What are the advantages and disadvantages of free ports?

Supporters of free ports allege that it attracts business and boost trade and manufacturing industry.

For instance, the individual pieces of assembling a car are produced in different countries, in a free port scenario the manufacturer could import all those pieces, saving costs, to a factory within a free port area.

In a free port goods can be brought in customs free, processed or stored and then re-exported. Conversely, critics warn the risk of free ports being used to avoid tax and launder money.

Does the EU prevent the creation of free ports?

No, free ports are permitted in the EU. In the majority of the countries, these free ports existed before becoming members of the EU. In fact, seven free ports located in UK operated from 1984 to 2012. Currently, there are not free ports in UK, but there is one on the Isle Man.

Why UK Government consider that Brexit is an opportunity to create free ports?

The UK Government argued that European free ports are more restricted and limited when compared internationally. The UK Government would like to take the opportunity Brexit brings to create new free ports following the American model of Free Trade Zones.

The UK Government has argued that free ports could attract investment and generate new jobs but critics say it could induce money laundering operations.

UK Government launches free ports consultation

On 10 February 2020, the government has launched a consultation on creating up to 10 free ports with special tariff and duty status with the objective of opening it for business in 2021.

The consultation was intended to close on 20 April but the government considers that key sectors with a special interest in this policy such as: local government, ports and businesses, are facing challenges due to Covid-19. Therefore, the Free ports consultation will be extended to close on 13 July. Responses can be submitted through the existing gov.uk portal until this date.

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Comprobación limitada

In this category we can find three subtypes of notifications:

• Notificaciones de Requerimiento: you should submit the documentation required by the Spanish Tax Authorities in the said Notificacion de Requerimiento. That documentation must be submitted in the place and the period indicated in the notification. If the submit is delayed or not done, it will be a penalty.
• Notificaciones de propuesta de liquidación: they modify or correct, at your discretion any finance statement you have submitted. If you do not agree, you can submit claims within the deadline to do so.
• Notificación de Resolución del procedimiento: once allegations have been submitted, the Spanish Tax Authority responds with the resolution and agrees to a settlement if appropriate. If you are not satisfied, it can be appealed within the established period.

Providencia de apremio

The Spanish Tax Authority use this procedure to collect a debt once the corresponding period of voluntary payment has ended. The Spanish Tax Authority applies a surcharge on the debt in addition to the interest for the delay in the payment.

Notificación de inicio de investigación: inspección fiscal

This inspection can be arbitrary, simply due to a selection process for all taxpayers, or it may be due to doubts raised by the inspectors in relation to a possible fraud. In this notification, the start of the procedure is informed and the taxpayer must appear before the Spanish Tax Authorities.

Notificación de expediente sancionador

The Spanish Tax Authority confirms that you have committed a fault in breach of the tax regulations. You are then informed about the beginning of the sanctioning proceeding indicating the amount to be paid for the infraction committed. If you do not agree with the imposition of the sanction, within the period indicated in the notification, you must send the documentation proving that you have not committed any breach of the tax regulations.

Notificación de diligencias de embargo

This is the notification of a foreclosure proceeding carried out by the Tax Agency against the person or company that is not uptodate with any payments due to the Spanish Tax Authorities, in order to collect the amount of the debt.

For example, balance withholding in your bank account with the amount due or property seizures.

Electronics Notifications from The Spanish Tax Authorities. I am in UK, How can I register in The Electronics Notifications System from The Spanish Tax Authorities?

You should go to the spanish consulate in London carrying your NIE, your Passport and its photocopy and you will be provided with a digital signature with which you will have access to your electronic notifications from the Spanish Tax Authorities.

Effects of Electronic Notifications

Electronic notifications will be considered as taking place at the time of access to the content of its notification or, if access is not carried out, after 10 calendar days from their dispatch without access to the same.

All communications and notifications will be available for 90 calendar days in the enabled electronic address. During this time, you will be able to view the full content as often as you wish (the content can only be viewed for 90 days if you have accessed it within the term of 10 days; if it has expired, you will not be able to view the content). After this term, it can only be viewed in the Tax Agency E-Office.

The electronic notification system confirms the time and date in which the information is available for those interested in the notification. Similarly, the system confirms the date of access of the recipient to the content of the document notified or that on which the notification was rejected as the legally established term had expired.

If, prior to the date of receipt of the communication of the notification, you have accessed the Tax Agency E-Office and you have received the notification electronically, the date prevailing to all effects is that of the first of the notification correctly carried out.

