would be available, in those cases, in line with the standard. 189. Spain should review its system whereby a significant number of non-complying inactive companies to remain with legal personality in the Commercial Registry.

A.3. Banking information Banking information should be available for all account-holders.

190. The 2011 Report concluded that banks’ record keeping requirements and their implementation in practice were in line with the standard. The A.3 element was determined to be “in place” and rated “compliant”. 191. Banks and other financial institutions are subject to the AML/CFT laws. As such, banks are required to identify and verify their customers and the beneficial owner(s) of their customers. Banks and other financial institutions are required to conduct on-going monitoring and must retain these records for a period of at least ten years after the termination of the business relationship or the execution of the financial transaction. 192. During the current review period, Spain received several requests for banking information. Peers were satisfied with the quality of the responses received. Spain was generally able to provide the information requested. 193.

The table of determinations and ratings is as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

A.3.1. Availability of banking information 194. Jurisdictions should ensure that banking information, including beneficial ownership information, is available for all account holders. 195. As part of the AML CDD measures, banks and other financial institutions, as AML: obliged person, are required to: (i) determine the structure

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of ownership and control of entities and (ii) identify and take reasonable measures to verify the identity of the beneficial owner(s), as a condition to establish the business relationship or executing an occasional transaction (section 4 AML/CFT Act). 196. As indicated under section A.1.1, the identification of the customer (individual or legal person) must be based on reliable and irrefutable documentary evidence, such as: official identification documents, a deed of incorporation or extract from the Chamber of Commerce and Industry or other competent authority (section 6 of Royal Decree 304/2014). Banks are prohibited from opening or maintain anonymous accounts. 197. The 2016 ToR specifically require that beneficial ownership information be available in respect of all account holders. The identification process of beneficial owners is an integral part of the CDD procedure. Current provisions (section 7 of the AML/CTF Act) provide that banks must apply CDD measures (including the identification and verification of beneficial owners) when establishing a business relationship or performing an occasional wire transfer for an amount exceeding EUR 1 000 or performing other occasional transaction over a EUR 15 000 threshold (section 9.1 of Royal Decree 304/2014). 198. For these purposes, an obliged person can rely on a sworn declaration by the customer to identify the BOs. However, the obliged person must obtain documentary proof or information from reliable third party sources in order to verify the identity of the beneficial owner(s) when: (i) there are doubts regarding the adequacy and veracity of the information declared by the customer or (ii) when there are circumstances requiring enhanced CDD. 8 According to Article 7.3 of the AML/CFT Act, obliged entities should not establish business relationships when they cannot apply CDD measures. If the CDD cannot be applied to a current client, obliged entities should close the account and analyse its operations. 199. As previously indicated under section A.1.1, Spain’s AML legal framework (section 4 AML/CFT Act and section 8 of Royal Decree 304/2014) is in line with the beneficial ownership definition under the 2016 ToR. According to Spain’s AML/CFT Act, a beneficial owner is: “the natural person(s): (a) on whose behalf the relationship is to be established or the 8.

The situations where enhanced measures are required are: (a) non-face-to-face business, cross-border correspondent banking, transactions with Politically Exposed Persons (AML/CFT Law sections 12 to 15), and (b) situations that by their nature can present a higher risk, including those listed in regulation (e.g. private banking, money remittance, foreign exchange operations, companies which use bearer shares) (AML/CFT Law section 11 and Royal Decree 304/2014 section 19).

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60 – Part A: Availability of information transaction conducted; (b) who ultimately owns or controls (direct or indirect) 25% or more of the capital or voting rights or who, by other means exercises control, directly or indirectly controls, over the management of a legal person; or (c) who owns or controls 25% or more of the property of a legal arrangement, or, where the beneficiaries have yet to be determined, the class of persons in whose interest the legal arrangement is set up”. Royal Decree 304/2014 includes additional detail, such as in section 8, which contains the obligation to identify the senior managing official in cases where no natural person is identified under the definition of beneficial owner set out above. In the case of trusts, section 9.5 of Royal Decree 304/2014 requires banks to identify the settlor, trustee(s), protector(s), beneficiary or class of beneficiaries, and any other natural person exercising control over the trust. For other relevant legal arrangements (including fiducias), the person(s) holding equivalent or similar positions in the case of trusts must be identified. 200. Regarding the retention period, the AML legal framework requires obliged entities to keep documentation gathered for compliance with the AML framework (including copies of documents obtained through the CDD process) for ten years from the termination of the business relationship or the completion of an occasional transaction (section 25 of the AML/CFT Act and section 28 to 30 of Royal Decree 304/2014). 201. An obliged person is allowed to rely on CDD measures applied by certain third parties, with the exception of ongoing monitoring of the business relationship. The reliance on a third party is only possible if the third party is subject by the AML/CF of other Member States of the European Union or equivalent third countries, even if the documents or data required by the latter are different to those under the Spanish AML/CTF Act. However, the obliged person remains ultimately responsible for ensuring that CDD measures are applied in accordance with the Spanish AML framework, even when the breach is attributable to the third party. Reliance on third parties for the implementation of due diligence measures shall require the prior execution of a written agreement between the obliged person and the third party to formalise the respective obligations. This agreement must contain the obligation for the third parties to make information obtained in application of the due diligence measures immediately available to the obliged person. Likewise, the agreement has to oblige the third parties to send the obliged person, at the request of the latter, a copy of the relevant documents pursuant to this section (section 8 of the AML/CTF Act and section 13 of the Royal Decree 304/2014). 202. Beneficial ownership information should be regularly updated according to a risk-based approach. Banks and other financial institutions must prepare a handbook on the prevention of money laundering and terrorist financing. The handbook is to include the timing as to how often information

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is to be updated. For clients with higher than average risk, 9 that information must be updated, at least, annually (Art. 11.2 Royal Decree 304/2014). 203. Since January 2016, credit institutions are obligated to report information regarding the opening and cancellation by any individual or legal person of current accounts, savings accounts, securities accounts and term deposits to SEPBLAC. This also includes information regarding the legal and beneficial owner(s) of the account or deposit. SEPBLAC includes this information in the Financial Ownership File, which is a centralised database, which contains prescribed information on all customers’ bank and securities accounts in Spain. The information in the database includes the date of account opening, the name of the account holder, the name of the beneficial owner, the name of the financial institution and the branch location. 204. SEPBLAC and the Bank of Spain supervise banks’ compliance with AML/CTF obligations. SEPBLAC and Bank of Spain carry out their supervisory duties mainly through on-site and off-site activities. In the event a financial institution is non-compliant with the law, SEPBLAC and Bank of Spain may impose formal or informal enforcement measures. 205. In the case of severe infringements of the AML framework, both pecuniary and non-pecuniary sanctions may be applied, including the revocation of the financial institution’s license. Non-compliance with identification of beneficial owner(s) or record keeping obligations is considered to be a severe infringement, which can be sanctioned with (i) either a private or public warning; and (ii) a fine that ranging from EUR 60 001 up to EUR 150 000. 206. It should be noted that under Section 54 of the AML/CFT Act, those who hold administration or management posts in or for an obliged person, whether individually or in professional associations, may be liable for any infraction attributable to their wilful or negligent misconduct. During 2015 and 2016 no sanctions were imposed to persons holding administration or management posts. 207. The enforcement and oversight of the AML/CTF framework is already described in section A.1 of this report, in paragraphs 92 to 103. 208. In practice, Spain has not had any difficulty in obtaining banking information for its EOI partners and no concerns in respect of availability of banking information were reported by the peers. 9.

An accurate description of customers potentially posing a higher than average risk has to be included in the AML/CTF manual that all obliged persons shall have. The description shall be based on a statutory provision (such as the ones provide on section 19 of Royal Decree 304/2014) or resulting from the risk analysis.

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Part B: Access to information 209. Effective exchange of information requires that a jurisdiction’s competent authority has adequate powers to access and obtain a variety of information that may be relevant to a tax inquiry. Jurisdictions should also have in place effective enforcement mechanisms to compel production of information. Sections B.1 and B.2 evaluate whether the competent authority has the power to obtain and provide information that is the subject of a request under an EOI agreement from all relevant persons within their territorial jurisdiction and whether any rights and safeguards in place are compatible with effective EOI.

B.1. Competent authority’s ability to obtain and provide information Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).

