Data of the Beneficial Owners of Commercial Entities shall be reported in the Annual Accounts 2017.

The end of unjustified Geo-blocking: New Regulation UE 2018/302.

The end of the minimum instalment payment in the Corporate Income Tax for Venture Capital entities.

Data of the Beneficial Owners of Commercial Entities shall be reported in the Annual Accounts 2017.

By Jordi Majoral

Order JUS 319/2018 approving the official versions for the filing of the Annual Accounts with the Companies Registry was published in the Official State Gazette BOE in March.

The most remarkable development in the Annual Accounts results from Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.

Under such Directive, a new form is included in the official version of the Annual Accounts which identifies the beneficial owners of the company. We must mention that such document is of a non-accounting nature and thus is not part of the annual accounts, but it is mandatorily attached thereto as other documents, such as the filing application, the general data page, the environmental declaration or the treasury shares form.

Such form is structured in three sections, so that the information to be reported will depend on the existence or not of a beneficial ownership and the conditions in which this is expressed. There are accordingly:

A first section of information for the identification of the beneficial owner. This section shall include the information relating to such natural persons with a share percentage above 25 per cent. The following information on such persons shall be supplied: tax identification number, either Spanish or foreign, birth date, nationality, residence country and share percentage, broken down as direct or indirect.

The second section is called “person taken as beneficial owner” and shall be filled in if there is no natural person owning or controlling a percentage above 25 per cent of the capital or the voting rights. In such cases, the information to be reported shall refer to directors or managers of the entity.

Finally, the third section of information is called “details of the companies involved in the control chain” and shall be used in the event of indirect beneficial ownership. If this is the case, information shall be supplied on such entities through which indirect ownership is held, breaking down the tax identification numbers abroad or in Spain, the level of each entity within the control chain, their corporate names, their nationalities, their registered offices and their registry details.

Similarly, we must mention that fulfilment of this additional form is mandatory for entities regardless of the fact that they may prepare and file their accounts pursuant to the “normal”, “abridged” or “SME” version.

The end of unjustified Geo-blocking: New Regulation (UE) 2018/302.

By Alejandro Ferreiro

On 28.02.2018, Regulation (EU) 2018/302 of the European Parliament and of the Council of 28 February 2018 on addressing unjustified geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market and amending Regulations (EC) No 2006/2004 and (EU) 2017/2394 and Directive 2009/22/EC (Text with EEA relevance, was approved.

Geo-blocking is a commercial practice carried out by several e-trade companies of products and services, consisting of blocking a service or product offer from customers according to their geographical location with the purposes of differentiating the commercial conditions in which they sell their products in the different member States of the European Union. Particularly, such companies impose barriers to prevent customers of other countries in the European Union from accessing their services or products in the same conditions as customers of the country of origin of such companies.

For practicing geo-blocking, companies use different techniques and formulas, such as redirection to local web pages with different prices to those offered on the main web page, price increases for non-resident purchasers or commissions or extra rates due to the customer geographical location. On other occasions, the purchase is directly impossible to be made for foreign customers.

This kind of practices directly collide with the main political goals of the European Union and the Community Law on competition, such as the achievement of a digital single market, maximisation of the consumer well-being and integration of the member States and their economies, thus such practices being considered as discriminatory for consumers when the same are unjustified. In this regard, the European Union managed long ago to abolish physical commercial borders for community citizens. Thanks to this, citizens may, for example, purchase any product in any European country without having to declare it when they pass the border. However, geo-blocking implies that the European citizens’ rights are not applied on the Internet.

The purpose of the new European Regulation is thus removing such restrictions and unblocking e-trade in the benefit both of consumers and companies and removing discrimination based on customers' nationality, place of residence or place of establishment.

Regulation 2018/302 states that in order to realise the full potential of the internal market, as an area without internal frontiers in which the free movement of, inter alia, goods and services is ensured, it is not sufficient to abolish, between Member States, State barriers alone. Such abolition can be undermined by private parties putting in place obstacles inconsistent with internal market freedoms. That occurs where traders operating in one Member State block or limit access to their online interfaces, such as websites and apps, by customers from other Member States wishing to engage in cross-border transactions. Then, the purpose of the Regulation is to adopt measures against unjustified geo-blocking by removing certain barriers to operation of the internal market.

