Minutes of the meeting

Large Companies Forum

MINUTES OF THE PLENARY SESSION 1/2014

Vice-President of the Large Companies Forum

Director General of the State Agency for Tax Administration
Mr. Santiago Menéndez Menéndez

Members representing the Tax Agency

Director of the Department of Financial and Tax Inspection
Mr. Luis María Sánchez González

Director of the Tax Management Department
Mr. Rufino de la Rosa Cordón

Director of the Tax Collection Department
Soledad García López

Director of the Customs and Excise Department
Pilar Jurado Borrego

Central Delegate of Large Taxpayers
Mr. Ignacio Huidobro Arreba

Members representing Large Companies

Technical Secretariat of the Large Companies Forum

Technical Secretary
Mr. Angel Rodriguez Rodriguez

In Madrid, as of 17 June 2014, the eighth plenary session of the Large Companies Forum is held, attended by the aforementioned, and according to the following

AGENDA

1. Session opening

2. Approval of the minutes of the plenary session held on the 29th of October 2013

3. Large Companies Forum: Current situation

4. Relevant conclusions of the different Work Groups of the Forum

5. Next call: dates and subjects to deal with

6. Other considerations, requests and questions

1. Session opening

The meeting is opened by the Chief Operating Officer of the Tax Agency and Vice-President of the Large Companies Forum, Santiago Menéndez Menéndez, who welcomes the assistants and apologizes for the absence of the State Secretary of Treasury and President of the Forum, Miguel Ferre Navarrete, as unavoidable commitments related to the imminent tax reform have prevented him from attending this act.

Firstly, he states that would like to emphasize the importance of the Large Companies Forum for the Tax Agency, and therefore he commits to holding two annual sessions, even in a moment as the current one in which, due to the new tax reform, it is difficult to find time in everyone's schedules.

2. Large Companies Forum: Current situation

D. Santiago Menéndez Menéndez indicates that as regards a cooperative relationship, already in the years 2007/2008, when the definition began to take shape, the Agency decided on a relationship that was focused on all taxpayers. Therefore, in addition to this Large Companies Forum, the Associations and Tax Professionals Forum was created, where all the professionals who have a relationship with the Agency in the tax area are represented. He adds that for the Agency, transparency in relationships with every type of taxpayer is of vital importance, not just with large companies. He continues by stating that these relations are difficult to implement, since the matters are complicated and the points of view are not unanimous. But he adds that that is not going to prevent the Agency from continuing to advance in the improvement of this cooperative relationship.

Next he provides a brief summary of the tasks that have been carried out in the different Forum Work Groups:

Work Group on Analysis and Rationalisation of Indirect Tax Burdens

• Presentation and disclosure, prior to its implementation, of the new Special Regime for the provision of telecommunications, radio and television or electronic services under VAT , which will apply from 1 January 2015 to all telecommunications, radio broadcasting, television and electronic services provided to individuals residing in the EU by taxable entities established and not established in the EU .
• Implementation of the possibility of grouping embargo payments, which will allow the payer (especially large employers) to carry out all payments for embargoes of its employees' salaries and other credit rights in a single act.
• Amendment to the Corporate Tax Regulations that will allow approved amortization plans to be applied to other assets with identical characteristics provided that the physical, technological, legal and economic circumstances determining the approved amortization method are substantially maintained.
• Elimination of the duty for payers of income to keep, at the disposal of the Tax Administration, the documents provided by the taxpayer to justify his or her personal and family situation for the purpose of withholdings (for example, employees' sentences of separation).
• Commitment to improve access to the electronic office, which will be seen immediately in the possibility to obtain grouped reminders, although the legal repercussions of this measure will be studied, so that it does not translate into a new source of conflicts for any of the parties. On the other hand, work will be done to achieve a better identification of the concepts of payment letters and enforcement orders and certain simplifications of the VAT informative declarations are being evaluated.

Cooperative Relationship Work Group

The General Director wants to highlight that in relation to this Group there is a commitment to internal communication within the Tax Agency in whose work he himself is very involved. But there is also an area of external communication that the companies themselves and their representatives in the Forum can carry out, since each in its area could report on the cooperative relationship and how positive it is for everyone.