210. Spain’s access powers were assessed under the 2010 ToR and found to be generally adequate. In the 2011 Report, element B.1 was determined to be “in place” and rated Compliant. Spain’s tax authorities have broad powers to obtain bank, ownership, identity, and accounting information and to compel the production of such information where needed. Spain’s competent authority is empowered to obtain all such information from any person within its jurisdiction who is in possession of the information. Since the last review, no relevant changes to the legal framework have been made. 211. Under Spanish law, the powers to access information do not vary depending on the type of information sought. That is, the powers can be consistently applied regardless of whether the information is ownership, identity, banking or accounting information. 212. Much of the information requested by EOI partners continues to be contained in the Tax Administration’s database or directly accessible by the tax administration from the Commercial Registrar, the Property Registrar and the Notaries Sole Index database.

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64 – Part B: Access to information 213. When the requested information is not found in the database or registry, the tax administration uses its broad access powers to obtain information. In particular, these powers allow the authorities to request information from any person who may have the information sought. Banking secrecy is lifted in all tax matters. There are enforcement measures available to compel the disclosure of information, but they often do not need to be used. This legal framework allows the Spanish tax authorities to collect the information requested by their partners. 214.

The table of determinations and ratings remains as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

B.1.1. Ownership, identity and bank information and B.1.2 Accounting records 215. The 2011 Report concluded that appropriate access powers are in place for EOI purposes. The Tax Administration has broad access powers to obtain all types of relevant information including ownership, accounting and banking information from any person for EOI purposes. These same rules continue to apply following the 2011 Report.

General access to information 216. In Spain, the competent authority, which handles EOI requests, is the head of the Information Office of the Tax Administration (ECI: Equipo Central de Información). This office gathers information for both domestic and international tax purposes. 217. Pursuant to the Section 177 ter of the General Tax Law, all provisions and procedures for collecting information for domestic purposes contained in the General Tax Law may be used to gather information for EOI purposes. 218. Section 29 of the General Tax Law sets out the general obligations of taxpayers. According to this section, taxpayers have an obligation to provide the tax authorities with any books, records, documents or other information that the taxpayer is under a duty to preserve in connection with the performance of his/her own or a third party’s tax obligations. In addition, it states that taxpayers must summit on demand by the tax authorities or by means of periodic returns any data, report, background particulars or evidence having significance for tax purposes.

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219. Subsection 93(1) of the General Tax Law sets out further obligations on any person, entity or arrangement to provide the tax administration with any type of information having tax significance in connection with the performance of their own tax obligations or linked to their economic, professional or financial relations with others. This provision also includes banks and other financial institutions. 220. Section 94 of the General Tax Law is similar to subsection 93(1) but applies to public authorities. It specifies that the requested public authority does not need to obtain the consent of the person subject of a request before providing the tax administration with the information. In particular, the SEPBLAC must provide the tax administration with any information of tax relevance it may request, provided that the request comes from the director of the concerned tax department (section 94(4) of the General Tax Law and section 56 of the General Regulation on Tax Auditing). 221. According with section 37 to 42 ter of Royal Decree 1065/2007, financial institutions have to provide annually to the tax administration information with relation to all financial accounts they hold. This information must include: (i) the full identification of the account holder, (ii) the balance of the account at the end of the calendar year and (iii) the average monthly account balance. Additionally, the financial institutions should annually provide to the tax administration information about all granted loans and credits, all debit and credit card payments, all cheques that were issued, among other information. Therefore, the tax administration has a robust database regarding bank information.

Access to ownership and accounting information in practice 222. The main sources of ownership, accounting and banking information are the tax administration’s database. The tax administration’s database is directly accessible by the EOI Unit and contains information obtained for domestic tax purposes. This database also contains information from the periodic declarations made by third parties such as public notaries and the Commercial Registry. 223. In addition, the competent authority has direct access to the Commercial Registry. This access allows the competent authority to obtain all information held by the register about the identity of owners of commercial entities and other entities registered with them without having to exercise any particular power to access it. The competent authority also has direct access to the Notaries Sole Index, which as previously mentioned, contains entities’ legal and beneficial ownership information. 224. When a request for information received cannot be answered satisfactorily using the tax administration’s database, the Commercial Registry

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66 – Part B: Access to information or the Notaries Sole Index, the competent authority will issue a notice to a taxpayer or any third party to provide information, generally within 10 working days of receipt of the notice. The process to issue a notice is systematic and there is a template form for the notice. This form does not mention that the information is requested for EOI purposes. 225. Occasionally, Spanish officials will visit companies to obtain information. In these cases the local tax office is required to visit the information holder and collect the information. 226. There were no cases during the review period where the scope of access powers limited the Competent Authority’s ability to obtain information for EOI purposes. Also, no concerns were reported by peers.

Access to banking information in practice 227. As the tax administration’s database already contains extensive bank information, when the requesting partner provides the information for the identification of either the bank account or the account holder, the competent authority can often exchange bank information without having to collect the information from the bank or the account holder. 228. In the cases where the information is not available in the tax administration database, section 93 of the General Tax Law allows the Tax Administration to obtain the requested information from the banks or financial institutions. The request of information to banks has to be done through a centralised national office of the tax administration dedicated to the gathering of information from financial institutions for both domestic and exchange of information purposes. This office is part of the competent authority (ECI). 229. The requests for all or some of the account movements must be approved and signed by the Head of the Tax Audit Department. The requests for other bank information (including the identification of the account holder) does not need any special authorisation; it is approved and signed by the head of the competent authority office. 230. Information can be requested in writing (usually by electronic means) or by a visit to the bank. The minimum term that has to be granted to financial institutions to answer the request for information is 15 days.

B.1.3. Use of information gathering measures absent domestic tax interest 231. The concept of “domestic tax interest” describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes.

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232. The 2011 Report concluded that the access powers of Spain’s tax administration are not curtailed by any requirement that its power may only be exercised where there is a domestic tax interest. There has been no change in the legal framework in this respect since the first round review. 233. According to the Spanish authorities, Spain had received EOI requests where the requested information is not relevant for domestic tax purposes. During the period under review, there was no case where Spain’s access powers would not be applicable due to lack of domestic tax interest.

B.1.4. Effective enforcement provisions to compel the production of information 234. Jurisdictions should have in place effective enforcement provisions to compel the production of information. 235. Failure to comply with a Tax Administration’s request for information constitutes a serious tax offence, which may lead to an administrative pecuniary penalty. This penalty applies irrespective of whether the information is requested for domestic or EOI purposes. 236. The pecuniary penalty is a fine that can be graded according to the number of unattended requests. The fine ranges from EUR 150 to EUR 400 000. 237. The Spanish authorities can also search business premises and seize documents for EOI purposes, in the framework of a domestic tax audit (section 142(2) of the General Tax Law), provided, in the case of private premises, they obtained the consent of the person or with a judicial order (section 113). 238. The Spanish authorities can seize documents, pursuant to section 146 of the General Tax Law, together with section 181 of the General Regulation on Tax Auditing. The tax administration can put under seal, deposit or seize documents in the framework of a tax audit, when the measure is necessary to prevent the destruction or alteration of evidence of tax obligations.

B.1.5. Secrecy provisions 239. The 2011 Report concluded that the tax administration’s access powers provide for access to banking information in line with the standard. There has been no change since the first round review in this respect.

(a) Bank secrecy 240. Bank secrecy in Spain derives from the right to privacy contained in Article 81.1 of the Constitution. It is codified in Act 26/1988 requiring financial institutions to keep client information confidential, with certain exception.

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68 – Part B: Access to information 241. Section 93.3 of the General Tax Law expressly provides that bank secrecy does not apply to the Tax Administration. Banks and other financial institutions have an obligation to report information pursuant to section 93 of the General Tax Law. In addition, there are other provisions in the General Tax Law requiring them to periodically provide certain types of information to the tax administration. 242. Any type of banking information can be requested by the tax administration, including all or some of the account movements, financial transactions, supporting documents thereof, identity of the holder of the account of origin or destination of the movements, cheques, or other debit or credit entries.

(b) Professional privilege 243. Professional secrecy is protected by the Constitution. Not­ with­ stand­ing, section 93(5) of the General Tax Law lifts the professional secrecy vis-à-vis the tax administration for economic data (e.g. assets and wealth) and for non-economic data that would not violate the right to honour or personal and family privacy. 244. The Spanish authorities indicate that this provision also applies with regard to attorney-client privilege. The courts have determined that, concerning a request for information made by the Spanish tax authorities, the scope of the attorney-client privilege only covers strictly personal, intimate, nonpatrimonial or confidential data of their clients unconnected to the act of tax content that serves as a basis for the request of information. 10 245. The Spanish competent authority and its EOI partners indicate that professional secrecy has never caused any problem in practice.

