Spain’s Draft Pillar 2 Decree Includes OECD Administrative Guidance

On December 4, 2024, Spain issued a draft decree which includes Regulations for the application of the Draft Global Minimum Tax Law (subject to a public consultation). The Draft Global Minimum Tax Law (to implement the EU Minimum Tax Directive)  was previously updated and published in the Official Gazette of the Spanish Parliament on June 14, 2024.

The provisions of the Draft Regulations generally apply to fiscal years that commence on or after December 31, 2023.

Whilst the Draft Global Minimum Tax Law does not currently reflect most aspects of the OECD Administrative Guidance (either the February 2023, July 2023, December 2023 or June 2024 guidance issued), The December 2024 Draft Regulation does propose to include a number of these provisions from the:

February 2023 OECD Administrative Guidance (AG1)

July 2023 OECD Administrative Guidance (AG2)

December 2023 OECD Administrative Guidance (AG3)

Implementation of OECD Administrative Guidance

The December 2024 Draft Regulation includes:

-Meaning of “ancillary” for Non-Profit Organisations (Article 1.6);

-Forex hedge election (Article 2.2);

-Excluded dividends – asymmetric treatment of dividends and distributions (Article 2.3);

-Debt release election (Article 2.4);

-Equity gain or loss inclusion election (Article 2.9);

-The extension of Additional Capital to include Restricted Tier One Capital (Article 3.3);

-Liabilities related to Excluded Dividends and Excluded Equity Gain or Loss from securities held on behalf of policyholders (Article 3.4);

-Application of Tax transparency election to Mutual insurance companies (Article 3.6).

–Tax Credits Guidance (MTTCs) (Article 2 Second Set of OECD Administrative Guidance);

-Rules for the Substance-Based Income Exclusion:

o Foreign rules (Article 3 Second Set of OECD Administrative Guidance)
o Stock-based compensation election
o Leases (Article 3 Second Set of OECD Administrative Guidance)

-Mismatch between fiscal years of the UPE and another constituent entity (Article 3.1 of the Third Set OECD Administrative Guidance);

-Mismatch between fiscal year and tax year of a constituent entity (Article 3.2 of the Third Set OECD Administrative Guidance).

Registration/GIR

The Draft Regulation also include a registration obligation. Article 18(1) of the Draft Regulation provides that any constituent entity located in Spain that forms part of a large multinational or domestic group is required to file an information return with the tax authority.

It must notify the Tax Authority of the identification, the start and end date of the tax period and the country or territory in which the UPE is located, when the UPE is required to file the return or, if it is not required to file the return, it must notify the Tax Authority of the identification and the country or territory in which the entity designated to file the return is located. This must be filed at least 3 months before the GIR filing deadline.

The draft regulation also provides the content of the GloBE Information Return (in detail) although a future Ministerial Decree will be issued to provide the form.