In the Work Group we agreed to carry out an analysis of the application and development of mechanisms already established in tax regulation, as well as of the previous evaluation agreements and the statements of agreements. In this sense it is convenient to remember that already in the year 2003 the statements of agreements were introduced in the General Tax Act, which are an important instrument for conflict resolution. He adds that the statements of agreement can be applied to numerous cases when we face undetermined legal concepts or when we face the issue of evaluations in general.

We also made the commitment to carry out a study on experiences in this matter in the international area, to discover anything that may be of use here. In this regard, it would be very interesting for company representatives to share their experiences with other tax authorities in specific cases.

On the other hand, we have deepened this commitment in the design of new cooperative instruments:

• Knowledge of tax conflicts relevant to companies. In this sense it is necessary to carry out a positive evaluation of the reform of the Capital Companies Act where this issue is tackled.
• Procedures that could be developed to resolve conflicts and on the manner in which the Tax Agency learns about and evaluates specific solutions applicable to tax norms used by companies.

The General Director also highlights that in order to advance in this cooperative relationship, it is important that all parties believe in it and demonstrate their will to be up to date on the advances of this Work Group, of the implementation in the organisation of all the measures that are approved and of awareness in the organisation. Collaboration of the companies is also necessary, and must be done with a positive attitude.

Next he comments that in the cooperative relationship there are two levels: the formal level and the underlying level. The formal level has been advanced in a considerable way in the Work Group, since the doors have been opened to a bidirectional relationship of understanding. But it should be clear that this does not mean that in the underlying issues we have to coincide in all cases. What is true is that the Tax Agency is willing to give the taxpayer the reasons for which that coincidence does not occur.

Next he refers succinctly to the rest of the work groups:

Work Group on Special Taxes:

The most relevant issues that have been discussed in this Work Group are the following:

• The most relevant modifications to the Regulation on Special Taxes.
• Application of internal EMCS (Monitoring System for Special Taxes Movements).
• Issues related to the new environmental taxes.
• Issues related to the partial exemption of the electricity tax.
• Management of the refunds of the Tax on Sales of Specific Hydrocarbons (known as the "céntimo sanitario").

Work group on analysis of tax regulations and conflict reduction:

This Work Group has not met because all of its members agreed not to meet until the new tax reform was passed.

However, the topic of conflict reduction was spoken about quite a bit in the Group on Cooperative Relationships as has been previously commented. He also invites the Technical Secretariat of the Forum, the SEPRI , the Departments and himself to bring to light any suggestions or problems that may arise, since the intention of the Tax Agency is to try to avoid conflicts as far as possible.

The General Director finishes his speed by welcoming the new Tax Agency managers in the Forum, Luis María Sánchez González, Director of the Department of Financial and Tax Inspection and Ángel Rodríguez Rodríguez, Director of Planning and Institutional Relations and manager of the Forum's Technical Secretariat; and thanks the dedication with which his predecessors have carried out their functions in the Large Companies Forum, Luis Ramón Jones Rodríguez and Elena Guerrero Martínez. And he again states his commitment to holding full meetings of the Forum twice a year, as long as the utility of said meeting is relevant for the common goal, that of the Tax Administration and of the companies, in search of a cooperative relationship with mutual benefits.

A speaking round is now opened .

First Ángel Martín Gómez participates, representative from Telefónica and collaborator in the Forum's Technical Secretariat in representation of the companies, who indicates that the companies view as very positive the meetings carried out in the work groups and expresses the interest of the companies that the Work Group on analysis of Tax Regulation and Reduction of the Conflict begin soon.

On the other hand he indicates that from a point of view of constructive criticism, he would like to highlight that the companies have noticed two problems. First, that the Large Companies Forum was not consulted in any of the phases of launching the tax reform. The second problem regards the bill to reform the Capital Companies Law, since in said bill there are elements that appear in the Code of Good Tax Practices and now have been transferred to the bill, that is, which have turned into general obligations, which means that the Code loses its importance. Therefore, he suggests that these issues be discussed so that they do not happen again.

