"IBERDROLA DIVIDENDO FLEXIBLE" FREQUENTLY ASKED QUESTIONS
It was a shareholder remuneration system that Iberdrola implemented in order to allow them to decide whether they would prefer to receive all or a portion of their compensation in cash or in paid-up shares of Iberdrola (i.e. without any payment by the shareholder).
In order to carry out each edition of the "Iberdrola Dividendo Flexible" program , the General Shareholders' Meeting of Iberdrola had to approve a capital increase, charged to reserves as provided for in Section 303.1 of the Spanish Companies Act (Ley de Sociedades de Capital).
In each edition, the shareholders automatically received free allocation rights that were listed on the stock exchange. Therefore, the shareholder could choose between (a) keeping the rights and receiving new shares, (b) selling the rights to Iberdrola and receive cash at a guaranteed purchase price, (c) selling the rights on the market and thus receiving compensation in cash according to the price of the right.
In the January 2018 edition of the "Iberdrola Dividendo Flexible" system, as a new feature, the three traditional options of the system were combined with a fourth additional election: (d) to receive an amount in cash by means of the interim dividend corresponding to the fiscal year 2017.
Shareholders should inform the bank or custodian in which they have deposited their shares of the option chosen (sell the free allocation rights to Iberdrola, sell them on the market or receive an amount in cash by means of the interim dividend corresponding to fiscal year 2017) bearing in ming the deadlines for each option.
No. Each capital increase was carried out free of charges and commissions. Iberdrola assumed the costs of issuance, subscription, floatation, admission to listing and other items relating to the capital increase. However, the institution with which you have deposited your shares may, in accordance with applicable law, freely establish fees and expenses for maintaining the shares on its books.
Yes, In order to do so, he/she had to notify the bank or custodian his/her intention to sell a portion of your free-of-charge allocation rights or receive an amount in cash (or to receive an interim dividend payment for 2017) and keep the other portion, within the relevant deadlines.
In this case, the shareholder received shares of Iberdrola based on the number of free allocation rights available and the final number of rights needed to obtain a new share established in each edition of the program. (See Historical)
Iberdrola submitted a binding consultation to the General Tax Directorate (Dirección General de Tributos) regarding the tax treatment applicable to the shareholders of Iberdrola in the common regions (territorio común). The consultation was answered on April 28, 2010 (V0848-10) and supplemented by the explanation of October 4, 2010 (V2206-10).
Please, note that the tax regime for residents of Ceuta and Melilla, the Historic Territories of the Basque Country (Territorios Históricos del País Vasco) and the Autonomous Region of Navarra (Comunidad Foral de Navarra), although similar to that of the common regions, has a different treatment.
You should keep in mind that the taxation of the "Iberdrola Dividendo Flexible" system summarized in this document does not specify all possible tax consequences. For that reason, it is recommended that you read in detail the answer to the consultation issued by the General Tax Directorate, together with its explanation, and pay particular attention to any changes that have occured in legislation in force as of the date of this document, in standards of interpretation, and in the particular circumstances of each shareholder or holder of free-of-charge rights.
In particular, the amounts obtained upon the sale of rights received by those Iberdrola shareholders who are taxpayers for Spanish Individual Income Tax ("IIT") and Spanish Non-Resident Income Tax (without permanent establishment in Spain) ("NRIT") purposes, will be treated as a capital gain for the seller on the fiscal year in which the transfer takes place. In addition, for IIT taxpayers, these amounts will be subject to withholding on account of IIT, currently at a 19% rate. Generally, this withholding tax is levied by the corresponding depositary.
Finally, the amounts received by Iberdrola shareholders under both the interim dividend and the option of selling their rights to Iberdrola, will be treated as a dividend for Spanish tax purposes and, hence, subject to the applicable taxation and withholding tax.
Shareholders who are not resident in Spain and the holders of ADRs and CDIs should consult with their tax advisors regarding the effects of the Iberdrola Dividendo Flexible system, including the right to apply the provisions of treaties signed with Spain for the avoidance of double-taxation.
In all editions of the "Iberdrola Dividendo Flexible" program, shareholders received one free allocation right per share held on the record date.
The number of rights required to receive one newly issued share was calculated on the basis of the listed price for Iberdrola shares during the five trading sessions prior to the approval of the implementation of the transaction. This number was announced to the market by means of the corresponding significant event. (See Historical)
This depended on the depositary agreement that the shareholder had signed with his/her bank or custodian (or the instructions provided to them). The banks used to sell the spare rights on the market at the indicated tax rate and pay the shareholders the cash resulting from this sale.
However, if such agreement or the instructions given by the shareholder to the bank or custodian did not allow this sale, the issued shares corresponding to such odd-lots (both the shareholder´s and those of the other shareholders in the same situation) were deposited into a securities account in the name of Iberdrola and on behalf of third parties. Three years after the date the deposit is made, the shares may be sold by Iberdrola and the net amount from the sale of the shares is deposited and made available to the interested parties at Banco de España or at Caja General de Depósitos in accordance with the provisions of Section 117.3 of the Spanish Companies Act (Ley de Sociedades de Capital).
It was up to the bare owner (nudo propietario) to decide what to do with the free-of-charge allocation rights corresponding to shares subject to an usufruct. If the bare owner chose to receive new shares or to sell the rights on the market, the usufruct would extend to cover the new shares or the proceeds of the sale. If, on the other hand, the bare owner opted to sell the rights to Iberdrola, the corresponding cash had the same withholding as the dividends and will be considered a "fruit" (fruto civil) of the shares, belonging to the usufructuary (usufructuario).