Why does the Government need to prove that the Railways are liars?

The transfer of the headquarters of Ferrovial in Belgium is proposed as a merger in which Ferrovial Internacional SE (FISE), based in Amsterdam, will absorb until now the main company, Ferrovial SA, based in Madrid, and will become the parent group. Translated: the daughter absorbs and occupies the mother. In one way or another, any merger works entails an influx of contributions, acquisitions and exchanges of securities, which involve the largest proposal, except for the existence of the so-called. special tax regime for mergerswhich allows great savings for this type of operation. In the document ‘Common cross border merger project’ sent by Ferrovial to the CNMV on Thursday, March 2, the company confirms its intention to benefit from this special tax regime: “The merger will be carried out under the tax neutrality regime provided for in Chapter VII of Title VII on the right of the company”. All large restructuring operations, such as the merger of Caixabank and Bankia, for example, seek the benefit of this tax benefit of the regime, which allows the deferral of the taxation of capital gains at the material time.

When a merger is carried out, the value of the assets of the acquired company must be updated and this brings some capital gains for which the treasury must be taxed. This is where the so-called “Government” [fiscal] mergers, divisions, contributions of assets, the exchange of securities and the change of the registered office of the European Company or the European Cooperative Society from one Member State to another European Union”. According to the sum of the tax experts consulted in practice; of the merger (for you only have to pay those taxes if you sell the property and obtain a capital gain). The only condition imposed by law to be able to enjoy this relief is that the merger is actually carried out “for sound economic reasons” and not “for the sole purpose of obtaining tax benefits”.

This is where the concern lies. If Ferrovialis argues without criticism that there are “strong economic reasons” that moving the headquarters from Madrid to Amsterdam will bring more business and benefits to the company, there will be no question of applying the advantages of the special merger regime. If, on the other hand, the Government or the CNMV suppresses the “substance” of the arguments – in Calviño’s phrase – it is revealed that the reason for moving the headquarters to Amsterdam is only to enjoy the best of the Dutch government, they would not deny anything. a special regime could be used longer. In this case, Ferrovial could go to the Netherlands, but only after paying a week’s tax to the Spanish treasury. The debate about the reasons for Ferrovial going to Spain is not so much political as it seems from the fiery disputes emanating from the Government and the Popular Party. Substantial economic factors are involved. With the publication of the Cinco Días newspaper, railway executives met this Thursday with civil servants from the Central Delegate of the Great Taxpayers of the Tax Agency to discuss the corporate operation of the Railway.

In the document ‘Common cross border merger project’, of 92 pages, sent to the CNMV, Ferrovial breaks down the arguments that lead to the transfer of its headquarters to Belgium. Savings tax is not mentioned among them. The railroad acknowledges that it is getting tax savings, but does not cite a reason for the transfer of headquarters. But it should be noted that the Belgians, with an AAA credit rating, have “a suitable business and investor environment, a reliable legal system and a strong body of government framework”. In addition, it is argued that this triple assessment “must understand, in the future, the settings of the costs of the company to reduce the debt problems and, to discover, also to improve the cost of capital”. Third, Ferrovial believes that its presence in the Netherlands will “increase its brand awareness both in Europe and in the rest of the world”. Finally, Belgium is considered to be “the best platform for listing in the United States”, both in Spain and Belgium; and “counting in the United States is a strategic objective for the Railway Group”, as it plans to focus more business there (92% of the compensation committed by the group during the period 2023-2027 corresponds to the US.

The Government doubts that there is “substance” in the arguments raised by the Railways. The CNMV, for its part, states that it is not necessary to go to Amsterdam to register in the US, since it can do so in Madrid. Moncloa points to the fiscal reason for the transfer. Dividends from subsidiaries abroad to the parent distributed in the Netherlands are exempt up to 100%; in Spain the exemption only reaches 95% of the loan. This, according to the analysis of Banc Sabadell, could bring savings of 40 million of cash to the group that paid 30 million in taxes in the profit of 2022, of which only 5 million were in Spain, according to the 2022 Integrated Annual Report. the bill is largely explained by the losses from the past years. In addition to predictable tax savings due to the total exemption of dividends, the Dutch multinationals allow individuals to negotiate with the Dutch tax administration with a special tax ruling (‘tax ruling’). Another type of taxes can come from collecting damages. According to the annual integrated report of the group, the Ferrovial group accumulates negative tax credits from the past years of 712 million, of which 160 correspond to Spain. The Dutch legislation gives an unlimited allowance for losses accumulated in previous years with a consequent reduction of taxes; In Spain there are limits to damages.

The experts consulted agree to the same: although it is true that the lower taxes in Ferroval’s opinion by moving in Belgium, it will be very difficult to argue that they will be able to obtain the same or greater size. economic benefits that your business claims. That being the case, it is very difficult for the AEAT to deny the government tax neutrality to the Railway merger.