B.2. Notification requirements, rights, and safeguards The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

246. The 2011 Report found that the rights and safeguards applicable to persons in Spain were compatible with effective EOI. Element B.2 was, therefore, determined to be “in place” and rated Compliant. 247. There have been no relevant changes to Spain’s legal framework and practices concerning rights and safeguards since the 2011 Report. As such, Element B.2 continues to be determined as “in place” and rated Compliant. 10.

National Court Judgment of 20 October 2011 (346/2008).

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248.

The table of determinations and ratings remains as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

B.2.1. Rights and safeguards should not unduly prevent or delay effective exchange of information 249. Spanish domestic law does not require the notification of the person who is the subject of an EOI request. In addition, when requesting information, the Spanish tax authorities do not have to inform the information holder of the purpose of the request. 250. In practice, the Tax Administration’s database contains a significant amount of information and therefore Spain often does not need to seek information from a third party. 251. An information holder may appeal a request for information from the Spanish Competent Authority in the same way and under the same conditions as an appeal to any other administrative act of the tax administration (article 227.1 of the General Tax Law). The only person(s) entitled to appeal are those to whom the request is addressed. The person subject of an EOI request cannot appeal against the decision of sending the requested information to the EOI partner. The appellant can have access to the information provided by the requesting jurisdiction but not to the Competent Authority’s letter. Under Spanish laws, the communications between Competent Authorities are strictly confidential and they should not be accessible and obtainable by the information holder. According to Spain’s Competent Authority, if a Court were to request additional information, Spain’s Competent Authority would always ask for permission from the requesting party to disclose the letter of request or the information provided by the requesting jurisdiction. 252. During the review period, there was only one case where the information holder appealed the Spanish Competent Authority’s request letter. In this case, the information holder argued that the information requested lacked tax relevance. The Administrative-Economic Court dismissed the appeal. Therefore, the requested information was collected by the Competent Authority and sent to the requesting jurisdiction after about a year. 253. The Spanish Competent Authority did not report having experienced any practical difficulties with the application of rights and safeguards, nor did any of its EOI partners.

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Part C: Exchanging information 254. Sections C.1 to C.5 evaluate the effectiveness of Spain’s EOI in practice by reviewing its network of EOI mechanisms – whether these EOI mechanisms cover all its relevant partners, whether there were adequate provisions to ensure the confidentiality of information received, whether they respect the rights and safeguards of taxpayers and third parties, and whether Spain could provide the information requested in an effective manner.

C.1. Exchange of information mechanisms Exchange of information mechanisms should provide for effective exchange of information.

255. The 2011 Report concluded that the EOI mechanisms in Spain were “in place” and rated Compliant. At that time, Spain had a large network of agreements allowing EOI for tax purposes with 99 partner jurisdictions. 256. According to the 2011 Report, Spain had signed 89 DTCs (of which 10 were not in force) and 7 TIEAs. Spain was also Party to the Multilateral Convention and a signatory to its Protocol. In accordance with the 2011 Report, with the exception of the agreement with Morocco, all of Spain’s EOI agreements were compliant with the international standard. 257. Since the 2011 Report, the Multilateral Convention as amended by its Protocol entered into force in respect of Spain on 1 January 2013. 258. In addition, Spain has signed 11 new tax treaties and 7 new protocols to existing tax treaties. Spain is also bound to other European Union members by Council Directive 2011/16/UE of 15 February 2011 concerning the administrative co-operation in the field of taxation. 259.

The table of determinations and ratings remains as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

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C.1.1. Foreseeably relevant standard 260. Exchange of information mechanisms should allow for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. This concept, as articulated in Article 26 of the OECD Model Tax Convention, is to be interpreted broadly, but does not extend so far as to allow for “fishing expeditions”. The Article 26 commentary recognises that the standard of “foreseeable relevance” can be met when alternative terms are used in an agreement, such as “necessary” or “relevant”. The 2011 Report concluded that all of Spain’s DTCs, except the DTC with Morocco, met the foreseeably relevant standard. This continues to be the case, The 2011 Report also found that Spain’s TIEAs met the foreseeably relevant standard. 261. The 2011 Report concluded that the DTC with Morocco did not cover all information that may be foreseeably relevant to the implementation of the administration or enforcement of the domestic laws of the parties, as it restricted EOI to “carrying out the provisions of the present Convention”. Following the 2011 Report, the Spanish Government contacted the Moroccan Ministry of Finance and was informed that Morocco intended to sign the Multilateral Convention. Morocco signed the Multilateral Convention on 21 May 2013, once Morocco deposits its instrument of ratification, Spain and Morocco will have an EOI agreement that is in line with the standard in place. In addition, Morocco’s Phase 2 PRG Report for the First Round of reviews of November 2016 stated that “Morocco indicated that applies the principle of foreseeable relevance without restriction.” 262. Spain continues to interpret and apply its EOI agreements consistent with the OECD Model Tax Convention and Model TIEA. All of the new EOI agreements that Spain has signed since the 2011 Report include the term “foreseeably relevant”. Spain has renegotiated eight of its EOI agreements to now include the term “foreseeable relevance”. 263. Spain does not require specific information to prove foreseeable relevance. However, the requesting jurisdiction must provide the elements necessary to identify the taxpayer or group of taxpayers. Spain does not require a specific form to be used for EOI requests.

Group requests 264. None of Spain’s EOI agreements or domestic law contain language prohibiting group requests. Spain interprets its agreements and domestic law as allowing it to provide information requested pursuant to group requests in line with Article 26 of the OECD Model Tax Convention and its commentaries.

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265. Spain treats group requests in a similar manner as individual requests, both in terms of process and the application of the foreseeably relevant standard, in line with commentary on Article 26 of the OECD Model Convention. Spain confirmed that its access powers enable information to be obtained for EOI purposes in respect of taxpayers not specifically identified and has used such powers in this way for domestic purposes. 266. During the review period, Spain received one group request in the third quarter of 2017. The request is under discussion by the Competent Authorities. According to Spain, the requested information was not available in the Spanish Tax Administration database nor directly in possession of third parties, Spain is going to seek the information from different sources and try to compile it to provide accurate information. In the meantime, Spain has requested additional information concerning the identification details of the cases of non-compliance detected by the requesting jurisdiction.

C.1.2. Provide for exchange of information in respect of all persons 267. All of Spain’s EOI agreements allow for EOI with respect to all persons. Where some of its older DTCs do not explicitly provide that the EOI provision is not restricted by Article 1 (Persons Covered), Spain has advised that it interprets the EOI provision to allow exchange with respect to all persons regardless of their residence. 268. The 2011 Report concluded that in the DTC with Morocco the EOI was limited to residents as this DTC restricts EOI to “carrying out the provisions of the present Convention” and Article 1 of the treaty indicates that it applies to “persons who are residents of one or both of the Contracting States”. As mentioned in section C 1.1, following the 2011 Report, the Spanish Government contacted the Moroccan Ministry of Finance and was informed that Morocco intended to sign the Multilateral Convention. Morocco signed the Multilateral Convention on 21 May 2013. Once Morocco deposits its instrument of ratification and the Multilateral Convention enters into force for Morocco, Spain and Morocco will have an EOI agreement that is in line with the standard in place. In addition, Morocco’s Phase 2 PRG Report for the First Round of reviews of November 2016 stated that “in practice,(Morocco’s] peers experienced no restrictions to exchange of information based on the grounds that the person in question was not resident in Morocco.” 269. During the period under review, there was no instance where Spain, or its EOI partner, refused to exchange information on the basis that the person of whom the information being requested was not covered by the EOI provision of the agreement. Also, no issue in this respect was raised by peers.

