The Spanish construction company and concessionaire Ferrovial will have to justify to the Spanish authorities the economic arguments for its transfer to the Netherlands if it does not want to pay a million-dollar tax bill.
The Government has repeatedly expressed its rejection of such an emblematic group moving its headquarters outside of Spain.
He considers that he does not need to move to Amsterdam for his shares to be traded simultaneously on Wall Street and on the Ibex, as the company claims.
The Secretary of State for the Economy, Gonzalo García Andrés,
sent a letter to the Spanish company on Monday in which it remarked that after the analysis of Bolsas y Mercados Españoles (BME) and the National Securities Market Commission (CNMV) they have not found "obstacles or indications of its existence for the admission to direct negotiation of the shares of a Spanish company listed in the United States”.
The letter was sent three days before the general meeting of shareholders of the group chaired by Rafael del Pino, who must vote this Thursday, the 13th, on the transfer to Amsterdam.
The letter notes that the lack of obstacles for it to be listed both in New York and in Spain "questions the economic motivation of the cross-border merger project announced on February 28."
The Government wants to put pressure on this argument to try to avoid
The letter notes that the lack of obstacles for it to be listed both in New York and in Spain "questions the economic motivation of the cross-border merger project announced on February 28."
The Government wants to put pressure on this argument to try to avoid
The letter notes that the lack of obstacles for it to be listed both in New York and in Spain "questions the economic motivation of the cross-border merger project announced on February 28."
The Government wants to put pressure on this argument to try to avoid
in extremis
the transfer.
The existence or not of economic reasons for the move is key to the operation.
Ferrovial could face a million-dollar tax cost if the Tax Agency considers that the company intends to establish itself in the Netherlands to obtain a tax benefit, according to sources familiar with this type of operation.
In the event that the Treasury interprets that the operation does not respond to business logic, Ferrovial could not apply the tax advantages of the "special regime for mergers, spin-offs, asset contributions, exchange of securities, and change of registered office of a company Union or a European cooperative society from one Member State to another of the European Union”.
More information
The Government warns Ferrovial by letter that it sees no economic reasons for his transfer to the Netherlands
The company has explained to investors that the corporate restructuring to carry out the transfer to the Netherlands will consist of the merger by absorption of the Spanish parent company Ferrovial SA by the subsidiary in the Netherlands, Ferrovial International SE (FISE).
And this operation, he assures, will allow him to take advantage of the tax advantages of the Corporation Tax in the case of mergers.
In this way, it would avoid paying taxes for the latent capital gains that will emerge in the business process.
But Ferrovial has not warned of any possible tax risk associated with the corporate tax merger regime.
In order to take advantage of the multiple tax exemptions and benefits, you must have the endorsement of the Tax Agency.
And it will only give its approval if it finds a business logic in the operation and does not believe that it is only seeking tax savings.
Legal sources consider that at the present time, after the letter from the Secretary of State for the Economy, there are ingredients to doubt the existence of that economic motivation that supports the move.
For the moment, the Treasury will limit itself to analyzing the operation and will only decide once it is formalized.
So the negative consequences could be after the hypothetical transfer.
It is up to the company to demonstrate the existence of economic reasons.
Tax exemptions only in certain cases
Legal sources explain that the Corporate Tax Law states in its article 89.2 that the special merger regime will not be applied when "the operation carried out has fraud or tax evasion as its main objective" or when "the operation is not carried out for reasons valid economic conditions, such as the restructuring or rationalization of the activities of the entities participating in the operation, but with the sole purpose of obtaining a tax advantage”.
In the report that the Ferrovial board of directors presented to the shareholders on the common cross-border merger project, the company explained that it planned to avail itself of this special regime for mergers of Corporation Tax so that the merger does not generate a taxable capital gain or loss. in Spain for the shareholders of the concessionaire and construction group and is tax neutral.
"It is understood that the merger takes place for valid economic reasons and not for tax reasons," highlights the company, which does not mention any tax advantage.
Ferrovial admits that it has received the letter from the Secretary of State and ensures that it studies its content in detail.
Company sources indicate that they will maintain all the points on the agenda of the shareholders' meeting scheduled for next Thursday without paying attention to external pressures.
They assure that the operation will have a fiscally neutral effect and they have explained this to investors in the document registered with the CNMV, where they detailed the reasons for the transfer.
The same sources specify that the decision to move the headquarters to the Netherlands has an economic reason such as increasing the liquidity of the shares, obtaining better financing conditions, getting closer to the networks of American investors, who tend to be more domestic, and gaining competitiveness in large projects.
In addition, sources from the construction company assured a few days ago that "today, Spanish listed companies cannot be listed in the United States with ordinary shares."
And they added: “According to the information available, to create this possibility, regardless of possible regulatory changes, a solution would have to be given to technical and operational issues (technological compatibility, rebalancing, balance reconciliations, information protocols, etc.).
This requires time and the will of the operators and regulators involved”.
The CNMV and BME see no obstacles to listing in the US
The operation is exceptional because until now no company based in Spain had considered listing directly on the US and Spanish stock markets.
Known cases are made through the ADR (
American Depositary Receipt
) formula, certificates issued by a bank over a part, usually a small one, of the company's share capital, so that what is quoted there is a fraction of the capital listed in Spain and that fraction is determined by the demand of US investors for that value.
Ferrovial wants to quote directly.
The Spanish Ministry of the Economy, Stock Exchanges and Markets (BME) and the National Securities Market Commission (CNMV) have carried out an in-depth analysis and have not observed any impediment to this double listing.
"The three organizations immediately set out to verify if there were any obstacles and, where appropriate, proceed to eliminate them," explains the Secretary of State for the Economy in the letter that he sent this Monday to the CEO of Ferrovial, Ignacio Madridejos.
In it, he stresses that "until now, no regulatory obstacles have been identified in the Spanish regulation for this possibility to become a reality in a short term."
In addition, he calls on the executive of the construction company to report "adequately" at the shareholders' meeting on "the different options in this area,
The company's forecasts are that between the end of the second quarter —not before May 14— and the third quarter of this year, this merger will be completed and the company will begin listing on the Amsterdam Stock Exchange, with the ultimate goal of listing on Wall Street before the end of 2023. Ferrovial has reiterated that its motivation for this change is that there is currently no legal structure that enables a listed Spanish company to trade its shares directly on the United States stock markets.
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