Energy: Energy Regulatory Developments of Royal Decree-Law 5/2023 of 28 June

Tax: Tax incentives Startups Law

Disputes: Effectiveness or nullity of the IRPH

ENERGY

Energy Regulatory Developments of Royal Decree-Law 5/2023 of 28 June

SONSOLES GARCÍA
Senior Associate

Royal Decree-Law 5/2023 of 28 June was published on June 29 this year in the Spanish Official State Gazette, to and extend certain measures in response to the economic and social consequences of the war in Ukraine, to support the reconstruction of the island of La Palma and other situations of vulnerability; transposing European Union Directives on structural modifications of commercial companies and reconciliation of family and professional life for parents and carers; and on the implementation and enforcement of European Union law (hereinafter RDL 5/2023).

The main measures adopted in the aforementioned regulation in the field of energy are detailed below:

Inclusion of the regulatory principles of the “Comunidades de Energías Renovables“

Article 183 of the Royal Decree amends Law 24/2013 on the Electricity Sector, in order to incorporate into Spanish law the regulatory principles of the Renewable Energy Communities [Renewable Energy Communities], in accordance with the provisions of Community law, specifically Directive 2018/2001 of 11 December 2018 on the use of energy from renewable energy sources and Directive 2019/994 of 5 June 2019 on common rules for the internal electricity market. This Community legislation has led to a redefinition of the general regulatory framework applicable to the electricity system, which is based on the general principle of empowering the end energy cons First, the following definition of Comunidades Ciudadanas de Energía [Civil Energy Communities] is introduced in Article 6.1 of the Electricity Sector Law: “legal entities based on voluntary and open participation, whose effective control is exercised by partners or members who are natural persons, local authorities, including municipalities, or small enterprises, and whose main objective is to provide environmental, economic or social benefits to their members, partners or the locality in which the business or professional activity is carried out".

Secondly, two new articles have been added to the Electricity Sector Law (articles 12 bis and 12 ter) which recognise the rights of renewable energy communities and the guarantees to be offered by public administrations for their operation and development. All of this in accordance with the provisions of Community regulations (Directive 2018/2001, article 22, and Directive 2019/994, article 16). It also establishes the general lines of the legal framework for Civil Energy Communities, which must be approved by regulation. In this regard, there is currently a Draft Royal Decree pending approval by the Government, which has already been submitted to a public hearing.

The regulatory principles include the right to produce, consume, store and sell energy from renewable sources through electricity purchase and sale contracts, energy sharing in the community itself, as well as access to energy markets. It also includes obligations on public administrations to encourage and facilitate the development of these types of communities, with the aim of guaranteeing the elimination of unjustified regulatory and bureaucratic obstacles and preventing dealing with these types of communities in a discriminatory manner with respect to other market participants in relation to their activities.

Promoting electric mobility: installation of recharging points and tax benefits

In order to promote electric mobility through the provision of electric vehicle charging point infrastructures, article 184 of Royal Decree Law 5/2023 amends Royal Decree 184/2022, of 8 March, which regulates vehicle charging services. This amendment increases the power of recharging facilities that are subject to administrative authorisations and a declaration of public utility.

In particular, the power of recharging facilities is increased from 250 kW to 3000 kW, which will be subject to the administrative authorisation procedure established in the Electricity Sector Law, as well as for these facilities to be declared as public utility facilities in accordance with the same regulations. Thus, the installation of recharging points with a capacity below this new limit (3000kW) is made more flexible and easier as they are exempt from complying with the administrative procedure established in article 53 of the Electricity Sector Law, which requires, among others: prior administrative authorisation, administrative authorisation for construction and authorisation for operation. Furthermore, recharging facilities with a capacity of less than 3000kW are not considered to be declared of public utility.

Another of the measures included in the Royal Decree-Law for the promotion of electric mobility is the introduction of certain tax incentives to encourage the purchase of plug-in electric and fuel cell vehicles. These measures are included in personal income tax and corporate income tax:

• Personal Income Tax: Law 35/2006, of 28 November, on Personal Income Tax and partially amending the laws on Corporate Income Tax, Non-Resident Income Tax and Wealth Tax, is amended. The following tax deductions are included:

- Deduction of 15% of the purchase value of a new electric vehicle.

- Deduction of 15% of the amounts paid for the installation in buildings of battery recharging systems for electric vehicles that are not used for an economic activity.

