Ferrovial explained to CNMV four reasons why the board decided to sign Spain. Holland 100 percent of the multinational’s headquarters is financial and strategic to provide easier access to finance and capital, and to achieve greater “notoriety” for its brand both in Europe and the rest of the world. The government insists on questioning the allegations made by Ferrovial. vice president Nadia Kalvino He said the government and the CNMV will analyze these arguments to find out if they have “essence”. La Moncloa, the real reasons behind the Ferrovial president’s decision, Raphael del pinoThey are financial in nature. Beyond the intersection of political noise and outrage, there are strong reasons for trying to show that the allegations made by Del Pino in the Government cannot be true.
A special tax regime for mergers
The relocation of Ferrovial’s headquarters to the Netherlands has been proposed as a merger in which Amsterdam-based Ferrovial Internacional SE (FISE) will now acquire Madrid-based parent company Ferrovial SA and appear in the group matrix. Translation: the girl engulfs the mother and takes control. One way or another, any merger requires an influx of contributions, acquisitions, and exchanges of securities that would have resulted in a very high tax bill without the so-called merger. Special tax regime for mergersThis provides significant savings for such operations. in the document ‘Joint cross-border merger project’ In the letter sent by Ferrovial to the CNMV on Thursday, March 2, the company confirms its intention to benefit from this special tax regime: “Mergers are companies under Title VII of Title VII of the Tax Code”. For example, all major restructuring transactions, such as the merger of Caixabank and Bankia, seek to take advantage of this advantageous tax regime that allows the taxation of capital gains to be deferred as soon as they occur.
One condition: not to pay less
When the merger takes place, the value of the acquired company’s assets needs to be updated, resulting in some capital gains (profits) that the Treasury will tax. The so-called “Regime” here [fiscal] Mergers, demergers, asset contributions, exchange of securities and change of registered office of a European Company or a European Cooperative Community from one Member State of the European Union to another State of the European Union”. means you don’t have to pay taxes on hidden capital gains (you only have to pay tax if you sell an asset and earn a capital gain). must have been accomplished.
The crux of the matter
Here is the crux of the matter. If Ferrovial can unfailingly argue that the “valid economic reasons” justifying the relocation of headquarters from Madrid to Amsterdam will bring more jobs and benefits to the company, there will be no problem in enforcing the advantages of the private merger regime. On the contrary, they would not have done so if the Government or the CNMV had – to use Calviño’s words – taken away the “essence” of the arguments and it turned out that the reason for the relocation of headquarters to Amsterdam was simply to take advantage of the Netherlands’ best tax regime. it will be possible to apply the special regime for a longer period of time. In this case, Ferrovial could go to the Netherlands, but only after paying heavy taxes to the Spanish Treasury. Thus, the debate over what were the reasons that led Ferrovial to leave Spain is not purely political, as can be seen from the heated bickering from the Government and the People’s Party. There are important economic reasons behind it. As published by the Cinco Días newspaper, Ferrovial executives met with officers from the Tax Office’s Large Taxpayer Center Delegation this Thursday to discuss the corporate running of Ferrovial.
Four reasons for Del Pino
in the document ‘Joint cross-border merger project’The 92-page Ferrovial submitted to CNMV breaks down the arguments that led it to relocate its headquarters to the Netherlands. There is no mention of tax savings among them. Ferrovial acknowledges that it will achieve tax savings, but does not use this as a justification for the transfer of headquarters. Instead, he states that the AAA-rated Netherlands stands for “a favorable business and investor environment, a reliable legal system and a strong corporate governance framework”. It is further argued that this triple A rating “should mean lowering the financing costs of the company’s debt issuances in the future and improvements in the cost of capital in the long run”. Third, Ferrovial believes its presence in the Netherlands will “increase the awareness of its brand both in Europe and the rest of the world”. Finally, the Netherlands is considered to constitute the “optimal platform for listing in the United States” alongside Spain and the Netherlands; and “Listing in the United States is a strategic goal for Ferrovial Group,” as it plans to concentrate more business there (92% of investments committed by the group for the period 2023-2027 correspond to the United States).
Government suspicion: financial motive
The Government doubted that there was “substantive” in the arguments presented by Ferrovial. The CNMV, on the other hand, argues that it is not necessary to go to Amsterdam to be listed in the US, as it is possible to do so from Madrid. Moncloa cites a financial justification for the transfer. Dividends distributed to the parent company by subsidiaries abroad are 100% exempt in the Netherlands; In Spain, the exemption reaches only 95% of the dividends repatriated. According to an analysis by Banc Sabadell, this could save €40 million for a group that pays 30 million taxes on profits in 2022, of which 5 million are in Spain alone, according to the 2022 Integrated Annual Report. The bill is largely explained by compensating for losses from past years. In addition to the foreseeable tax savings due to the total dividend exemption, the Netherlands allows every multinational to negotiate a special tax procedure (‘tax judgment) with the Dutch tax administration. Another avenue of tax savings can come from accumulated book losses. According to the group’s integrated annual report, the Ferrovial group has accumulated tax credits for negative tax bases amounting to 712 million from previous years, 160 of which correspond to Spain. Dutch legislation allows for unlimited compensation for accumulated losses in previous years and, as a result, tax relief; There are limits to losses in Spain.
possible outcome
The experts consulted agree on the same point: while there is indeed a reason for Ferrovial to pay less tax in its decision to move its headquarters to the Netherlands, it is very hard to deny that it could get more for the same or even greater measure. the economic benefits it claims for your business. That being the case, it would be very difficult for the AEAT to reject the tax neutrality regime to the Ferrovial merger.