He adds that also a debate remains pending on how the Large Companies Forum works. Especially as regards admissions and cancellations of its members.

The General Director answers that as regards the tax reform, as is known, the Tax Agency is not the competent body to carry out the regulatory impulse of tax laws. And that it should not be forgotten that when bills are published, the corresponding public information proceedings open and the corresponding parliamentary debate also takes place. But if the companies represented here consider that the Forum should play some role in facilitating the communication of suggestions to the Taxation General Directorate, he does see any reason why that can't be done.

With regard to the proposal to reform the Capital Company Law, he indicates that it is a project that has been promoted by our Ministry.

Next the representative from Vodafone, Javier Viloria Gutiérrez, speaks who declares that in his opinion the Large Companies Forum should participate in some way in the regulatory system, clarifying criteria and mechanisms so that the regulations are feasible and make sense.

The General Director answers indicating that he is going to take everything into account and that he is going to transmit both messages: on the one hand that large companies request to take part in the preliminary phases of regulatory projects and on the other that the appropriate channel for carrying out this work is the Large Companies Forum itself.

3. Approval of the minutes of the meeting held on 29 October 2013

Mr. Rufino de la Rosa Cordón, Director of the Tax Management Department, points out that the minutes of the 7th session of the Plenary Session of the Forum were sent to its members and adds that since no comments were received, and if there were none at this time, it would be definitively approved. As no remarks were made by the attendees, Ángel Rodríguez Rodríguez, head of the Technical Secretariat of the Large Companies Forum, declares the minutes from the plenary session of 29 October 2013 approved.

4. Relevant conclusions of the different Work Groups of the Forum

a) Work Group on Analysis and Rationalisation of Indirect Tax Burdens.

D. Rufino de la Rosa Cordón hands the word over to Luis María Sánchez González, Director of the Department of Financial and Tax Inspection, who indicates that the Work Group is of great importance for the companies and for the Tax Agency and indicates that the group passed a total of forty-four measures between 2009 and 2012, and of those, a total of 31 were implemented. Therefore, he thinks that the Group should continue to exist. In this sense he adds that the meeting held 4 June was quite productive and that they tackled the following matters:

• Issues related to forms 193 (Withholdings of Earnings from Liquid Capital) and 196 (Annual Summary of Earnings from Liquid Capital), which regardless of their previous analysis, were valued positively by the Tax Agency.
• Simplifications of forms 303 and 390, which it does not considered appropriate to carry out in the present moment due to issues of control.
• Improvements in the Electronic Office related to the management of debt payments, which are going to be carried out as soon as possible by the Tax Agency, separating the process of payment from the process of reminders.
• Possibility to obtain pending reminders together. At this point he highlighted the important work that the Postal Service performs in this matter and he informed that the Tax Agency is going to advance technically in the improvement of identifying notifications when they are downloaded jointly, allowing the companies a better distribution of notifications among their different working areas.
• Improvements in the identification of the items on receipts and enforced collection rulings. The Tax Agency informed that it is going to work on that.
• Request to limit the obligation of withholders to issue certificates of work withholdings in those cases in which the worker requests it. Or otherwise that it be enough to post these certifications on the corporate intranet. This measure needs a regulatory modification, therefore it must be evaluated by the Taxation General Directorate.
• Proposal related to the Special Scheme on Cash Basis. It is requested that the entities that opt for the scheme communicate it formally to the recipient (And the renunciation or the impossibility of applying for the Scheme). Instead of recipients revising every incoming invoice to see whether it includes the mention of the "Scheme on Cash Basis". The group also considered the possibility of there being a sort of census. There was a lot of debate but a consensus was not reached by the companies. Therefore, the Tax Agency thinks it is necessary to clarify the proposal.
• Issue of rectifying invoices and of the costs of the claims necessary to obtain the necessary authoritative document to rectify the bases. It was reported that this would be evaluated by the Taxation General Directorate.
• Issues related to associated operations, which we decided to discuss once the new tax reform was published.

b) Work Group on Excise Duties.