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C.1.3. Obligation to exchange all types of information 270. The OECD Model Tax Convention and the OECD Model TIEA both require the exchange of all types of information, including bank information, information held by a fiduciary or nominee, or information concerning ownership interests. 271. The 2011 Report noted that although many of Spain’s DTCs did not specifically include language mirroring Article 26(5) of the Model Tax Convention, its absence did not restrict the types of information that could be exchanged and Spain was able to access and exchange information held by banks and fiduciaries under its domestic law. 272. All of Spain’s TIEAs, the EU administrative co-operation directive, the Multilateral Convention, and all of Spain’s DTCs and protocols signed after the first round review, except the DTC signed with Azerbaijan (for which the Multilateral Convention is in force since 2015), contain wording akin to Article 26(5) of the Model Tax Convention. Such wording is however not contained in all of Spain’s older DTCs. 273. The 2011 Report found that 56 of Spain’s DTCs did not specifically include Article 26(5) of the Model Tax Convention or similar language. Since the 2011 Report, six of these DTCs 11 were renegotiated to include said language. Furthermore, only 15 12 of these 56 DTCs are with jurisdictions in which the Multilateral Convention is not yet in force in those jurisdictions. These 15 agreements with jurisdictions in which the Multilateral Convention is not yet in force are applicable in 13 jurisdictions that have not yet been reviewed by the Global Forum and may have restrictions in access to certain types of relevant information which would limit effective EOI under the respective DTCs. 13 However, this is not a concern in practice, as Spain’s powers to access and provide the relevant information are not constrained by a reciprocity requirement. 274. During the current review period, Spain was able to respond to requests for all types of information covered by the standard. No issues were identified by peers.

11. 12.

13.

These six DTCs are with Belgium, Canada, Finland, India, Luxembourg and Mexico. These 15 DTCs are with Algeria, Bolivia, Cuba, Ecuador, Egypt, North Macedonia, Iran, Israel, Morocco, Philippines, Thailand, United States, Former Union of Soviet Socialist Republics (USSR) (which Spain continues to apply to Belarus, Kirghizstan, Tajikistan and Turkmenistan), Venezuela and Viet Nam. These 13 jurisdictions are Algeria, Belarus, Bolivia, Cuba, Ecuador, Egypt, Iran, Kirghizstan, Tajikistan, Thailand, Turkmenistan, Venezuela and Viet Nam.

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C.1.4. Absence of domestic tax interest 275. EOI partners must be able to use their information gathering measures even though invoked solely to obtain and provide information to the requesting jurisdiction. The 2011 Report noted that many of Spain’s DTCs lacked a provision, mirroring Article 26(4) of the OECD Model Tax Convention. The 2011 Report noted, however, that the absence of such a provision did not create any restrictions provided that there was no domestic tax interest impediment in the case of either contracting party. As discussed under element B.1, Spain’s law has no such impediment. 276. All of Spain’s TIEAs, the EU administrative co-operation directive, the Multilateral Convention, and all of Spain’s DTCs and protocols signed after the first round review contain wording akin to Article 26(4) of the Model DTC. 277. The 2011 Report found that 54 of Spain’s DTCs do not specifically include Article 26(4) of the OECD Model Tax Convention or similar language. Six of these DTC 14 were renegotiated, after the 2011 Report, to include said language. Furthermore, only 15 15 of these 54 DTCs are with jurisdictions in which the Multilateral Convention is not yet in force in those jurisdictions. These 15 agreements with jurisdictions in which the Multilateral Convention is not yet in force are applicable in 13 jurisdictions that have not yet been reviewed by the Global Forum and may have restrictions in accessing information regardless of domestic tax interest which would limit effective EOI under the respective DTCs. 16 However, this is not a concern in practice, as Spain’s powers to access and provide the relevant information are not constrained by a reciprocity requirement. 278. No issues arose in practice during the current review period. Spain reports it would seek to include language similar to Article 26(4) of the Model Tax Convention in any new or renegotiated DTC.

C.1.5. Absence of dual criminality principles 279. All of Spain’s EOI agreements require the exchange of information regardless of whether the conduct under investigation, if committed in Spain, would constitute a crime. No issues in respect of dual criminality were identified in the 2011 Report and no such issues arose during the current review period.

14. 15. 16.

See footnote 12 above. See footnote 13 above. See footnote 14 above.

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C.1.6. Exchange information relating to both civil and criminal tax matters 280. All of Spain’s EOI agreements provide for exchange of information in both civil and criminal matters. Spain has responded to requests, during the review period, in respect of both criminal and civil tax matters. Peers have not raised any issues in practice.

C.1.7. Provide information in specific form requested 281. There are no restrictions in Spain’s EOI agreements or domestic laws that would prevent it from providing information in a specific form. During the review period, Spain reports that it provided information in the specific form requested by partners, if so indicated. No peers raised any concerns.

C.1.8. Signed agreements should be in force 282. Exchange of information cannot take place unless a jurisdiction has EOI agreements in force. Where EOI agreements have been signed, the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 283. Spain’s EOI network comprises of 99 agreements, 17 consisting of 90 DTCs, eight TIEAs and the Multilateral Convention. Out of these 99 agreements, 93 18 are in force. Out of the six jurisdictions with which Spain has a DTC or a TIEA that is currently not in force, only one jurisdiction (Cabo Verde) is not party to the Multilateral Convention. 284. According to Spain’s authorities, it is expected that during 2019 the proceedings for ratification of the six pending treaties shall be concluded, if there are no unexpected circumstances. 285. The following table summarises the outcomes of the analysis under element C.1 in respect of Spain’s bilateral EOI mechanism (i.e. regardless of whether Spain has an EOI instrument can exchange information with the particular treaty partner also under a multilateral instrument). 17.

These figures reflect the number of agreements and not the number of jurisdictions covered by the agreements. There are cases where an agreement covers more than one jurisdiction (e.g. the Former USSR agreement is counted as one agreement even though it covers 5 jurisdictions). 18. The six agreements that are not yet in force are the TIEAs with Guernsey, Jersey and Isle of Man; and the DTCs with Azerbaijan, Cabo Verde and Peru. Additionally, the DTC protocols signed with Belarus, India and Romania are not yet in force.

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EOI bilateral mechanisms Total A B C D E F G

Total Number of DTCs/TIEAS A=B+C Number of DTCs/TIEAs signed (but pending ratification), i.e. not in force B=D+E Number of DTCs/TIEAs signed and in force C=F+G Number of DTCs/TIEAs signed (but pending ratification) and to the Standard Number of DTCs/TIEAs signed (but pending ratification) and not to the Standard Number of DTCs/TIEAs in force and to the Standard Number of DTCs/TIEAs in force and not to the Standard

98 6 92 6 0 91 1

C.1.9. Be given effect through domestic law 286. For information exchange to be effective, the parties to an EOI agreement need to enact any legislation necessary to comply with the terms of the arrangement. For a DTC or TIEA to have effect, its ratification must be authorised by the Spanish Parliament, assented by the King, and its text must be published in the Official Gazette. Once a DTC or TIEA comes into force, Spain does not need to take additional measures to make it effective.

C.2. Exchange of information mechanisms with all relevant partners The jurisdiction’s network of information exchange mechanisms should cover all relevant partners.

287. The 2011 Report found that the negotiation of some EOI agreements was stalled for reasons not linked to the EOI purposes. The issue concerned was the conclusion of treaties with a number of Overseas Territories and Crown Dependencies of the United Kingdom. As such, element C.2 was determined to be “in place, but certain elements of the implementation of the element need to improve” and rated Largely Compliant. 288. Since the previous report, TIEAs have been signed with Guernsey, Isle of Man and Jersey, and are pending Spain’s parliamentary approval. Additionally, the United Kingdom declared the extension of the Multilateral Convention to all the Overseas Territories and Crown Dependencies. Accordingly, there is an EOI mechanism in place between Spain and the Overseas Territories and Crown Dependencies of the United Kingdom. 289. Also since the 2011 Report, Spain’s treaty network has expanded from 99 jurisdictions to 142 due to both the increase in Spain’s network of bilateral treaties (three new TIEAs and eight new DTCs have entered into force) as well as through the expansion in the number of the Multilateral Convention signatories. Spain has been active in expanding its EOI network over the years and has never refused to enter into an EOI agreement. Accordingly, Spain’s EOI

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78 – Part C: Exchanging information network encompasses a wide range of counterparties, including all of its major trading partners, all the G20 members and all OECD members. 290. Spain has in place an active negotiation programme which includes renegotiating of existing DTCs to ensure that that they are up to date and in line with international standards and expansion of its already existing treaty network so that all relevant partners are covered. No jurisdiction has reported any refusal by Spain to agree an EOI arrangement during the review period. Spain should nonetheless continue to conclude EOI arrangements with any new relevant partner who so require it. 291. The updated table of recommendations, determination and rating is as follows: Legal and Regulatory Framework Determination: In Place Practical Implementation of the standard Rating: Compliant

C.3. Confidentiality The jurisdiction’s information exchange mechanisms should have adequate provisions to ensure the confidentiality of information received.

292. The 2011 Report concluded that the applicable treaty provisions and statutory rules that apply to officials with access to treaty information and the practice in Spain regarding confidentiality were in accordance with the standard. 293. Since the 2011 Report, Spain has continued to ensure that its EOI confidentiality practices meet the high requirements of the standard. 294.

