1. Tax reform in Spain: some of the main proposals

2. 11 Content Tax reform: Introduction Equity restructuring Treatment of intangibles Restriction on the offset of tax losses Exemption for dividends and capital gains on the transfer of shares Corporate income tax rate Consolidated tax groups Inbound expatriates regime Exit tax Amnesty for foreign pensioners Severance for dismissal

3. 22 Tax reform: introduction New Corporate Income Tax Law with many significant changes Entry into force: January 1, 2015 Transitional regime for 2015 and for previous transactions Isolated changes in personal income tax Adaptations in the tax proceeding to facilitate inspection and collection proceedings

4. 33 Equity restructuring Non-deductibility of the remuneration of equity, irrespective of its accounting classification (nonvoting shares, etc.) or of the finance costs of the participating loans provided by companies of the same group The income derived from these items is deemed a dividend, except for that of participating loans that generate a deductible expense at the payer Restriction on the deductibility of the expenses derived from related-party transactions that do not generate income or that are subject to a rate below 10% (Transposition of BEPS measures: anti hybrids)

5. 44 Equity restructuring Restriction on the deductibility of finance costs: Those derived from debts with the group used to acquire companies from other group companies or to increase capital are not deductible, unless there are valid economic reasons Net finance costs are deductible subject to the limit of 30% of operating income of the year An additional limitation is included for cases of acquisitions of companies included in the consolidated tax group or that are absorbed in a merger Elimination of the tax credit for reinvestment of business income “Capitalization Reserve” is created Tax base is reduced by 10% of the amount of the increase in equity Limited to 10% of the tax base of the fiscal year prior to the reduction The increase in equity must be maintained for 5 years The increase in equity cannot derive from shareholder contributions or from restructuring transactions

6. 55 Treatment of intangibles “Patent Box” regime: 40% reduction in the tax base Applicable to transactions within a consolidated tax group when carried out with third parties Deduction of systematic depreciation (not impairment): Intangibles with defined useful life (according to their duration) intangibles with undefined useful life (maximum 5% per year) goodwill (maximum 5% per year). Transitional regime for 2015

7. 66 Restriction on the offset of tax losses Restricted to 60% of the tax base of the year. This restriction does not affect income deriving from restructuring transactions Limitation in case of acquisitions of companies for those to which a new activity is provided and which increase their turnover Transitional regime for 2015

8. 77 Exemption for dividends and capital gains on the transfer of shares New conditions for the exemption for income deriving from nonresident entities Holding of 5% or cost of €20 million Minimum taxation of 10%, unless tax treaty applies Fulfillment of these requirements in indirect holdings Not required to carry out business activities abroad. New case of international fiscal transparency (CFC rules) New exemption for income deriving from resident entities: Holding of 5% or cost of €20 million Nondeductibility of merger goodwill. Transitional regime

9. 88 Corporate income tax rate 25% (28% in 2015). 15% for newly created entities Possibility of maintaining the current 30% (credit institutions). Accounting effect

10. 99 Consolidated tax groups Changes in the scope of consolidation Use of pre-consolidation tax losses and tax credits. Inclusion of eliminations made Transitional regime

11. 10 Inbound expatriates regime Applicable to workers assigned to Spain for employment reasons (employment contract). No professional sportspersons Option to be taxed under nonresident income tax: 24% up to €600,000 and 45% thereafter; and 19%-23% for savings income

12. 11 Exit tax When there is a change in residence, any unrealized gain on shares or units in any collective investment undertaking is treated as a taxable gain in Spain It is included in the tax period prior to the change in residence. Transitional regime? Applicable to securities exceeding €4 million or shares exceeding 25% of the capital if their value exceeds €1 million

13. 12 Amnesty for foreign pensioners Amnesty is permitted without surcharges, interest or penalties. Retroactive in nature Only affects undeclared pensions, not other income. But everything must be disclosed Time limit: 6 months after law is approved

14. 13 Severance for dismissal Severance pay for dismissal is exempt from personal income tax in the amount established as mandatory by the labor legislation Special treatment for senior management / directors Limit on exempt amount: €180,000 The expense is not deductible for corporate income tax purposes in the portion that exceeds the larger of the following 2 figures: €1 million per recipient; and The amount established as mandatory by the labor legislation Tax Deductibility of directors’ remuneration

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