Written by Laura Gallego Herráez

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Having subsequently looked at a number of these unsuccessful applications, we believe this is down to two principal factors:

1. the applicant’s inability to produce the relevant information in the clear and concise manner that lenders expect so that they can rapidly analyse and decide whether to approve the application and provide the funding and/or;
2. not knowing how to discern which lenders are more likely to approve their application.

At Scornik Gerstein LLP, we have had numerous exchanges with the government approved lenders and have developed the expertise required to help our clients with their applications so as to successfully obtain funding through the CBILS & BBLS loan programmes.

We hope we can help you to swiftly and successfully apply for this unique borrowing opportunity.

Please feel free to contact your relationship Partner either Antonio Arenas (on 07540667073 or antonio.arenas@scornik.com) or Xabier de Beristain Humphrey (on xabier.deberistainhumphrey@scornik.com)

(Keep reading below for further information about the CBILS & BBLS loan programmes extracted from the UK government’s dedicated website)

Bounce Back Loan Scheme (BBLS)

(Finance of up to £50,000)

About the scheme

The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.

How it works

A lender can provide a six-year term loan from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.

The scheme gives the lender a full (100%) government-backed guarantee against the outstanding balance of the facility (both capital and interest).

The borrower always remains fully liable for the debt.

Key features of the scheme

Coronavirus Business Interruption Loan Scheme (CBILS)

(Finance of up to £5 million)

About the scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

How it works

British Business Bank operates CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance. They include:

• high-street banks
• challenger banks
• asset-based lenders
• smaller specialist local lenders

A lender can provide up to £5 million in the form of:

• term loans
• overdrafts
• invoice finance
• asset finance

CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending.

The borrower remains fully liable for the debt.

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

• recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
• a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility

Key features of the scheme

Coronavirus Business Interruption Loan Scheme (CBILS)

(Finance of up to £50 million)

Specifically, it facilitates access to finance for businesses with a turnover above £45 million, the upper limit for the existing smaller-business focused Coronavirus Business Interruption Loan Scheme (CBILS).

How it works

A lender can provide:

• up to £25 million to businesses with turnover from £45 million up to £250 million
• up to £50 million to businesses for those with a turnover of over £250 million

Finance is available in the form of:

• term loans
• revolving credit facilities (including overdrafts)
• invoice finance
• asset finance

CLBILS gives the lender a government-backed partial guarantee (80%) against the outstanding balance of the facility.

The borrower remains fully liable for the debt.

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, but claims cannot exceed 20% of losses after all other recoveries have been applied.

Key features of the scheme

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In order to grant such exemption, it is required for the investee company to be resident in a country with which SP has in place a DTA to avoid double taxation (this is the case of UK as above indicated). The problem resides with investee companies that, complying with all of the above, are established in Gibraltar.

Gibraltar's CT sets an average nominal rate of 10%, and since it is an integrated territory in the UK, the exemption established under Article 21 of the SPCT will apply, since both requirements are met: minimum nominal rate of 10% and existence of DTA.

Notwithstanding the precept referred to above provides that: "In no case shall this requirement be deemed to have been fulfilled when the investee is a resident of a country or territory classified as a tax haven, unless it resides in a member state of the European Union (EU)".

Nowadays, despite the fact that Gibraltar is considered by SP as a tax haven, UK is a member state of the EU, so the exemption of Article 21 SPCT is put into practice. Following the effective departure of the UK from the EU, this exemption would remain without effect on Gibraltar companies, as the exception in the case of an EU Member State would not be fulfilled.

This being the case, Governments of the UK and SP have each approved in their Council of Ministers an information exchange agreement that would allow the exclusion of Gibraltar from the list of tax havens for SP, as long as the agreement is ratified by the Congress.

Patent Box

Article 23 SPCT – Reduction of income from certain intangible assets (Patent Box).

In accordance with Section 1 of Article 21 of the SPCT, in order for the application of the reduction to be applied, it is required that the assignee does not reside in a country or territory of zero taxation or classified as a tax haven, unless it is located in a EU Member State.

Therefore, this reduction may continue to apply to Gibraltar companies from January 2021, provided that the goverment of SP ratifies the agreement between the UK and SP which would exclude Gibraltar from being considered a tax haven.

In the rest of the UK territories the DTA will apply.