Particularly, upon the effective date of the Regulation, the European traders shall treat consumers of other countries of the Union as the local consumers, that is, without possibility to apply any geolocation filter, in the following cases:

(i) buy goods from a trader and either those goods are delivered to a location in a Member State to which the trader offers delivery in the general conditions of access or those goods are collected at a location agreed upon between the trader and the customer in a Member State in which the trader offers such an option in the general conditions of access.

(ii) electronically supplied services not protected by copyright, such as cloud services, data warehousing services, website hosting.

(iii) services, such as hotel stay and vehicle lease, which the customer receives in the country where the trader operates.

Similarly, the Regulation prohibits unjustified discrimination of customers in terms of methods of payment. Therefore, traders may not apply to customers different payment terms based on their nationality, place of residence or place of establishment.

In turn, traders may not block or limit access from customers to their online interfaces based on their nationality or place of residence and shall be obliged to provide a clear and justified explanation when forwarding a customer to a different version of the interface.

In this context, Regulation 2018/302 sets forth a series of exceptions or exclusions of its application to certain services, for which the geo-blocking may continue in operation, such as services electronically rendered whose main characteristic is to provide access to works protected by copyright or other protected services, such as e-books, music or videogames. Other services, such as financial, audio-visual, transport, health and social services shall be also excluded.

In this regard, the Regulation excludes from its application scope such on-line services that sell or provide access to digital works protected with copyright. For example, the Regulation will affect sellers of paper books on the Internet, but it will be applied, for the time being, to of e-book sale.

However, article 4 of the Regulation establishes that “shall not prevent traders from applying different prices to customers in certain territories in so far as they are required to do so under the laws of Member States in accordance with Union law”.

In any event, the Regulation shall be applicable as of 03.12.18, so that geo-blocking could continue in operation until such date. In this regard, the Regulation sets forth that upon its second anniversary, the Commission shall carry out a first evaluation of its impact within the internal market, as well as of the application scope of the Regulation and its possible extension to certain services electronically rendered and protected by copyright, such as music, e-books or software.

The end of the minimum instalment payment in the Corporate Income Tax for Venture Capital entities.

By Jordi Majoral

Pursuant to Draft Act 121/20, on the General State Budget, venture capital entities shall not be subject to the minimum instalment payment of the Corporate Income Tax any longer.

We must remind that venture capital entities are such closed-ended collective investment entities which obtain capital from different investors with the purpose of generating profits and/or returns for the investors.

The main purpose of these type of entities, which may have the legal form of venture capital companies or venture capital funds, is the taking of temporary shares in the capital of companies of a non-real estate or financial nature which, upon taking the shares, are not listed in the first stock exchange or any other equivalent regulated market of the EU or the rest of the countries members of the OECD.

This being said, we must also remind that the minimum instalment payment of the Corporate Income tax is a measure introduced in 2016 with the aim of reducing the public deficit of the administration and which consists of establishing a minimum amount to be credited as payment on account of the Corporate Income Tax, this amount not being lower than 23 per cent of the positive result of the profit and loss account of the year of the 3, 9 or 11 first months of each calendar year.

Since its introduction in 2016, both Collective Investment Institutions such as the SOCIMI were expressly excluded from this measure, but not the venture capital entities; which is at first sight surprising since all these types of entities have a common denominator; the nearly full exemption from payment of the Corporate Income Tax.

Their inclusion in the minimum payment obligation had more than significant effects for venture capital entities since their profitability was affected for being obliged to make important instalment payments which, in certain cases, required external funding to be met; in other cases, performance of the profitability established for their investors was hindered and, if the worst comes to the worst, it caused the relocation of part of these entities in favour of more beneficial jurisdictions, such as Luxemburg.

The impact on venture capital entities and funds is even more remarkable since they are entitled to apply a 99 per cent exemption in the Corporate Income Tax, which leads them to request the refund of nearly all payments on account made.

If the Draft of the General State Budget Act is not altered from its current wording, the situation we have described above would cease and the financial ups and downs that outlays made as minimum payment generate in the venture capital companies, would disappear.