# Guide to Capital Gains Tax on Investments in Spain

### Stock Market Investments

#### Example 1: Calculating Capital Gains or Losses

An investor sold 1,000 shares of BETA company on 07/16/2010 for €12,020.24 (after expenses). These securities were acquired on 05/25/2010 for €16,828.34 (including commissions and expenses). On 08/16/2010, the investor bought 1,000 more shares of BETA.

**Tax Implication:** The integration of this loss cannot be made in the 2010 tax return, but rather in the year in which the total or partial transmission of the new shares acquired occurs.

#### Example 2: Taxable Income from Investments

An investor received the following returns from OMEGA company (listed on the stock exchange and taxed under the general regime) in 2010:

- Net dividends: €600
- Released shares from a capital increase: €300 (market value)

**Tax Implication:** The total amount to be computed as income from movable capital in the 2010 tax return is €740.74.

#### Example 3: Capital Gains on Shares Acquired Before 1991

**Key Point:** Capital gains from shares admitted to trading on official markets and acquired before 12/31/1991 are not subject to income tax.

#### Example 4: Extraordinary Dividends

A taxpayer received an extraordinary dividend of €1,200 from BBVA on July 3, 2010, charged to the entity’s voluntary reserves.

**Tax Implication:** The taxpayer must allocate a total return of the investment capital of €1,481.48 in their 2010 tax return.

### Bond Investments

#### Example 5: Capital Losses from Zero-Coupon Bonds

An investor acquired zero-coupon bonds on 10/1/2010 for €12,000. Ten months later, they sold the bonds in the secondary market for €10,000 due to concerns about the issuer’s solvency.

**Tax Implication:** The investor must allocate a total return of the movable capital of -€2,000 in their 2010 tax return.

#### Example 6: Tax on Government Bond Coupons

An individual holds government bonds acquired five years ago for a nominal value of €5,000 at par, with annual coupons of 5%. The bonds mature on 11/23/2010.

**Tax Implication:** The individual must integrate an intangible return on capital of €250, subject to a withholding tax of €47.5, in their 2010 tax return.

#### Example 7: Withholding Tax on Zero-Coupon Bond Maturity

An investor received €1,150 upon the expiration of a zero-coupon bond purchased two years prior for €1,000. The financial institution charged €10 for reimbursement commission and €15 for administration and deposit expenses.

**Tax Implication:** The withholding tax on account of IRPF will amount to €28.5.

#### Example 8: Capital Gains from Bond Sales

A taxpayer acquired a 15-year Telefónica bond with 7% annual coupons for €1,000. Two years and one day after acquisition, they sold it in the secondary market for €1,060. Administration and deposit expenses amounted to €10.

**Tax Implication:** The sale results in a net return of movable capital of €50, not subject to withholding tax or any reduction, for IRPF purposes.

### Investment Fund Transactions

#### Example 9: Capital Gains from SICAV Share Sales

An individual sold shares of a SICAV for €30,000, which they had acquired two years earlier for €20,000.

**Tax Implication:** This transaction results in a capital gain of €10,000, subject to a withholding tax of €1,900 and integrable in the tax base of savings for IRPF purposes.

#### Example 10: Tax Implications of Fund Transfers

An investor transferred €10,000 from a variable income investment fund (acquired six months prior for €11,000) to another fund with a less risky investment strategy.

**Tax Implication:** This transfer will not have immediate tax consequences for the investor.

### Forward Rate Agreements (FRAs)

#### Example 11: Hedging Against Interest Rate Changes

A company plans to request a 3-month loan in nine months and wants to protect itself against unfavorable interest rate movements using a FRA contract.

**Recommendation:** Buy a FRA”nine against twelve month”.

#### Example 12: Guaranteed Theoretical Rate of a FRA

**Key Points:**

- The guaranteed theoretical rate of a FRA may not coincide with the actual market rate.
- To calculate the theoretical guaranteed rate for the buyer, we consider the interest rate of the total period covered by the FRA.
- To calculate the theoretical guaranteed rate for the seller, we also consider the interest rate of the total period covered by the FRA.

#### Example 13: Liquidity of the FRA Market

**Key Point:** One disadvantage of FRAs is that they are not very liquid, and it may not be possible to undo the operation at any time.

### Forward-Forward Operations

#### Example 14: Securing an Investment Rate

A company anticipates an excess liquidity of €1 million in 3 months, which it will not need for another 6 months (9 months from the initial moment). The company wants to secure a rate for its investment.

**Recommendation:** Carry out a forward-forward operation consisting of borrowing for 3 months today and investing the amount for 9 months.

#### Example 15: Differences Between FRAs and Forward-Forward Operations

**Key Points:**

- Settlement for differences is not practiced in forward-forward operations.
- The term of a forward-forward operation can significantly exceed one year.
- Forward-forward operations appear on the balance sheet from the day they are implemented.

### Interest Rate Swaps (IRS)

#### Example 16: Hedging Against Rising Interest Rates with a CAP Contract

In a CAP contract, the financial entity offers the contracting party a maximum cost for their financing, but this does not prevent them from taking advantage of a potential decrease in rates.

#### Example 17: Hedging Against Rising Interest Rates with an IRS

TELEFONICA issued bonds two years ago at an annual interest rate of EURIBOR + 50 basis points, with eight years remaining until maturity. The company is concerned about an unfavorable evolution of interest rates and decides to hedge using generic interest rate swaps.

**Recommendation:** Hire a coupon IRS as a fixed payer.

**Cost of Debt After Hedging:** If the agreed swap rate is 5%, the cost of the debt will be 5.5% after the hedging operation.

#### Example 18: Valuing an IRS Contract

A company acts as a fixed payer in a semi-annual generic interest rate swap contract with nine months to expiration. The contract has a theoretical principal of €100 million, and the fixed rate agreed upon was 6%. The EURIBOR rates at 3, 6, and 9 months are 2.10%, 2.17%, and 2.3%, respectively. The 6-month interbank rate, effective three years ago, was 2.20%.

**Valuation:** Using an ACT/ACT basis for calculating days, the swap value for the company is -€3.67 million.

### Swaptions

#### Example 19: Characteristics of Swaptions

**Key Point:** Option contracts on IRS or swaptions must, in any case, collect the fixed interest rate that will be paid or received if the option is exercised.

### Option Contracts

on IRS or swaptions : c) They must collect in any case the fixed interest rate that will be paid or received if finally it is decided to exercise the option.**The sale of an OPTION CALL**: c) Forces us to sell the underlying asset at the strike price on or after the date period of validity thereof.**The AMERICAN OPTIONS are those tha**t: a) They can be exercised at any time between the day of purchase and the date of expiration, both inclusive.**Determine the incorrect claim about the purchase of PUT OPTIONS**: b) We are facing a bullish strategy.**The OUT OF THE MONEY options:**d) All the previous answers are correct.a) Are those whose exercise would imply a loss for the buyer. b) They have null intrinsic value. c) They only have temporary value**The theoretical value of a CALL OPTION will be greater:** c) The higher the interest rate.**Attending the PUT-CALL PARITY, the purchase of a CALL :** a) It is equivalent to buying a put and its corresponding underlying asset and getting into debt in such a quantity that, at the time, the sum of principal and interest is equal to exercise price.**Indicate which of the statements about the delta coefficient is incorrect:** d) Mathematically, it is the second partial derivative of the premium with respect to the price of the underlying.**The implied volatility of an option:** c) It helps us determine if an option is overvalued or undervalued comparing it with our expectations in volatility.