D. Rufino de la Rosa Cordón gave the stage to Pilar Jurado Borrego, Director of the Department of Customs and Excise Duties, who indicates in the first place that this Work Group began as a group split off from the Work Group on Analysis and Rationalisation of Indirect Tax Burdens and that currently six companies participate in the group, which are represented in the Forum plus one company that is a signatory to the Code of Good Tax Practices (CLH). She adds that since the last meeting of the plenary session two group meetings have been held: one in December 2013 and another in June 2014. The main subjects tackled in these meetings are as follows:

• Issues arising from the implementation of the electronic system for filing accompanying documents. When this electronic form was established, the logical incidences occurred, which the companies have commented in the meetings and which have been solved by carrying out the necessary adjustments.
• Issues related to the Electricity Tax. On the one hand, for form 513, some problems of interpretation have been discussed in the meetings, showing that the contents of the form should be explained better. The experience had in the Customs Department is that the duties arising from this tax fall on very specific sectors but affect a very large group of taxpayers, therefore taking all this into in account, it has been decided that the form should be adapted to this reality. On the other hand, and continuing with the Electricity Tax, practical clarifications have had to be made as regards the partial exemption from the tax and the comments that the companies have shared in this Work Group been very useful.
• Tax on the Value of the Production of Electrical Energy. The management of this tax makes necessary information that does not always originates from the taxpayer, but is information that is presented through information returns, with the corresponding issue that derives from that.
• Management of the refunds of the Tax on Sales of Specific Hydrocarbons (known as the "céntimo sanitario").

c) Work Group on Cooperative Relationship.

D. Rufino de la Rosa Cordón yields the floor to Ignacio Huidobro Arreba, Central Delegate for Major Taxpayers, who indicates that at the present there are several verification procedures, all a posteriori, that have some limitations and maybe in some cases could generate conflict, which also happens because the companies are immersed in a process of internationalisation that has a direct repercussion on the activity developed by the Tax Agency. He adds that that taking all of that into account, in the Work Group on Cooperative Relationships what makes sense is to mark some guidelines to transform this reality, so that in relation to specific important operations, problems and issues to be dealt with can be detected early, as well as take any steps to reduce conflict. This must be the general principle of the work group and the direction that it should go in.

In order to do so, the Tax Agency has started an important effort for internal communication. An example of that has been the session for the entire Central Office with the main ideas of insisting on the application of the Code of Good Tax Practices and of informing in detail on the conclusions document for the cooperative relation form and ways to work towards a more cooperative model. On the other hand, in these tasks of training and of internal communication, in September sessions will be held in which representatives from tax administrations from countries such as Holland and the United Kingdom will participate, as well as companies and intermediaries, with the idea of learning about the practical application of advanced models of cooperative relationships, as well as intermediate experiences of countries that are still working out how they are going to carry out the cooperative relationship model. All of this will be done with the idea of taking the best ideas and adapting them to our idiosyncrasy. It is in this line in which we expect, also in the Work Group, to share experiences and to clarify what must be incorporated to the model, mainly, receiving advice from companies with experience in applying corporate forms in other countries.

He continues by indicating that in order to keep advancing in the model it would be helpful to carry out an analysis in the Group of the instruments that we already have available, such as the previous evaluation agreements, in their different areas and adds that the Tax Agency is going to evaluate certain common solutions for applying tax norms in relation to facts and operations that companies use. Also in the Work Group we will study possible collaboration practices or procedures to prevent conflict which could be developed in the procedures of verification.

5. Next call: dates and subjects to deal with

D. Rufino de la Rosa Cordón declares that the commitment to call the next plenary session of the Large Companies Forum in the second semester of 2014 remains, given that the idea is to carry out this type of meetings twice a year.

6. Other considerations, requests and questions

D. Rufino de la Rosa Cordón asks the attendees if they want to present another issue or to ask a question.

As no remarks are made by the attendees to the plenary session and there are no more subjects to discuss, the meeting is adjourned, thanking everyone for their presence and participation.