Adolfo Zunzunegui: “The level of disruption has been exponential”

The head of Allen & Overy’s tax practice in Spain discusses the many changes to corporate tax laws.

Posted Wednesday, December 1st 2021
Adolfo Zunzunegui: “The level of disruption has been exponential”

Leaders LeagueIn the years you have been leading the firm’s tax practice, what has been the biggest challenge in the tax advisory area? 

Adolfo Zunzunegui: These last few years have been unprecedented for tax practices in legal firms. The level of disruption has been exponential and we, as tax lawyers, have been tested almost on a continuous basis.  

As an example, since the start of the COVID-19 pandemic, more than 120 countries have made significant changes to their tax codes. No doubt these measures where intended to sustain businesses and economies, but the truth is that they also complicated taxes. In fact, we anticipate that such stimulus will need to be recouped in the following years, meaning additional changes to tax systems. We and our clients must prepare for higher taxation. 

However, the pandemic is not the only disruption we have faced. The emergence of new businesses and operating models in conjunction with the challenges posed by rapidly changing compliance obligations and evolving international tax policy require tax practitioners to adapt quickly.  

Countries and taxpayers are accelerating their digital transformation and no doubt the future of taxation will be digital and real-time. This is exposing our clients to significantly higher risks and costs. We as tax advisors need to be prepared for and trained in a digital tax environment. 

Finally, the risk of controversy has accelerated during the last decade. The way in which tax authorities collect information, risk-rate the taxpayers and supplement human interpretation with data analytics is resulting in higher demand for controversy management and defence strategies. Clients as well as advisors will need to adapt and be ready to document everything. The right data tools will be necessary to provide answer to authorities’ requests for substantial amounts of detailed evidence about a particular structure or transaction. 


What are the most relevant tax measures that the Spanish government has adopted in the last year to limit the negative impact of COVID-19? 

In 2020 the Spanish government adopted a number of measures to postpone tax proceedings and mitigate the diverse effects of the situation. These measures include postponing deadlines on the payment of tax debts, expediting customs clearance, mortgage tax exemptions for vulnerable individuals. In addition, the regional governments approved their own measures on issues such as transfer tax, inheritance and gift taxes and local taxes. 

Although the tax package was put in place quickly and was intended to ensure liquidity by extending payment deadlines and provide flexibility for the deferral of certain tax debts, it is fair to say that the measures did not cover all taxpayers. 

Other European countries have also shown a lack of aggressiveness in their COVID-19 tax measures. Like most tax professionals, we have been demanding a more generous approach, suggesting measures including a general extension of deadlines to file tax returns and make tax payments, the deferral of all tax payments, remitting penalties and interest, debt payment plans, suspending debt recovery and quicker tax refunds. 

European countries have also shown a lack of aggressiveness in their COVID-19 tax measures.


What have been the main challenges in restructuring operations in Spanish companies in the last year? 

The main challenges we face when contemplating a restructuring or insolvency transaction, whether as a lender, borrower or potential investor, are debt forgiveness and amendments, interest deductibility, indirect taxes on disposals by property-rich companies, the loss of tax consolidation if a company becomes insolvent with significant tax costs, and secondary liabilities.  


Are domestic and international transactions expected to increase this year? In which sectors? 

The infrastructure and energy sectors remain the strongest and most important for the Spanish economy.  Private equity activity is hectic these days as there is still a lot of liquidity in the market, with fierce competition between the different players.  

There is also significant activity in the NPL and funds space, including structured finance, as there was before the pandemic, and we expect a high number of restructuring and insolvency processes from distressed businesses once the financial measures enacted during the pandemic have expired.