The table of determinations and ratings remains as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

C.3.1. Information received: disclosure, use and safeguards 295. The 2011 Report concluded that all of Spain’s EOI agreements have confidentiality provisions based on the Model Tax Convention or Model

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TIEA. While the provisions varied in wording, they were found to generally contain all essential aspects. Similarly, Spain’s domestic laws were found to be in line with the standard. 296. The 2011 Report also concluded that the Tax Administration had in place adequate information security arrangements in the areas of human resources, physical security, handling and storage of information and its transmission to and from foreign competent authorities that ensured the requirements of the standard were met. These arrangements have not significantly changed since the last review. 297. Pursuant to section 177 ter of the General Tax Law, information provided by other jurisdictions shall treated as confidential information. According to the Spanish Tax Administration, the request letter is considered as confidential information. To protect the confidentiality of this information, the EOI notice sent to a third-party information holder only includes the information requested by the requesting jurisdiction. The requested person is also informed of any relevant deadline to be met, as well as of the consequences of non-compliance, of the appeals and claims that may be filed against the EOI notice. 298. According to Spanish Tax Law, taxpayers under audit have the right to access all the information included in the administrative file in order to be able to defend themselves. This right is limited by third parties’ interests or rights and by the regulations where applicable. The communications between competent authorities are strictly confidential and should not be accessible and by the taxpayer. Where the reply is included in the Competent Authority response letter any information not concerning the taxpayer (Competent Authority details, third parties’ information, etc.) would be deleted/struckthrough and this version is the one accessible by the taxpayer. 299. The disclosure of confidential and secret information by a public official constitutes a very serious disciplinary offence for which the Tax Administration can impose penalties, such as the suspension of functions, a forced transfer or even removal from office. Additionally, a breach may constitute a criminal offence with sanctions of up to four years of imprisonment. 300. All Tax Administration employees and contractors undergo multiple trainings that include information on the applicable confidentiality policies. For example, employees receive sensitisation to the Code of Conduct, information security training (which covers elements of information awareness and security controls), and security access briefings. 301. Access to EOI data is limited to those employees that have received previous authorisation.

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80 – Part C: Exchanging information 302. The confidentiality policies are designed to respect the requirements of the international information security standard. The policies apply to all information held by the Tax Administration, including the information exchanged with Spain’s EOI partners. 303. Physical access to Tax Administration buildings, including where the EOI Unit is located, is strictly controlled and public access is forbidden except for limited areas where Tax Administration staff accompaniment is required at all times. 304. Access to information systems is provisioned on a strict “need to know” basis with strong identification, authentication and logging. All accesses to the systems are identified and stored by the control access system. Periodic audits are conducted to supervise unauthorised access or improper use of the information. 305. Regarding physical documentation, the Tax Administration has endorsed a non-paper policy since 2009; therefore, original papers are digitalised and stored on secure archives. When, occasionally, physical documentation is needed to be examined, it should be stored in secure cabinets. There are appropriate procedures to dispose of information according to business needs. 306. Adequate planning, security and risk assessment processes are in place and are in conformity with internationally accepted good standards. 307. According to the Spanish authorities, there has not been a case in which information received from an EOI partner was improperly disclosed. Peers have indicated no such case or concern in this respect.

C.3.2. Confidentiality of other information 308. Confidentiality rules should apply to all types of exchanged information, including information provided by a requesting jurisdiction in a request, information transmitted in response to a request and any background documents to such request. Spanish authorities confirm that in practice they consider all types of information relating to an EOI request confidential (including communications between Spain and the requesting jurisdiction).

C.4. Rights and safeguards of taxpayers and third parties The information exchange mechanisms should respect the rights and safeguards of taxpayers and third parties.

309. The international standard allows requested parties to not supply information in response to a request in certain identified situations where an issue of trade, business or other secret may arise. Among other reasons,

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an information request can be declined where the requested information would disclose confidential communications protected by the attorney-client privilege. 310. The 2011 Report concluded that Spain’s legal framework and practices concerning the rights and safeguards of taxpayers and third parties was in line with the standard and element C.4 was determined to be “in place” and Compliant, with no recommendations made. There have been no changes to the legal framework or in practice since the 2011 Report. 311.

The table of determinations and ratings remains as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

C.4.1. Exceptions to requirement to provide information 312. All of Spain’s EOI agreements contain a provision which ensures that the contracting states are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret, trade process or information the disclosure of which would be contrary to public policy. Further, the EOI Act does not contain exceptions for attorneyclient privilege. 313. As discussed in section B.1.5, there is no professional or banking secrecy under Spanish domestic law that can be invoked when information is requested for tax purposes by the tax administration except for information subject to attorney-client privilege. This privilege is, however, only applicable to communications between a client and an attorney where the attorney acts in his or her professional capacity as attorney and therefore is found to be in line with the standard. 314. As mentioned on section B.1.5, according to the Courts, the attorneyclient privilege only covers strictly personal, intimate, non-patrimonial or confidential data of their clients unconnected to the act of tax content that serves as a basis for the request of information. 19 Therefore, the information obtained by an attorney due to its performance as company manager or agent, for giving economic counsel or tax planning advice or as in-house legal counsel is not covered by the attorney-client privilege.

19.

National Court Judgment of 20 October 2011 (346/2008).

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82 – Part C: Exchanging information 315. During the period under review, there was no case where a person refused to provide the requested information because of professional privilege. Spain also did not decline to provide the requested information because it was covered by legal professional privilege or any other professional secret and no peer indicated any issue in this respect.

C.5. Requesting and providing information in an effective manner The jurisdiction should request and provide information under its network of agreements in an effective manner.

316. In order for exchange of information to be effective, jurisdictions should request and provide information under its network of EOI agreements in an effective manner. In particular: • Responding to requests: Jurisdictions should be able to respond to requests within 90 days of receipt by providing the information requested or provide an update on the status of the request. • Organisational processes and resources: Jurisdictions should have appropriate organisational processes and resources in place to ensure quality of requests and quality and timeliness of responses. • Restrictive conditions: EOI assistance should not be subject to unreasonable, disproportionate, or unduly restrictive conditions. 317. In the first round review, Spain’s timeliness of responses to EOI requests was found to be adequate (Spain responded to most EOI requests within 90 days). The 2011 Report also found that Spain’s Competent Authority had sufficient resources to carry out its EOI duties. However, Spain often failed to provide status updates when it was not able to respond to EOI requests within 90 days. Therefore, Spain was recommended to implement a system for advising requesting jurisdictions of the status of their request, when the competent authority is not in a position to respond within 90 days. 318. In order to address this recommendation, Spain has implemented new procedures to ensure that status updates are provided in cases where responding to a request takes longer than 90 days. Peer input has been mostly positive. 319.

The updated table of determinations and ratings is as follows: Legal and Regulatory Framework

Determination: In Place Practical Implementation of the standard Rating: Compliant

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C.5.1. Timeliness of responses to requests for information 320. Over the current period under review (1 January 2015 to 31 December 2017), Spain received a total of 1 775 requests for information. 20 The following table sets out the number of requests received during the period under review and Spain’s response times, together with a summary of other relevant factors impacting the effectiveness of Spain’s EOI practice. 2015   Total number of requests received (A+B+C+D+E) Full response: = 90 days = 180 days (cumulative) = 1 year (cumulative) (A) > 1  year (B) Declined for valid reasons Status update provided within 90 days (for outstanding cases with full information not provided within 90 days, responses provided > 90 days)* Requests withdrawn by requesting jurisdiction (C) Failure to obtain and provide information requested (D) Requests still pending at date of review (E)

Num.

2016 %

Num.

2017 %

Num.

Total %

Num.

%

589 576 607 1 772 398 67.57 395 68.58 434 71.50 1 227 69.24 544 92.36 534 92.71 572 94.23 1 650 93.12 588 99.83 570 99.96 606 99.84 1 764 99.55 0 0 2 0.35 0 0 2 0.11 1 1 1 3 NA NA NA NA NA NA NA NA

0 0 1

0.17

4 0 0

0.69 0.0

0 0 1

0.16

4 0.23 0 0 2 0.11

Notes: Spain generally counts the EOI request by taxpayer, so that a new request is open per taxpayer. The time periods in this table are counted from the date of receipt of the request to the date on which the final and complete response was issued. * Spain could not produce statistics of the status updates provided during the review period. A modification was introduced to the INTER IT system (see further explanation below in 5.2) in order to capture the information of the provided status update.