Exit Tax

Article 19 SPCT – Exit tax

When a company resident within Spanish territory transfers its residence outside of SP the difference between the market value and the tax value of the patrimonial elements owned by the company will be included in the tax base of the CT settlement in the year in that the transfer of residence occurs. However, when the transfer of residence is made to a Member State, the integration into the tax base will be deferred until the date of transmission of the affected assets to third parties.

In other words, the Member States enjoy a privilege vis-à-vis with third countries, being able in the first case to postpone the tax obligation resulting from the change of residence. From January 2021, this privilege will not apply to transfers made to the UK.

Article 14 SPCT – Provisions and other expenses

Article 14 SPCT includes the deductibility of the contributions made by pension provider companies provided for in Directive 2003/41 / EC to employment pension funds authorized or registered in another Member State (as long as certain requirements are met). After the effective exit from the EU, contributions to UK employment pension funds will not be considered deductible expenses as this is a purely financial matter.

Written by Álvaro Diz Sánchez

Read more about Taxation Law.

Where did the negotiations stop?

On 5th of March 2020 both sides met in Brussels for the ´first round´ of negotiations. When they were planning about to meet for the second round they decided put on pause the Brexit negotiations to focus on combat the spread of coronavirus.

However, on 18th March, British and European negotiating teams exchanged draft legal texts and officials had been discussing and reviewing those texts during one week by videoconference.

Where are we now?

On 15th of April 2020, David Frost, the UK´s chief negotiator, and Michel Barnier, the EU´s chief negotiator, had a meeting by video conference. Both sides reviewed the achievements and technical dialogue carried out during the first round of negotiations.

The next round is rescheduling for the weeks of 20 April, 11 May and 1 June.

The two parties continue to show high divergence of opinion on the following matters:

• TRADE DEAL AND THE LEVEL PLAYING FIELD: the level playing field is a trade-policy term that refers to common standards and regulation which seeks to avoid business in one country undercutting their competitors in other countries in areas such as taxation, environmental protection or workers' rights. It is therefore necessary to establish whether the UK will continue adhere to such standards or if in the contrary will be free to stablish its own.

 

• FISHERIES: The two key issues are:
1. Agreement on the access of European Fishermen to UK waters and vice versa. British fishing organisations consider that due to the EU’s Common Fisheries Policy they have not received their fair and reasonable share of quotas.
2. Determination of the shares of the Total Allowable Catch (TAC) for each stock which should be allocated to UK and EU fishers.
• THE EUROPEAN COURT OF JUSTICE’S (ECJ) ROLE IN DISPUTE SETTLEMENT: UK Government wants the ECJ not to have jurisdiction in the UK.

 

• SECURITY: EU says that a crime fighting agreement would not be possible if the UK withdraws from the European Convention on human rights. Although UK is not requesting entering into the EU policy agency Europol, nor the EU law enforcement agency Eurojust wants to work with both of them. Moreover, UK is seeking to sign an extradition agreement to substitute the European arrest warrant.

 

• TRANSPORT: lorry and goods vehicle drivers. The EU insists that British lorry drivers cannot expect to have the same rights as their European counterparts.

Will the Brexit transition period be extended due to Coronavirus?

The UK Government can ask for an extension of the transition period of one or two years. The deadline to do so expires on 1 July 2020.

A high-level meeting is scheduled to take place in June to analyse the progress made so far with a view to determining the framework for relations between the EU and the United Kingdom, at the end of the transition phase, which currently remains set for 31 December 2020.

Global Institutions such as The International Monetary Fund (IMF), has asked the United Kingdom via her director Kristalina Georgieva, to ask the European Union (EU) for an extension of its post-Brexit transition period amid uncertainty induced by the outbreak of coronavirus in all the world. The UK government is however not inclined to attend such request since any transition extension period could be perceived as an extension of the uncertainty.

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• Scenario 1: 8-week confinement period and a quick economic recovery from the health crisis.

 

• Scenario 2: same confinement period as before, 8 weeks, but in this case the measures taken by the government to mitigate the economic consequences of the coronavirus have been less effective, generating a liquidity problem and consequently, solvency troubles for businesses.

 

• Scenario 3: 12 weeks of confinement. The prolonged State of Alarm will inevitably produce a negative impact on the economy and delay the return to normality.

The three scenarios have been reproduced and unsurprisingly, all forecast a dull future. Employment drops and so does consumption as many families see their income reduced. Unemployment rate is estimated to reach the unsettling figure of 20,6%.