• Corporate Income Tax: Law 27/2014, of 27 November, on Corporate Income Tax is amended, establishing new depreciation rules for investments in new vehicles, as well as in charging infrastructures that begin in the years 2023, 2024 and 2025.

6-month extension of the deadline for obtaining administrative authorisation for the construction of new renewable energy projects.

Article 185 of the Royal Decree-Law extends the deadline for obtaining the Administrative Construction Authorisation by an additional 6 months, maintaining the validity of the access and connection permits currently pending processing, thus avoiding their expiry. This administrative step is regulated in Royal Decree-Law 23/2020, of 23 June, approving measures in the field of energy and other areas for economic reactivation (hereinafter RDL 23/2020), which came into force on 25 June 2020.

RDL 23/2020 introduced a series of mandatory administrative measures to control access and connection to electricity transmission and distribution networks. The administrative step on which the new regulation is based refers to obtaining the Autorización Administrativa de Construcción [Administrative Construction Authorisation] (“AAC”) for access permits obtained after 31 December 2017 and before the entry into force of this RDL 5/2023, i.e. before 30 June 2023.

RDL 5/2023 extends the deadline for this administrative step by 43 months, compared to the previous 37 months. However, as stated in the regulation, this period “shall be calculated from:

• 25 June 2020 for power generation facilities that obtained access permits before that date and after 31 December 2017.

• From the date of obtaining the permits for those holders of access permits who have obtained them since 25 June 2020 and before the entry into force of this Royal Decree-Law”.

Promotion of the electro-intensive industry

Article 152 of the Royal Decree-Law extends the support mechanism to ensure the competitiveness of the electro-intensive industry until 31 December 2023.

The support mechanism for the electro-intensive industry was established by Royal Decree-Law 6/2022 of 29 March, adopting urgent measures within the framework of the National Response Plan to the economic and social consequences of the war in Ukraine. This mechanism consists of an 80% reduction in the cost of access tolls to the electricity transmission and distribution networks applicable in each billing cycle for those consumers holding the electro-intensive consumer certificate.

These measures were extended by RDL 20/2022 until 30 June 2023, and are now extended until 31 December 2023.

September 2023

TAX

Tax incentives Startups Law

ALEJANDRO PUYO
Partner

The Law 28/2022, of December 21, on the promotion of the ecosystem of emerging companies, also known as the Startups Law, aims to encourage and promote the creation, growth and relocation of emerging companies in order to attract talent and new foreign investment.

The tax incentives contained in this Law are effective as from January 1, 2023, and are applicable to companies that meet the requirements established in the new regime for emerging companies.

In this regard, we must analyze, for the purposes of this Law, what is understood by an emerging company.

According to the Startups Law, any legal entity, including technology-based companies, that meets the following conditions will be considered an emerging company:

• New or recently created companies. The company must have been recently incorporated, i.e. no more than five years must have elapsed since its registration in the Commercial Registry or in the Cooperative Registry. For companies in the biotechnology, energy, industrial and other sectors, the period is seven years. Merger, division or transformation operations. Companies that have arisen from these types of operations may not be considered emerging companies.

• Dividends. To obtain such consideration it is necessary that companies do not distribute, nor have distributed, dividends or returns in the case of cooperatives.

• Not be listed on a regulated market.

• Have the registered office, registered office or permanent establishment in Spain.

• 60% of the employees must have an employment contract in Spain.

• Innovative project. Companies must develop an innovative entrepreneurial project with a scalable business model. The Law establishes minimum criteria to comply with this condition, among which are the following:

- Expenditures on research, development and technological innovation will be taken into account with respect to the company's total expenditures.

- The degree of market attractiveness will be assessed, and the scalability of the business model will be taken into account.

• Group of companies. In this case, the group or each of the companies that compose it must comply with the above requirements.

Even so, ultimately, emerging companies intending to avail themselves from the benefits of the Startups Law must request from ENISA (Empresa Nacional de Innovación, S.M.E., S.A.) a certificate attesting to their innovative character.

A ministerial order is currently pending which will determine, among other things, the criteria on which ENISA will base its assessment of the above-mentioned characteristics, in addition to the innovative and scalable nature of the start-ups.

The evaluation procedure by ENISA must be carried out within a period of no more than 3 months from the date of application. The expiration of such term, without notification of an express resolution, will cause the application to be estimated by positive administrative silence.

Some of the advantages established in the Startups Law for emerging companies are:

• A reduced tax rate from 25% to 15% is established for this type of companies applicable to the first tax period in which they have a positive tax base and in the following three.

