The Spanish coalition government approved the 2021 draft budget on October 27. One key corporate provision would reduce the participation exemption for dividends and capital gains to 95%.
The government also approved a tax bill on October 13 that introduced several tax measures, including the transposition of certain provisions contained in the EU’s anti-tax avoidance directive (ATAD), and an overhaul of the tax haven rules to align with EU and OECD standards.
Some of the corporate tax measures included in these two legislative proposals could apply retroactively to tax years commencing on or after January 1, 2020.
Since the government does not have a majority in either house of Parliament, it will need the support of several other political groups in order to secure passage of both pieces of legislation. Some of these measures therefore could be dropped or modified during the legislative process.
Multinational entities with operations in Spain or with Spanish holding companies should assess the impact of the proposed changes on their investments in Spain and prepare to respond accordingly.