Private investments are paralyzed due to uncertainty and public expenditures increase as a consequence of the measures taken by the government to secure the populations wellbeing. In all scenarios Spain’s GDP is significantly reduced, ranging from -6.6% in the first scenario to -13,6% in the third. These predictions reaffirm the ones made by the International Monetary Fund at the beginning of April, in which they estimated an 8% drop in Spain’s GDP. The percentage translated into numbers is of approximately 99.000M€. The data anticipates an economic recession that will only be alleviated by the capacity to reactive part of the damaged productive activity which, at the same time, depends on the perception of health risk in the coming months.

Looking ahead to 2021, the Spanish economy can be expected to recover a significant, but not complete, part of the flow of the activity and employment expected before the pandemic.

Written by Sara Caselles Gayà

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Article 9th of RD 8/20 indicates that “economically vulnerable” and accordingly eligible to benefit from the payment holidays are those who or whose:

1. have become unemployed or, in case of being self-employed, suffered a substantial loss of business income or substantial drop in his business sales.

 

2. total income of the members of the family unit must during the month prior to the request for the moratorium, must not exceed 4.833€.

 

3. mortgage payment, plus the basic expenses and supplies, is greater than or equal to 35% of the net income received by all the members of the family unit.

 

4. as a result of the health emergency, the family unit has suffered a significant alteration in its economic circumstances. That is, when the effort that represents the mortgage burden on family income has been multiplied by 1.3.

Those who wish to apply for the mortgage moratorium, must submit an application to his lender together with the supporting documents proving their vulnerable situation. If the application is approved, during the period of validity of the moratorium, the lender must not claim for the payment of the mortgage instalment, nor any other related payments such as its interest, late payment fees, etc…

Written by Sara Caselles Gayà

Read more about Insolvency.

Court Orders

Terms are suspended and time limits provided for in procedural laws are suspended and interrupted for all court orders. The calculation of time limits shall be resumed at the time when this Royal Decree or, as the case may be, any extensions thereof become ineffective.

Criminal Jurisdiction

In the criminal jurisdiction, suspension and interruption shall not apply to habeas corpus proceedings, proceedings entrusted to the guard services, proceedings with detainees, protection orders, urgent prison surveillance proceedings and any precautionary measures relating to violence against women or minors. Likewise, in the investigation phase, the competent judge or court may agree to conduct those proceedings which, because of their urgent nature, cannot be postponed.

Exceptions made to the rest of jurisdictions

With regard to the rest of the jurisdictional orders, the interruption referred to in the first paragraph shall not be applicable to the following cases:

1. The procedure for the protection of the fundamental rights of the person foreseen in articles 114 and following of Law 29/1998, of 13 July, regulating the Contentious-Administrative Jurisdiction, nor to the processing of the judicial authorizations or ratifications foreseen in article 8.6 of the mentioned law.
2. The procedures for collective conflict and for the protection of fundamental rights and public freedoms regulated by Law 36/2011, of 10 October, which regulates social jurisdiction.
3. Judicial authorization for non-voluntary internment on grounds of mental illness, as provided for in Article 763 of Law 1/2000 of 7 January on Civil Procedure.
4. The adoption of measures or provisions for the protection of minors as provided for in article 158 of the Civil Code.

Notwithstanding the provisions of the preceding paragraphs, the judge or court may agree to take any legal action that is necessary to avoid irreparable damage to the rights and legitimate interests of the parties to the proceedings.

Suspension of administrative deadlines

1. Terms and time limits for the processing of procedures by public sector entities are suspended. The calculation of the time limits will be resumed at the moment that the present royal decree or, if applicable, its extensions, becomes invalid.
2. The suspension of terms of deadlines will be applied to the entire public sector as defined in Law 39/2015, of 1 October, on the Common Administrative Procedure of Public Administrations.
3. Notwithstanding the above, the competent body may, by means of a reasoned decision, agree to the measures of organisation and instruction strictly necessary to avoid serious damage to the rights and interests of the interested party in the procedure and provided that the interested party agrees, or when the interested party agrees that the time limit should not be suspended.
4. This provision shall not affect the procedures and decisions referred to in paragraph 1 where these concern situations closely linked to the facts justifying the state of alert.

Suspension of limitation and prescription periods

The periods of limitation and expiry of any actions and rights shall be suspended during the period of validity of the state of alert and, where appropriate, any extensions thereto.

Written by Antonio Arenas

Managing Partner

e-mail: antonio.arenas@scornik.com

Direct Dial: 0044 2039629920

Mobile: 0044 7540667073

Read more about Litigation Law.