• The payment of Corporate Income Tax is made more flexible during first two years in which the taxable base of said tax is positive, so that the company may defer the self-assessment of the tax with exemption from guarantees and without interest.

• An exemption from the obligation to make installment payments is established.

• The exemption applicable to the delivery of shares or participations to employees of emerging companies (the so-called stock options) is increased from 12.000 to 50.000 euros per year. In order to have access to this exemption, it will not be necessary that the offer is made under the same conditions to all employees, but only that it is part of the general remuneration policy of the company and contributes to the participation of the employees in it.

• The deduction for investors in new or recently created companies is improved. Specifically: the deduction rises from 30% to 50% with an increase in the maximum deduction limit from 60.000 to 100.000 euros per year.

• A bonus of 50% of the earned income (carried interest) obtained by administrators, employees or managers of venture capital entities is contemplated.

• A bonus of 100% of the general minimum quota of self-employed is introduced for those who register as self-employed when starting their activity in a start-up company and simultaneously are working as employees.

September 2023 

DISPUTES

Effectiveness or nullity of the IRPH

ANTONI FAIXÓ
Partner

The IRPH index or “Índice de Referencia de Préstamos Hipotecarios” [Mortgage Loan Reference Index] was created in 1994 and is an official index recognised in Spain. The Bank of Spain publishes its monthly rate variation, as this index is the average of the weighted average interest rates of mortgage loans with a term equal to or longer than three years for the purchase of free housing initiated or renewed by the institutions in the reference month.

It is worth noting that until 2013 there were three types of IRPH: IRPH Bancos, IRPH Cajas, and IRPH Entidades de Crédito. In 2013, the first two were eliminated and it was established that loans subject to these indices would automatically change to IRPH Entidades de Crédito, which is the one currently in force.

Historically, the IRPH rate has been higher than the Euribor rate, and this, together with the fact that in recent years there have been numerous lawsuits requesting the declaration of nullity of multiple clauses in mortgage loan contracts, led to the emergence of many IRPH clause nullity lawsuits over the last few years.

There is a wide case law background on this issue, which can be summarised as follows:

• Prior to 2016 there were a number of different rulings from Courts of First Instance and Provincial Courts, including some rulings that did declare nullity by applying the generic interpretation that Banks did not provide sufficient information when negotiating mortgage loans.

• In 2016, the Supreme Court ruled that the IRPH index was legally valid and that it should be presumed that there was no breach of the right to information when agreeing to it, even if there was no clear communication of information given that it is a legal index that can be consulted in public regulations and whose rate is published monthly by the Bank of Spain.

• In 2020, the Court of Justice of the European Union ruled that the IRPH clause could be declared null and void if the Spanish judge considered it to be abusive, applying the usual rules and jurisprudential interpretation on abusiveness in Spain.

• Later in 2020, the Supreme Court issued another ruling insisting on the fact that the IRPH cannot be considered abusive or null and void even if no clear explicit information is provided but rather a mere reference, and considering that this interpretation is in line with what was stated in the CJEU ruling.

• On 13.07.23 the CJEU issued a new ruling, stating that the Spanish judge can assess whether there is a lack of transparency or abusiveness, reviewing whether the bank provided information in accordance with the Bank of Spain Circular 5/94, which requires the bank to send an example calculation including a negative differential to the client before signing the loan.

• On 26.07.23 the Provincial Court of Palma de Mallorca ruled that the recent CJEU ruling does not modify the previous interpretative approach of the Supreme Court and that the IRPH clause is valid with a mere reference.

A new Supreme Court ruling is currently pending in order to clarify this issue, which could either insist on its interpretation that the IRPH clause is valid per se and that it is transparent and not abusive by mere reference given that it is a public rate, or it could change this approach.

However, the aforementioned ruling of 26.07.23 shows that it seems to be more likely that the courts at this point intime will apply the current approach and not dispute this interpretation. In other words, they will not declare the clause null and void simply because the CJEU has issued a second ruling on the issue, since actually this ruling does not declare the IRPH index to be null and void at all times, nor does it oblige a specific interpretation of abusiveness, and also taking into account the clear jurisprudential approach of the Supreme Court in the two judgments cited above.

There is a possibility that certain courts would apply a different interpretation and use the latest CJEU ruling to justify this. However, when the new Supreme Court ruling is handed down with an assessment of the CJEU ruling, it will be clear guide in relation to what the courts should interpret, as the case law of the Supreme Court is an interpretative rule that cannot be disputed.

September 2023