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What is the Financial Transaction Tax?

Sometimes, due to ignorance or carelessness, taxpayers forget to file their tax returns or have no idea what step to take in their business. Have you heard about the Financial Transaction Tax in Spain? In this article we will give you the details you need to know about this tax.

Financial Transaction Tax

According to Law 5/2020 of October 15, 2020, the Financial Transaction Tax (FTT) is understood as an indirect tax on expensive acquisitions issued in Spain by listed companies with a stock market value exceeding 1,000 million euros.

It is also understood that the FTT came into force last year, on January 16, 2021, and applies a tax rate of 0.2%, regardless of the place where the acquisition is made and regardless of the residence or place of establishment of those involved in the transaction.

On the other hand, the Official State Gazette has assured that the main purpose of the Financial Transaction Tax is to contribute to the consolidation of public finances, as well as to improve equity in the Spanish tax system.


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Transactions subject to the Financial Transactions Tax

The taxable event in these cases is considered to be related to the acquisition of the financial instrument or the result of the allocation of a derivative position. Therefore, the acquisition of a call option is not subject to Financial Transaction Tax, but the acquisition of the stock underlying that option is.

In addition, financial instruments such as convertible or exchangeable bonds or debentures, preemptive subscription rights, warrants and preferred stock do not constitute a taxable event.

In this sense, only when the liquidation of the instruments leads to the delivery of shares or marketable securities involving deposits representing such shares, the tax would be payable.

As already mentioned, the tax is levied at 0.2% on those onerous purchases of shares representing the capital stock of companies with Spanish nationality and, for them, they must comply with the following conditions:

  • The company must have its shares listed on a Spanish market or in another member state of the European Union.

  • The company must have a market capitalization value of more than 1,000 million euros (as of December 1 of the year prior to the acquisition).


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What are the possible exemptions?

According to article 3.1 of the Financial Transactions Tax Law, a series of exemptions related to the primary market and acquisitions involved in the operation of structures related to companies or corporations are established. Thus, below, we mention the main facts applicable to the exemption of this tax:

  • In those cases in which the acquisition derives from a public offering of shares, for the initial placement among investors, the following are included in the initial placement.

  • Likewise, in acquisitions deriving from the issuance of shares, the Company will

  • The following are also exempt with respect to shares held between entities that are part of the same commercial group

  • Acquisitions eligible for application of the tax neutrality regime involving restructuring operations; provided that they comply with current corporate income tax regulations.

  • Transactions aligned with EU regulations and highlighting securities lending, sell/buy-back simultaneous transactions, as well as collateralized loans and collateralized repo transactions resulting from a collateralized repo agreement.

  • Acquisitions of own shares or shares of the parent company of a commercial group by any other entity forming part of its group carried out within the framework of a repurchase program.

How is the Financial Transaction Tax accrued?

When we speak of accrual of the tax we refer to the moment in which the obligation to pay the tax in question takes place.

Regarding the FTT, it is established that it will be accrued at the moment in which the securities are registered in favor of the acquirer in a securities account or registry. Therefore, it is independent if it involves an entity that provides the custody service or in the system of a central securities depository.


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Financial Transaction Tax Filing Deadline

In order to comply with the payment of this tax, you should know that its liquidation is scheduled on a monthly basis, from the 10th to the 20th of the month following the corresponding monthly liquidation period, as established by the Tax Agency.


When you decide to join the business world there are certain benefits to enjoy and various responsibilities to fulfill and, in the case of tax obligations, at TAS Consultoría we have tax experts who can advise you on each of your tax returns in Spain.


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