Scope of the Regulation

This Regulation is applied in cross-border cases to civil and commercial matters where the value of a claim does not exceed €5000 excluding all interest, expenses and disbursements. Claims about the status or legal capacity of persons, rights in property arising out of a matrimonial relationship, maintenance obligations, wills and succession, bankruptcy, social security, arbitration, employment law, tenancies of immovable property (with the exception of actions on monetary claims), violations of privacy and of rights relating to personality are not included.

Before 2015, the procedure was applied in cross-border cases to civil and commercial matters where the value of the claim did not exceed 2000€. However, on December 2015, the Regulation (EU) 2015/2421 of the European Parliament and of the Council was published increasing the ceiling as regards the value of the claim to 5000€.

What is the meaning of cross border cases regarding this procedure?

A cross-border case will be one in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court or tribunal seized. For example, the United Kingdom and Spain.

Procedure

The Procedure shall be written but the court or tribunal shall hold an oral hearing if considers this to be necessary or if a party so requests. The enforcement procedures shall be governed by the law of the member state of enforcement, i.e. the country where the defendant resides.

Languages

The claim form, the response, any counterclaim, any response to a counterclaim and any description of relevant supporting documents shall be submitted in the language or one of the languages of the court or tribunal were the claim is filed. Once the judgment is given, if it had to be enforced, for example in Spain, the claimant would have to submit an official translation of the judgment into Spanish or the language of the Autonomous Community, when applicable, where the competent court for enforcement is located.

Costs

The unsuccessful party shall bear the costs of the proceedings. For example, expenses resulting from the other party having been represented by a lawyer or another type of professional or any other disbursement resulting from the notification and translation of documents, which are proportionate to the value of the claim.

Brexit

If the United Kingdom exits the European Union, it is likely that the Regulation will no longer be available for those claiming or receiving claims through the Regulation. We therefore advise to those considering using the Regulation to claim, to do so before the exit takes place.

Written by Ángela Fernández.

Read more about Litigation Law.

What type of activity can be carried out?

The Ministry of Economy regulates Foreign Investment in Mexico. There are reserved and restricted activities for foreigners; the reserved activities are those that are of exclusive exploitation to the Mexican State and the restricted ones are those in which a maximum percentage of participation of foreign investment is permitted or, if exceeding, an authorization from the State is required. Although these limitations exist for foreigners, the activities to which they apply are limited and are of specific commercial sectors such as firearms, transportation, education, nuclear energy, exploration or exploitation of oil, among others. ₁ Outside of these areas, foreigners have the freedom to participate in trade without any problem.

Mexican Company Formation

First, it is necessary to request authorization and availability of the desired name and purpose of the company before the Ministry of Economy. This allows maintaining the certainty that no other corporation will exist within Mexico with the same name and purpose. ₂ With this process, a unique code is issued that will be included in the Deed of Incorporation, a document that will be explained later. This task is sometimes carried out by the Notary Public who carries out the protocolization process.

Which brings us to the second step, the drafting and elaboration of the Deed of Incorporation of the company. This document is the most important one in any corporation since it establishes all the guidelines and identification details of the company, i.e. the name, company’s purpose, address, duration and nationality of its shareholders, and the rules of how the company will be governed, i.e. its administration, ordinary and extraordinary shareholders' meetings. It is necessary that the Deed of Incorporation include all the relevant points for the corporation since, in the event of any conflict, problem or even the distribution of dividends, the guidelines established in it must be followed. To be sure that this document is correctly written, we recommend consulting with a lawyer. The Deed of Incorporation must be accepted and signed before a Notary Public. This process is known as the protocolization of the Constitutive Act.

Finally, the registration of the company must be done before the different government agencies, which are the Public Registry of Commerce, which varies depending on the state in which the incorporation of the company was made, the Ministry of Finance and Public Credit, more specifically in the Tax Administration System and, finally, if it has foreign partners, in the National Registry of Foreign Investments. This affects the company as duly incorporated before third parties and can start operations.

It is important to understand that the process of hiring foreigners is completely different from the one explained here.

In Scornik Gerstein we are prepared to support you with the necessary process for the incorporation of companies in Mexico, as well as with any doubts and management that may arise during the process.

Written by Melina Ramírez.

₁ For a complete list of activities review the Foreign Investment Law in its articles 5, 6, 7 and 8.

₂ It is important to emphasize that the name is not equivalent to the brand, trade name or trademark registration.

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