Spanish Senate approves tax on banks and energy companies

The Senate of Spain gave final approval Wednesday to a tax on windfall profits to banks and big energy companies, designed to ease the cost-of-living crisis, though it largely left out smaller local institutions and units of foreign banks in the country.

The bank tax imposes a 4.8% charge on net interest earnings and net commissions from banks above a threshold of 800 million euros ($849 million).

For energy companies with a turnover of at least 1 billion euros, excluding domestic regulated business and foreign operations, the rate is 1.2%.

After the bill cleared the first hurdle in Congress last month, the lower house introduced some corrections, reimposing the 800 million euro threshold as originally planned by the government, although the version approved by Congress called for that all banks supervised by the European Central Bank will pay.

As the bill has passed without any changes, the approval of the upper house is final.

Banks and corporations have opposed both the bank taxes and energy, and have threatened to challenge the new tax regime in court.

The vast majority of Spanish units of foreign banks, such as Deutsche Bankwill not be taxed unlike an earlier version of the draft that was approved in November.

However, BNP Paribas in Spain it could be subject to the tax depending on the perimeter of the business that will be taxed.

The government put forward the original proposal to create the temporary tax on banks and big energy companies in July to raise a total of 7 billion euros by 2024 to finance measures to ease cost-of-living pressures.

The energy proposal was meant to raise 4 billion euros, but the Bank of Spain recently estimated that it would only raise 2 billion euros after its regulated domestic activities and foreign operations were left out of the levy.

kg