Transactions March 2019

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The Google tax in Spain and Europe. Towards a single digital market?

Updates on “non-financial information” in major companies annual accounts

The Google tax in Spain and Europe. Towards a single digital market?

By Tania Otero

In Spain, the AEDE royalty (as per the acronym of the Asociación de Editores de Diarios Españoles) created under the amendment of the Intellectual property Act, became effective on 1 January 2015. This charge was popularly known as the google tax since it was applied for the first time to the news web “Google News”, which ceased to operate in our country. It consists of the payment of a royalty for linking works or contents protected by intellectual property rights. The AEDE royalty has barely been applied by the corresponding authority in its first years of validity due to the great controversy arisen as of its creation. It was finally derogated on a national level by the Supreme Court due to a formal defect in the formula of calculation of the payable charge, since it omitted large families.

In Europe, they have concurrently approved Directive 2014/26/EU completing Directive 2001/29/CE of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society. This regulation harmonises national regulations of the different European countries to establish the foundations for the management of copyrights by the different management entities. The aforementioned Directive has been transposed in the national legal regulations by Royal Decree-Law 2/2018 of 13 April.

In September 2018 (after an unsuccessful attempt in July of this year) the Plenary Session of the European Parliament approved the reform of the European Union regulations on copyrights. The amendment is mainly aimed at adapting the preliminary regulations to the digital world. Although the reform proposed has been approved by the European Parliament, it still must be agreed by the Council of the European Union for the relevant directive to be finally enacted. The principal discussion was focused on sections 11 and 13 of the text regarding the media rights on certain third-party publications and broadcasting by providers of protected content services.

The principal feature of the text approved in the Parliament is the modification of the position of the intellectual property right holders. As of the reform, such holders shall be entitled to negotiate with the major browsers or online social networks to be remunerated whenever they may link or share such rights in their networking. As soon as the websites detect this referral to a protected work, they shall be obliged to either obtain the authorisation of such rightholder or block the content or the link thereto. However, not all internet services are obliged to negotiate with copyright holders due to the existence of exemptions according to the type of web site; for example, online encyclopaedias o encyclopaedias for educational purposes. Exceptions are regulated in section 5 of Directive 2001/29/EC.

The commonly known Google Tax is also more clearly defined and structured in the text approved by the European Parliament. This tax grants press publishers the right to require compensation from internet news services or social networks using parts of their contents. This tax is inspired in the AEDE royalty referred to above, which was applied in Spain as of 2015.

Compensations to be required, pursuant to article 11 of the Parliament text, shall fall on certain rights set forth in Directive 2001/29/EC. They are the reproduction rights, i.e., the right to authorise or prohibit direct or indirect reproduction as set forth in article 1 of such Directive as regards authors and artists, among others. Under article 11 of the Parliament text, press publishers are granted reproduction and communication rights, which up to now were granted to authors, artists, phonogram producers, film producers or broadcasting organisations.

Under article 13 of the future directive, digital service providers shall be also required to ensure the effectiveness of the agreements they may have reached with copyright holders for using their works or documents, which implies an active practice to prevent an indiscriminate use of such links or partial reproductions on their web domains. In addition, section two of this article establishes an obligation for the member states, since they shall be liable for protecting rightsholders by implementing a procedure to settle any controversy that may arise from the practice. Moreover, member states shall ensure that the parties wishing to execute an agreement to make audio visual works available in video on demand platforms and deal with difficulties related to the granting of right licences, may be assisted by an impartial experienced organisation. Member states shall be obliged to notify the Commission such impartial organisation.

This new right favour press publishers, whose turnover shall be increased since they may demand a sum of money from the web services reproducing them, either partially or totally, for their own works or provisions. The text approved by the European Parliament provides that publishers may negotiate their contents, i.e., such copyright is not defined as inalienable (contrary to the AEDE royalty of the previous Spanish legislation). In accordance with article 11 of the text resulting from the European Parliament vote, rights provided for therein shall expire within twenty years as of the first appearance in the press and establishes as criterion that calculation shall start from the first day of the month of January of the following year until the publication date.

As new regulations, they have had supporters and detractors. The argument of those detracting the new regulations is the fact that the freedom of expression may be restricted by the control over the contents on the internet. Supporters consider that authors must receive a fair payment for their creations and that no third parties, such as internet portals or social networking platforms, may receive third-party profits.

Updates on “non-financial information” in major companies annual accounts

By Luis José Sanchez

On 30 December 2018, Act 11/2018, of 28 December, amending the Code of Commerce, the redrafted text of the Capital Companies Act approved by Royal Legislative Decree 1/2010, of 2 July, and Act 22/2015, of 20 July, on Accounting Audit, on non-financial information and miscellany (hereinafter referred to as the “Act”), came into force.

