The Exporters' Club advocates maintaining the limited tax incentives for Spanish business internationalisation

The Reflection Committee on Internationalisation of the Exporters and Investors Club advocates maintaining the few tax incentives for business internationalisation that still exist in Spain in order to preserve the competitiveness of companies with international activity.

In his opinion, a proposal is on the table that aims to limit the exemption on dividends, capital gains and income obtained by permanent establishments abroad. This is a measure already included in the 2019 General State Budget Bill, which consists of reducing the current exemption, which is currently 100%. 

"We would be facing a far-reaching change that would leave Spanish companies in a bad position compared to other competing companies that have a similar exemption in their legislation to that currently applied in Spain", states the Reflection Committee in a technical note published under the title 'Spanish tax competitiveness in the international framework'. 

Another of the incentives that are in danger of disappearing is that relating to the deductibility of final and definitive losses generated abroad in relation to subsidiaries and permanent establishments. This is a characteristic of our tax system," explains the Reflection Committee, "which has been limited in time and is only applicable to cases of extinction, transfer or cessation of activity".

The Reflection Committee on Internationalisation criticises the fact that these proposals to reform the tax framework are justified by the alleged "low taxation of Spanish multinationals", an idea it attributes to an incorrect interpretation of the statistical data.

"Although the Spanish government publishes both the effective rate calculated on the accounting result and the taxable base, the former is usually highlighted to the public; that is, the rate that does not take into account that part of the profits have already been taxed in other countries, and logically do not form part of the taxable base, or the adjustments for consolidation", the document states. According to this interpretation, it is stressed that the tax paid by multinationals in Spain on global profits is low, but it does not take into account that these companies have obtained part of their profits outside Spain and have already been taxed locally for this reason.

In this respect, the Reflection Committee on Internationalisation warns that "many statistics are based on non-comparable data such as the taxation of Spanish multinationals against SMEs that have no activity outside Spain, and therefore do not pay tax outside our borders, or entities that are not part of consolidated groups".  

The Committee relies on the European Commission's data to refute these arguments. These indicate that corporate tax collection in Spain is in line with the levels of the rest of the European Union countries and that, nevertheless, the total tax burden on Spanish companies (IS and social contributions) is much higher than in the European Union.

The Reflection Committee on Internationalisation urges the Spanish authorities to retain the "tax features" currently provided for in national regulations "if the presence of Spanish companies with investments abroad is to be maintained, so that they can compete with a minimum of possibilities against foreign companies, which already have mechanisms similar to those currently provided for in Spanish legislation".

It also considers that fiscal competitiveness does not lie solely in the rules in force, but depends on many contextual factors or on the "quality of the system". In relation to this aspect, he stresses the need to improve concepts such as clarity in the application and review of taxes, predictability or legal certainty. "Nor do these elements stand out in the Spanish tax system, which is subject to repeated legislative changes and has a strategy, specifically in the tax control and review phases, clearly inspired by a desire to collect taxes," he said. 

Another of the recommendations made by the Committee for Reflection on Internationalisation is aimed at establishing a tax system with clear and precise rules, stable over time, and an agile and accessible tax administration. "These are highly valued aspects in an international tax environment where there is an overabundance of regulations, which are complex and difficult to interpret even for trained lawyers with years of experience," he says. 

Finally, he assures that a great advance for the Spanish tax system would consist of providing itself with formulas that would allow companies to simplify compliance with the abundant and growing unpaid administrative burden they bear. "On this point, the Spanish Administration also has enormous potential for improvement, by deepening cooperative compliance schemes for conflict prevention and dispute resolution".

The document points out that "we are referring to the friendly settlement procedures, the keystone of the international tax system, where the resolution of conflicts in the area of double taxation lies, with greater participation of the taxpayer and the generalisation of arbitration in order to speed up the deadlines".