The Spanish Government has just signed, on Jan. 27, 2016, the Spanish Multilateral Agreement between States to exchange Country by Country information, that will become effective as from 2017, in coordination with the OECD.
The Agreement has been signed with 30 States and will permit Spain obtaining information of taxes paid by multinationals whose parent company is located in one of the States that has signed the Spanish Multilateral Agreement, without the need to subscribe bilateral agreements with each one of them.
✔The purpose of the exchange of information is increasing the knowledge of taxes paid by multinational companies in the countries in which they operate, optimising the resources available to local tax authorities and avoiding aggressive tax planning practices.
✔It is not surprising that the Secretary of the Spanish Ministry of Finance, and President of the Spanish Tax Agency, Mr Miguel Ferre has expressed that it implies an important step towards transparency of tax information at an international level.
✔ The Country by Country exchange of information is part of the BEPS action plan (Base Erosion and Profit Shifting), a package of 15 measures oriented towards the fight of base erosion, aggressive tax planning and artificial shift of entrepreneurial profits.
Although Corporate income tax is currently taxed at a national level, in the case of international activities, the interaction between different tax systems can lead to breaches that prevent the taxation of profits at a concrete location. Therefore, international initiatives have been taken to fight against such abusive practices.
✔ Prior to the signature of the Spanish Multilateral Agreement, Spain has done its homework, at least with respect to its domestic regulations. New rules have been passed in relation to the annual obligation for multinationals dominant companies residing in Spain and with a turnover exceeding 750 million Euro, to inform the Spanish Tax Agency of their taxes paid on a Country by Country basis, in the territories they operate. Such obligation is effective for fiscal years starting in 2016.
It is an obligation also affecting subsidiaries of foreign companies that reside in a country with no effective exchange of information.
✔ On paper, it is the most ambitious plan ever to fight against tax fraudulent practices of multinationals. Now, it is time to put it into practice.