321. There does not appear to be a direct relationship between the type of information requested and the ability to respond to a request within 90 days. The fact of not being able to respond within 90 days may be due to different causes, e.g. very complex cases; requests for bank information involving gathering a lot of documentation underlying specific transactions; requests for information concerning periods earlier than those determined as threshold for keeping documentation (6 years), or requests concerning transfer pricing cases.

20. This number includes the three requests of information declined for valid reasons.

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84 – Part C: Exchanging information 322. Further, the Spanish Competent Authority indicate that there was no failure by Spain, during the review period, to provide information responding to an EOI request. Spain always provided partial responses once part of the relevant information was available. In the very limited number of cases where Spain was not able to provide a full response, Spain did provide an explanation to the requesting jurisdiction of the steps taken and the reason(s) why the full information could not be provided. During the review period, three requests were declined for valid reasons: two being fishing expeditions and one being a request from a prosecutor for assistance not related with tax matters. 323. As seen from the table above, less than 1% of the requests received during the review period are pending. These requests do not relate to a particular type of information.

Status updates and communication with partners 324. The 2011 Report recommended that Spain promptly implement a system for advising requesting jurisdictions of the status of their requests within 90 days in those cases where it was not possible to provide complete responses within that timeframe. 325. To address this recommendation, in October 2015 the Spanish Competent Authority updated its EOI computer application to automatically send an email notification to the tax official in charge of managing the EOI request, urging him/her to send a corresponding status update. This e-mail notification is sent after 80 days have elapsed since the EOI request was received. Additionally, at EU level, an electronic form is now used to send an acknowledgement of receipt of the EOI request and includes providing information regarding the expected time to answer the request. 326. A new update was introduced in the last quarter of 2017 to the EOI computer application to record status update information, including statistical information. Spain will be able to provide statistics of the status update for EOI request received on year 2018 and afterwards. 327. The majority of peers confirmed that status updates were systematically provided in cases where the request was not responded to within 90 days. Six peers indicated that they were never provided with status updates; nonetheless, four of the six peers that reported that they never received status update are EU members; therefore, they did received status update through the EU electronic form. Additionally, another peer reported that there has been a great improvement by Spain in sending the 90-day status updates since 2017.

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Part C: Exchanging information– 85

C.5.2. Organisational processes and resources (a) Identification of competent authority 328. The competent authority of Spain is clearly identified to partners on the Global Forum’s secure competent authorities database. Additionally, within the EU, the competent authority’s contact details are included in the CIRCA database

(b) Resources and training 329. The EOI competent authority function is delegated to the head of the Information Office (Equipo Central de Información, ECI). In practice, treaty partners are given the co-ordinates of the latest delegated person, who receives all EOI requests. 330. The ECI counts seventeen officers in charge of all EOI requests received and sent by Spain in direct taxation matters: one head, two tax inspectors, eight technical tax experts, three tax agents, two full-time administrative staff and one part-time administrative staff. Staff members have belonged to ECI for three years on average and all have been trained in the Spanish Public School of Tax and received basic training on exchange of information. Every year they receive some training on audits and other relevant matters. 331. The ECI relies on its dedicated IT application to deal with requests for information. This application, called INTER, is the system through which all requests are managed. It allows knowing in real time at which stage of the procedure an EOI request is. 332. Statistics are prepared on a monthly basis to verify the degree of compliance on handling of requests. On an annual basis, this information is compiled and included in the ECI’s report.

(c) Incoming requests 333. The typical routing of an incoming request is as follows: the competent authority (ECI) receives the EOI request, makes a new entry into the EOI IT system (which is called INTER) and scans all the documents received. It then confirms its admissibility and acknowledges receipt within one or two days by mail post, or secured e-mail system within the EU. It informs the EOI partner of the allocated reference number of the request, to ease future communications on the request. 334. If there is any ambiguity in the request, or if details essential to find the information are missing (typically if the person cannot be identified in

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86 – Part C: Exchanging information the tax databases), ECI contacts its counterpart. Many EOI partners of Spain declared that communication with ECI was easy, and prompt responses were received. 335. The powers of the ECI to obtain information are broad; therefore, the ECI official assigned to the handling of a request analyses its content and decides whether to collect the information him/herself from available databases or use the ECI powers to request the information from the person or entity that holds the requested information. Only in some very specific cases, the ECI official would require a local administrative tax office to collect the information (e.g. when an on-site inspection is needed). If part of the information is in the tax databases or other accessible databases, this is sent to the requesting authority with a note indicating that the rest of the request is being processed. 336. Once the person that owns or controls the information provides it, the ECI official verifies that said information responds to the questions raised by the requesting jurisdiction. In the event that some information or documentation is missing, a new request is sent to the person that owns or controls that information, asking for their submission. 337. Once the competent official considers that all the information and documentation requested by the requesting jurisdiction has been received, that ECI official prepares a formal response and attaches any relevant complementary documentation. The ECI’s head reviews that response and documents before sending it to the requesting jurisdiction.

(d) Outgoing requests 338. The 2016 ToR also addresses the quality of requests made by the assessed jurisdiction. Jurisdictions should have in place organisational processes and resources to ensure the quality of outgoing EOI requests. 339. The EOI work manual used by Spain contains procedures that all tax inspectors must follow in making outgoing requests, including a template for the EOI request to ensure they meet the foreseeable relevance standard 340. Any tax inspectors, after having exhausted the internal sources of information, can enter in INTER a request for tax relevant information that is held abroad. Once the request is registered, the ECI officials review the request and ask the inspector for any clarification or supporting documentation deemed necessary, as the case may be. Once the necessary information is available. If the request meets the foreseeable relevance standard, an ECI official prepares the request. 341. ECI’s officials have to verify that all EOI requests meet the requirements of the international standard for the exchange of information.

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Part C: Exchanging information– 87

Additionally, they must follow up on the requests until full response by the requested jurisdiction is received. 342. Spain made 2 014 requests during the review period to 74 treaty partners. Overall peers were positive about the quality of the requests sent by Spain. Peer feedback indicated that foreseeable relevance was generally met and the requests for clarification did not tend to create delays in the process.

C.5.3. Unreasonable, disproportionate or unduly restrictive conditions for EOI 343. Exchange of information should not be subject to unreasonable, disproportionate or unduly restrictive conditions. There are no factors or issues identified in Spain laws that could unreasonably, disproportionately or unduly restrict effective EOI.

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ANNEXES – 89

Annex 1: List of in-text recommendations Issues may have arisen that have not had and are unlikely in the current circumstances to have more than a negligible impact on EOIR in practice. Nevertheless, there may be a concern that the circumstances may change and the relevance of the issue may increase. In these cases, a recommendation may be made; however, such recommendations should not be placed in the same box as more substantive recommendations. Rather, these recommendations can be mentioned in the text of the report. However, in order to ensure that the Global Forum does not lose sight of these “in text” recommendations, they should be listed in an annex to the EOIR report for ease of reference. •

Element A.1.1: Spain should monitor and enforce the effective compliance of the new obligation – established under Order JUS/319/2018 – of companies and partnerships to annually submit to the Commercial Registry a form identifying their beneficial owners.

•

Element A.1.1: Spain should therefore further strengthen measures to ensure that notaries are obtaining adequate, accurate and up to date beneficial ownership information in all cases.

•

Element A.1.4: It is recommended that supervisory activities in the case of lawyers and TCSPs should be strengthened in view of the limited number of on-site inspections undertaken and their potential role in the operation and management of trusts.

•

Element C.2: Spain should nonetheless continue to conclude EOI arrangements with any new relevant partner who would so require.

