Tax

Publication of the Law transposing the Hybrid Mismatches Directive

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Law 5/2022 of 9 March, which amends Law 27/2014, of 27 November, on Corporate Income Tax, and the revised text of the Law on Non-Resident Income Tax, approved by Royal Legislative Decree 5/2004, of 5 March, in relation to hybrid mismatches (hereinafter, the “Law 5/2022”), was published recently in the Spanish Official State Gazette (BOE).
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Law 5/2022 stems from the parliamentary processing of Royal Decree-Law 4/2021 of 9 March, which initially addressed the transposition of the ATAD II Directive, with the aim of eliminating the tax effects of hybrid mismatches and combating the tax evasion that occurs when certain taxpayers subject to two different tax jurisdictions benefit from unequal or uncoordinated tax treatment between them.

Hybrid mismatches can occur between a taxpayer located in Spain and a related entity located in another country when the entities themselves, the transactions they carry out or the income derived from these transactions have a different tax classification in Spain and in the other country.

The aim of this Law is to avoid the deduction of an expense in the country of the payer of the payment without the corresponding taxation of the corresponding income in the country of the payee, the double deduction of the same expense, as well as other cases that allow these asymmetries to be used as a mechanism for the erosion of the tax base and the transfer of profits.

The amendments introduced by this Law, which do not vary with respect to those provided for in Royal Decree-Law 4/2021 of 9 March, except for a small technical improvement, will be applicable to hybrid mismatches that occur between Spain and other EU Member States, and between Spain and third countries or territories, provided that between the parties involved in the transaction there is a relationship of association, significant influence is exercised or they act jointly with respect to voting rights or ownership of capital, as well as when the asymmetry takes place within the framework of a structured mechanism.

Law 5/2022 comes into force on March 11, 2022, and the aforementioned amendments will be effective for tax years beginning on or after January 1, 2020 and which have not ended on that date.

The tax department of Grant Thornton Spain is at your disposal for any clarification you may require in relation to this regulation.