I. APPLICATION SCOPE

Las previsiones contenidas en la Ley serán de aplicación progresiva a partir del ejercicio económico iniciado el 1 de enero de 2018. Por lo tanto, deberá incorporarse el Informe o Estado de Información No Financiera (“EINF”) en las cuentas anuales (individuales o consolidadas) a formular en el primer trimestre de 2019 y aprobar durante el primer semestre de 2019 (en aquellos ejercicios sociales que coincidan con el año natural)

a) Provisions in the Act shall be progressively applied as of the financial year started on 1 January 2018. Therefore, the Non-Financial Information Statement or Report (“EINF” as per the Spanish acronym) shall be incorporated into the (individual or consolidated) annual accounts to be formulated in the first quarter 2019 and approved within the first semester 2019 (in such years coinciding with the calendar year)

b) Companies obliged to submit IENF into their Annual Accounts are:

  • Companies with an average number of employees above 500,
  • Public interest entities (as defined in the Audit Act),
  • Companies in which, at least, two (2) of the following requirements may concur:

i. The total asset entries are above 20.000.000€.
ii. The net annual turnover is above 40.000.000€.
iii. The average number of workers employed during the year is above 250.
Within two (2) consecutive financial years (2018 and 2017),

c) Finally, upon three (3) years as of the effective date of the Act, such companies with more than 250 workers which, may be either considered as public interest entities (pursuant to the Audit regulations) or may meet, at least, one of the following requirements upon termination of two (2) consecutive financial years,

  • The total asset items are above 20.000.000€.
  • The net annual turnover is above 40.000.000€.

Shall be also obliged to submit the EINF.

II. IENF CONTENTS

The non-financial information statements shall include the necessary information to understand (a) the evolution, results and situation of the group and (b) the impact of its activity in respect to, at least: environmental and social issues, human rights and fight against corruption and bribery, issues on personnel and measures that, if any, may have been adopted to favour the principle of equal treatment and opportunities between men and women, the non-discrimination and inclusion of disabled people and universal accessibility.

a) IEFN contents in terms of “business model”:

  • A brief description of the group business model; business environment, organisation and structure, markets in which the group operates, purposes and strategies and main factors and trends that may affect its future evolution.
  • Due diligence policies and procedures and results from these policies: key indicators of relevant non-financial results which allow the monitoring and evaluation of the progress and which may encourage comparison between companies and sectors pursuant to the benchmarking frameworks used for each issue.
  • Risks: explanation of the procedures used to detect and evaluate them pursuant to the benchmarking frameworks used for each issue.
  • Key indicators of non-financial results: standards of non-financial key indicators which may be generally applied, and which may fulfil the guidelines of the European Commission on this issue, as well as the Global Reporting Initiative standards, shall be particularly used.

b) IEFN contents in terms of “other issuer”:

  • Environmental issues: effects and impact of the activity on the environment, as well as the use of renewable and non-renewable energy, greenhouse gas emissions, water consumption and atmospheric pollution etc.
  • Social and personnel-related issues: measures adopted to guarantee gender equality on the application of fundamental agreements of the International Labour Organisation, working conditions, respect of the workers right to be informed and consulted, respect of the union rights, health and safety in the workplace, etc.
  • Human rights: the non-financial report must include information on prevention of human rights violations and, if any, on the measures to mitigate, manage and repair any possible abuses committed and
  • Corruption and bribery: instruments existing in the company to fight against them, as well as contributions made to foundations and non-profit making entities.
  • Finally, it is worth mentioning that the Act closes the possibility left before the coming into force of the Act on the omission of certain information in exceptional cases when, pursuant to the management justified opinion, disclosure of such information may seriously damage the commercial position of the company.

III. PRACTICAL OBLIGATIONS ON IEFN

The Act provides for the possibility that the Non-Financial Report is issued separately (from the directors’ report), provided that it is expressly stated that the information is part of the directors’ report and, obviously, its contents conform that required by the Act and are subject to the same criteria of approval, deposit and publication as the directors’ report.

Apart from the possibility to separate the non-financial information report, the Act establishes the following practical obligations:

  • the non-financial report must be recorded, within the Agenda of the general meeting, as a separate and independent item;
  • the information contained in the non-financial report must be verified by an independent verification service provider. Recently, the ICAC issued a decision (decision of 12 February 2019) on this provision, concluding that until the specific regulation of the different aspects of such verification is not approved, such verification may be carried out by the accounting auditor or other persons with appropriate features or knowledge to exercise such duty, without any impediment from the regulatory standards of the accounting audit activity for such verification to be carried out by the auditor of the annual accounts of the entity in question; and
  • the report shall be made available to the public free of charge and shall be easily accessible on the company web site within six months as of the termination date of the financial year for a five-year term.