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90 – ANNEXES

Annex 2: List of Spain’s EOI mechanisms

1. Bilateral international agreements for the exchange of information EOI partner

Type of agreement

Signature

Entry into force

1

Albania

DTC

02/07/2010

04/05/2011

2

Algeria

DTC

07/10/2002

06/07/2005

3

Andorra

4

Argentina

TIEA

14/01/2010

10/02/2011

DTC

08/01/2015

26/02/2016

DTC

21/07/1992

28/07/1994

Protocol

11/03/2013

23/12/2013

5

Armenia

DTC

16/12/2010

21/03/2012

6

Aruba

TIEA

24/11/2008

27/01/2010

7

Australia

DTC

24/03/1992

10/12/1992

8

Austria

DTC

20/12/1966

15/03/1967

Protocol

24/02/1995

02/10/1995

9

Azerbaijan

DTC

23/04/2014

Not yet in force

10

Bahamas

TIEA

11/03/2010

17/08/2011

11

Barbados

DTC

1/12/2010

14/10/2011

12

Belarus a

DTC

01/03/1985

07/08/1986

Protocol

14/06/2017

Not yet in force

DTC

14/06/1995

25/06/2003-

Protocol

02/12/2009

23/04/2018

13

Belgium

Protocol

15/04/2014

24/07/2018

14

Bolivia

DTC

30/06/1997

23/11/1998

15

Bosnia and Herzegovina

DTC

05/02/2008

04/01/2011

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EOI partner

Type of agreement

Signature

Entry into force

16

Brazil

DTC

14/11/1974

03/12/1975

17

Bulgaria

DTC

06/03/1990

14/06/1991

18

Cabo Verde

DTC

05/06/2017

Not yet in force

19

Canada

DTC

23/11/1976

26/12/1980

Protocol

18/11/2014

12/12/2015

20

Chile

DTC

07/07/2003

23/12/2003

21

China (People’s Republic of)

DTC

22/11/1990

20/05/1992

22

Colombia

DTC

31/03/2005

23/10/2008

23

Costa Rica

DTC

04/05/2004

15/12/2010

24

Croatia

DTC

19/05/2005

20/04/2006

25

Cuba

DTC

03/02/1999

31/12/2000

26

Curaçao 

TIEA

2008-06-10

27/01/2010

27

Cyprus c

DTC

14/02/2013

28/05/2014

28

Czech Republic

DTC

08/05/1980

05/06/1981

29

Dominica Republic

DTC

16/11/2011

25/07/2014

b

30

Ecuador

DTC

20/05/1991

19/04/1993

31

Egypt

DTC

10/06/2005

28/05/2006

32

Estonia

DTC

03/09/2003

28/12/2004

33

El Salvador

DTC

07/07/2008

13/08/2009

34

Finland

DTC

15/11/1967

30/10/1968

Protocol

22/02/1973

24/04/1973

Protocol

27/04/1990

28/07/1992

DTC

15/12/2015

27/07/2018

35

France

DTC

10/10/1995

01/07/1997

36

Georgia

DTC

7/06/2010

01-06-2011

37

Germany

DTC

03/02/2011

18/10/2012

38

Greece

DTC

04/12/2000

21/08/2002

39

Guernsey

TIEA

10/11/2015

Not yet in force

40

Hong Kong, China

DTC

01/04/2011

13/04/2012

41

Hungary

DTC

09/07/1984

20/05/1987

42

Iceland

DTC

22/01/2002

02/08/2002

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92 – ANNEXES EOI partner

Type of agreement

Signature

Entry into force

DTC

08/02/1993

12/01/1995

Protocol

26/10/2012

Not yet in force

Indonesia

DTC

30/05/1995

20/12/1999

Iran

DTC

19/07/2003

30/01/2006

43

India

44 45 46

Ireland

DTC

10/02/1994

21/11/1994

47

Isle of Man

TIEA

03/12/2015

Not yet in force

48

Israel

DTC

30/11/1999

20/11/2000

49

Italy

DTC

08/09/1977

14/11/1980

50

Jamaica

DTC

08/07/2008

16/05/2009

51

Japan

DTC

13/02/1974

20/11/1974

52

Jersey

TIEA

17/11/2015

Not yet in force

53

Kazakhstan

DTC

02/07/2009

18/08/2011

54

Kirghizstan 

DTC

01/03/1985

07/08/1986

55

Korea

DTC

17/01/1994

21/11/1994

56

Kuwait

DTC

26/05/2008

19/07/2013

57

Latvia

DTC

04/09/2003

14/12/2004

58

Lithuania

d

59

Luxembourg

60

Malaysia

61

Malta

DTC

22/07/2003

26/12/2003

DTC

03/06/1986

19/05/1987

Protocol

10/11/2009

16/07/2011

DTC

24/05/2006

28/12/2007

DTC

08/11/2005

12/09/2006

DTC

24/07/1992

06/10/1994

Protocol

17/12/2015

27/09/2017

08/10/2007

30/03/2009

62

Mexico

63

Moldova

DTC

64

Morocco

DTC

10/07/1978

16/05/1985

65

Netherlands e

DTC

16/06/1971

20/09/1972

66

New Zealand

DTC

28/07/2005

31/07/2006

67

Nigeria

DTC

23/06/2009

05/06/2015

68

North Macedonia 

DTC

20/06/2005

01/12/2005

69

Norway

DTC

06/10/1999

18/12/2000

70

Oman

DTC

30/04/2014

19/09/2015

71

Pakistan

DTC

01/01/2010

18/05/2011

f

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ANNEXES – 93

EOI partner

Type of agreement

Signature

Entry into force

72

Panama

DTC

07/10/2010

25/07/2011

73

Peru

DTC

06/04/2006

Not yet in force

74

Philippines

DTC

14/03/1989

12/09/1994

75

Poland

DTC

15/11/1979

06/05/1982

76

Portugal

77

Romania

78

Qatar

DTC

26/10/1993

28/06/1995

DTC

24/05/1979

28/06/1980

Protocol

18/10/2017

Not yet in force

DTC

10/09/2015

06/02/2018

79

Russia

DTC

16/12/1998

13/06/2000

80

San Marino

TIEA

06/09/2010

02/08/2011

81

Saudi Arabia

DTC

19/06/2007

01/10/2008

82

Senegal

DTC

05/12/2006

22/10/2012

83

Serbia

DTC

09/03/2009

28/03/2010

84

Singapore

DTC

13/04/2011

02/02/2012

85

Sint Maarten g

TIEA

10/06/2008

27/01/2010

86

Slovak Republic 

DTC

08/05/1980

05/06/1981

h

87

Slovenia

DTC

23/05/2001

19/03/2002

88

South Africa

DTC

23/06/2006

28/12/2007

89

Sweden

DTC

16/06/1976

21/12/1976

DTC

26/04/1966

02/02/1967

Protocol

29/06/2006

01/06/2007

Protocol

27/07/2011

24/08/2013

DTC

01/03/1985

07/08/1986

DTC

14/10/1997

16/09/1998

90

Switzerland

91

Tajikistan 

92

Thailand

i

93

Timor-Leste 

DTC

30/05/1995

20/12/1999

94

Trinidad and Tobago

DTC

09/03/2009

28/12/2009

95

Tunisia

DTC

02/07/1982

14/02/1987

96

Turkey

DTC

05/07/2002

18/12/2003

97

Turkmenistan 

DTC

01/03/1985

07/08/1986

98

Ukraine l

DTC

01/03/1985

07/08/1986

99

United Arab Emirates

DTC

04/07/2006

02/04/2007

DTC

14/03/2013

12/06/2014

j

k

100 United Kingdom

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94 – ANNEXES EOI partner

Type of agreement

Signature

Entry into force

101 United States

DTC

22/02/1990

21/11/1990

102 Uruguay

DTC

09/10/2009

24/04/2011

103 Uzbekistan

DTC

08/07/2013

19/09/2015

104 Venezuela

DTC

08/04/2003

29/04/2004

105 Viet Nam

DTC

07/03/2005

22/12/2005

Notes: a. Spain continues to apply the agreement established with the Former USSR to Belarus.

b. Spain continues to apply the agreement established with the Netherlands Antilles to Curacao.



c. Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”. Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

d. Spain continues to apply the agreement established with the Former USSR to Kirghizstan.



e. There is also a separate TIEA with the Kingdom of the Netherlands covering Bonaire, Saint Eustatius and Saba (BES islands).



f. The Republic of North Macedonia, previously known as the Former Yugoslav Republic of Macedonia, has informed the United Nations and the OECD of its new official name. The change is effective as of 14 February 2019.



g. Spain continues to apply the agreement established with the Netherlands Antilles to Sint Maarten.



h. Spain continues to apply the agreement established with Czechoslovakia to the Slovak Republic.



i. Spain continues to apply the agreement established with the Former USSR to Tajikistan.



j. Spain continues to apply the agreement established with Indonesia to Timor Leste.



k. Spain continues to apply the agreement established with the Former USSR to Turkmenistan.



l. Spain continues to apply the agreement established with the Former USSR to Ukraine.

