Main tax issues in the purchase of debt and subsequent debt restructuring:

Sales of under-performing or non-core loan portfolios by Spanish and non-Spanish financial institutions, and also by Spanish "bad bank" SAREB, are expected to continue during 2015, due to the deleveraging process caused by regulatory requirements and increased focus on profitability, and to the reduction in sell/buy price expectations gap.
This provides an opportunity for overseas buyers to purchase distressed loans of Spanish entities at significant discounts.
Taxes may have a significant impact in the return of these investments, and in this note we summarize some of the main Spanish tax issues that should be considered both in the purchase of debt and also in the subsequent restructuring of such debt, taking into account the significant tax amendments approved during 2014 and the Spain's tax reform that came into force in 2015.
We include also some brief comments on the tax treatment of so-called FABs ("Fondos de Activos Bancarios"), which are special funds designed to facilitate the disposal of assets by the Spanish bad bank SAREB.

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