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Brussels, 28 January 2010

Capital duty: The European Commission formally requests Spain to abolish its transfer tax on certain contributions of capital

The European Commission has formally requested Spain to change its tax provisions related to the transfer of securities. The Commission considers that the imposition of a transfer tax on certain contributions of capital, in addition to capital duty, is contrary to the Capital Duty Directive (2008/7/EC). The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 258 of the Treaty on the Functioning of the European Union). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the Court of Justice of the European Communities.

According to article 108 of Law 24/1988 of 28 July 1988 on the securities market, in case of a contribution of capital to a company whose real estate assets located in Spain represent more than 50 % of its total assets or whose assets include securities in another entity whose assets consist for at least 50% of real estate located in Spain, any contributor who as a result of this contribution obtains a position such as to exercise control over this entity or, once this control has been obtained, increases his shareholding in the entity, will have to pay a transfer tax (at a tax rate which ranges from 6 to 7%) in addition to the capital duty (1%) paid by the company increasing its capital.

Council Directive 2008/7/EC allows Member States to levy capital duty on contributions of capital but the tax rate may not, in any event, exceed 1 % of the capital increase and, according to article 5 of the Directive, Member States may not levy any other tax on such an increase. The Commission considers that the Spanish legislation at issue is not in conformity with article 5 of Council Directive 2008/7/EC as it provides for another tax to be levied in addition to capital duty on certain contributions of capital that fall within the scope of the Directive.

The Commission's case reference number is 2008/4760.

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