Final Provision 1 of Act 7/2012, on the amendment of tax and budget legislation and for the adaptation of financial legislation to intensify actions for the prevention and fight against fraud, amends Article 108 of Act 24/1988, July 28, on the Securities Market Act (of the Spanish, LMV).

In accordance with the statement of reasons of the aforementioned Act 7/2012, the purpose of such amendment is to adjust the controversial Article 108 LMV, as it was originally established, in other words, “as an anti-tax evasion measure in possible security transfers that merely serve to cover property transfers by means of the interposition of shell companies”. In doing so its regulation has been simplified and the precept has been reformed, so that such amendment entails three substantial changes:

  • Taxation is established, if the antievasion regulation is applied, by means of the tax that would have corresponded (Property Tax (of the Spanish, ITP) or Value Added Tax (VAT)), and not necessarily in the form of Property Transfers under the Transfer Tax and Stamp Duty, as the case had been to date.
  • Purchases on the primary market are excluded from possible taxation.
  • And perhaps the most significant one: “the wording of the Article is simplified, from an objective provision to becoming an authentic provision for fighting fraud, although in the clearest cases an iuris tantum presumption is established that, where appropriate, should be refuted by the interested party if he opposes the application of the anti-evasion measure.”

It has been possible to determine such amendment, to a large extent, by the dubious adequacy to date of the aforementioned Article to Spanish and EU legislation, revealed by means of an EU Opinion and two preliminary rulings set forth by our Supreme Court.

In view of the above, in addition to reducing the extension of the wording of the Article, not just eliminating some situations (in the case of transfers on the primary market), but also simplifying the rules for application of the provision by means of the establishment of more clear and concise criteria allowing for a more simplified interpretation thereof.

Likewise the application of the tax corresponding to the specific situation has been established, and not necessarily the ITP, as before. And furthermore, solely and exclusively in those cases in which the transfer of securities is endeavored avoid the payment of taxes corresponding to the transfer of property, likewise establishing a series of presumptions for the most characteristic cases of tax evasion, which the taxpayer will in all cases be able to refute.