Fiscal Changes Which Affect M&A

Fiscal Changes Which Affect M&A

Fiscal Changes Which Affect M&A

As Spain’s economy emerges from a deep downturn and returns to growth, the government has implemented reforms aimed at ensuring the recovery is sustainable. One of the most important reforms so far is the planned overhaul of the country’s tax system. Due to come into effect in 2015, the fiscal reform affects both personal and corporate income tax, including restructuring operations.

M&A fuels growth and Spain’s market is gaining momentum as firms across a variety of industries seek to increase market shareForeign investors are also keen to expand their footprint and take advantage of Spain’s economic upturn. Top business leaders like Microsoft chairman Bill Gates and billionaire fund manager George Soros have already made substantial investments in Spanish companies over the last year, so it is important for them to consider the possible impact of the fiscal reforms when reviewing existing or future investment structures. So what are the tax changes which will directly affect restructuring operations? Here’s a bird’s eye view of the main proposals!

 

 

TRANSPARENCY KEY GOAL

Transparency is one of the main objectives of Spain’s latest fiscal shake-up.
One of the main changes related to M&A is that all deals will now be subject to a special tax regime. This will no longer be optional. Furthermore, all restructuring transactions must be communicated to the tax authorities. Failure to do so within the established time-frame will result in a fine of 10,000 euros per operations.

Other key issues are:

• Tax treatment of the goodwill arising from a merger. As any capital gains generated by the transfer of shares are now tax exempt, goodwill resulting from a merger is no longer tax deductible.

• When a business activity changes hands, the corresponding tax losses are subrogated by the buyer.

• The tax authorities will have the possibility to decide that the special tax regime is not partially implemented and will eliminate the effects of any tax breaks obtained.

 

SPAIN BETS ON GROWTH ATTRACTION

After a 2008 property crash left one in four workers unemployed and sent thousands of companies to the wall, Spain finally exited a recession in the second half of 2013. Economic data published over the last few months shows the recovery is slowly consolidating and job creation is finally a reality. The government is keen to make the most of this economic turnaround and its fiscal reform is aimed at widening the tax base by reducing the available tax breaks for companies. Spain is now in a position to attract investors for fundamental economic and business reasons and not just because of tax incentives.
For information on investing in Spain, contact corporate law firm, Argali Abogados.

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