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ANNEXES – 95

2. Convention on Mutual Administrative Assistance in Tax Matters (as amended) The Convention on Mutual Administrative Assistance in Tax Matters was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 (the Multilateral Convention). 21 The Multilateral Convention is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, a top priority for all jurisdictions. The original 1988 Convention was amended to respond to the call of the G20 at its April 2009 London Summit to align it to the international standard on exchange of information on request and to open it to all countries, in particular to ensure that developing countries could benefit from the new more transparent environment. The Multilateral Convention was opened for signature on 1 June 2011. Spain signed the 1988 Convention on 12 November 2009 and the Protocol amending the 1988 Convention on 11 March 2011. The Multilateral Convention entered into force in respect of Spain on 1 December 2010 while its amending Protocol entered into force on 1 January 2013. Currently, the Multilateral Convention is in force in respect of the following jurisdictions: Albania, Andorra, Anguilla (extension by the United Kingdom), Argentina, Aruba (extension by the Netherlands), Australia, Austria, Azerbaijan, Bahamas, Bahrain, Barbados, Belgium, Belize, Bermuda (extension by the United Kingdom), Brazil, British Virgin Islands (extension by the United Kingdom), Bulgaria, Cameroon, Canada, Cayman Islands (extension by the United Kingdom), Chile, China (People’s Republic of), Colombia, Cook Islands, Costa Rica, Croatia, Curaçao (extension by the Netherlands), Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands (extension by Denmark), Finland, France, Georgia, Germany, Ghana, Gibraltar (extension by the United Kingdom), Greece, Greenland (extension by Denmark), Grenada, Guatemala, Guernsey (extension by the United Kingdom), Hong Kong (extension by the People’s Republic of China), Hungary, Iceland, India, Indonesia, Ireland, Isle of Man (extension by the United Kingdom), Israel, Italy, Japan, Jersey (extension by the United Kingdom), Kazakhstan, Korea, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania, Luxembourg, Macau (extension by the People’s Republic of China) Malaysia, Malta, Marshall Islands, Mauritius, Mexico, 21. The amendments to the 1988 Convention were embodied into two separate instruments achieving the same purpose: the amended Convention (the Multi­ lateral Convention) which integrates the amendments into a consolidated text, and the Protocol amending the 1988 Convention which sets out the amendments separately.

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96 – ANNEXES Moldova, Monaco, Montserrat (extension by the United Kingdom), Nauru, Netherlands, New Zealand, Nigeria, Niue, Norway, Pakistan, Panama, Peru, Poland, Portugal, Romania, Russia, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Saudi Arabia, Senegal, Seychelles, Singapore, Sint Maarten (extension by the Netherlands), Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Tunisia, Turkey, Turks and Caicos Islands (extension by the United Kingdom), Uganda, Ukraine, United Arab Emirates, United Kingdom, Uruguay and Vanuatu. In addition, the Multilateral Convention was signed by, or its territorial application extended to, the following jurisdictions, where it is not yet in force: Antigua and Barbuda (instrument of ratification deposited on 16 October 2018 and entry into force on 1 February 2019), Armenia, Brunei Darussalam, Burkina Faso, Dominican Republic, Ecuador, El Salvador, North Macedonia, Gabon, Jamaica (instrument of ratification deposited on 29 November 2018 and entry into force on 1 March 2019), Kenya, Liberia, Morocco, Paraguay, Philippines, Qatar (instrument of ratification deposited on 17 September 2018 and entry into force on 1 January 2019) and United States (the original 1988 Convention is in force since 1 April 1995 and the amending Protocol was signed on 27 April 2010).

3. EU Directive on Mutual Administrative Assistance in Tax Matters Spain can exchange information relevant for direct taxes upon request with EU member states under the EU Council Directive 2011/16/EU of 15 February 2011 on administrative co-operation in the field of taxation (as amended). The Directive entered into force on 1 January 2013. All EU members were required to transpose it into their domestic legislation by 1 January 2013, i.e. Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom.

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ANNEXES – 97

Annex 3: Methodology for the review The reviews are based on the 2016 Terms of Reference, conducted in accordance with the 2016 Methodology for peer reviews and non-member reviews, as approved by the Global Forum in October 2015 and the 2016-21 Schedule of Reviews. This evaluation is based on the 2016 ToR, and has been prepared using the 2016 Methodology. The evaluation is based on information available to the assessment team including the exchange of information arrangements signed, laws and regulations in force or effective as at 21 December 2018, Spain’ EOIR practice in respect of EOI requests made and received during the three year period from 1 January 2015 to 31 December 2017, Spain’ responses to the EOIR questionnaire, information supplied by partner jurisdictions, as well as information provided by Spain’ authorities during the on-site visit that took place from 3-6 July 2018.

List of laws, regulations and other materials received The General Tax Law The General Regulation on Tax Auditing The Commercial Code The Corporate Enterprises Act AML/CTF Act Royal Decree 304/2014 (AML/CTF Regulation) Royal Decree 1065/2007 (Tax Inspection Regulation) Royal Decree 1784/1996 (Commercial Register Regulation)

Authorities interviewed during on-site visit Ministry of Economy and Finance (Ministerio de Economía y Hacienda) •

Dirección General de Tributos. SG Fiscalidad Internacional

•

Secretaría General del Tesoro y Política Financiera

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98 – ANNEXES Tax Agency (AEAT) •

ECI: Competent Authority on EOI

•

Direction of Legal Service

•

Departamento de Inspección Financiera y Tributaria

General Council of Public Notaries (Consejo General del Notariado) •

Notaries’ Centralised Prevention Unit

Spanish FIU (SEPBLAC) Stock Exchange regulator (CNMV) Institute of Accountants and Auditors (Instituto de Contabilidad y Auditoría de Cuentas) Central Bank of Spain (Banco de España)

Current and previous reviews This report is the second review of Spain conducted by the Global Forum. Spain previously underwent a combined Phase 1 and Phase 2 review of its legal and regulatory framework and the implementation of that framework in practice in 2011. The 2011 Report containing the conclusions of the first review was first published in October 2011 (then published on November 2013 incorporating Phase 2 ratings). The combined review were conducted according to the terms of reference approved by the Global Forum in February 2010 (2010 ToR) and the Methodology used in the first round of reviews. Summary of reviews Review

Legal Framework Date of adoption as of by Global Forum

Assessment team

Period under review

Round 1 Combined Report

Ms Soledad Salman of Chile; Mr Malcolm Campbell of Jersey; and Ms Gwenaëlle Le Coustumer of the Global Forum Secretariat.

n.a.

June 2011

October 2011

Round 2

Mr Duncan Nicol of Cayman Island; Mr Murilo da Silva Braga of Brazil; and Ms Kaelen Onusko and Mr Jose Mejia of the Global Forum Secretariat.

1 January 2015 to 31 December 2017

December 2018

15 March 2019

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ANNEXES – 99

Annex 4: Jurisdiction’s response to the review report 22 This annex is left blank because Spain has chosen not to provide any material to include in it.

22.

This Annex presents the Jurisdiction’s response to the review report and shall not be deemed to represent the Global Forum’s views.

PEER REVIEW REPORT – SECOND ROUND – SPAIN © OECD 2019

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to coordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.

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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report on the Exchange of Information on Request SPAIN 2019 (Second Round) The Global Forum on Transparency and Exchange of Information for Tax Purposes is a multilateral framework for tax transparency and information sharing, within which over 150 jurisdictions participate on an equal footing.

Peer Review Report on the Exchange of Information on Request

The Global Forum monitors and peer reviews the implementation of international standard of exchange of information on request (EOIR) and automatic exchange of information. The EOIR provides for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. All Global Forum members have agreed to have their implementation of the EOIR standard be assessed by peer review. In addition, non-members that are relevant to the Global Forum’s work are also subject to review. The legal and regulatory framework of each jurisdiction is assessed as is the implementation of the EOIR framework in practice. The final result is a rating for each of the essential elements and an overall rating.

This report contains the 2019 Peer Review Report on the Exchange of Information on Request of Spain.

Consult this publication on line at https://doi.org/10.1787/997a7b23-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.

ISBN 978-92-64-62286-9

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2019 (Second Round) PEER REVIEW REPORT ON THE EXCHANGE OF INFORMATION ON REQUEST SPAIN 2019

The first round of reviews was conducted from 2010 to 2016. The Global Forum has agreed that all members and relevant non-members should be subject to a second round of review starting in 2016, to ensure continued compliance with and implementation of the EOIR standard. Whereas the first round of reviews was generally conducted as separate reviews for Phase 1 (review of the legal framework) and Phase 2 (review of EOIR in practice), the EOIR reviews commencing in 2016 combine both Phase 1 and Phase 2 aspects into one review. Final review reports are published and reviewed jurisdictions are expected to follow up on any recommendations made. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes.

SPAIN