The new Directive aims primarily to combat greenwashing, which occurs when companies make false or exaggerated claims about the environmental impact of their products in order to attract consumers who are concerned about the state of the environment.

This misleading practice can lead to poor purchasing decisions and damage consumer confidence in companies that are committed to sustainability and care for the environment.
In 2020, the European Commission presented worrying data on greenwashing practices: 53.3% of environmental claims reviewed in the European Union were found to be misleading or unfounded, and approximately 40% lacked supporting verification.

To try to put an end to this practice, this new regulation provides for a ban on the use of environmental terms such as "environmentally friendly", "biodegradable" or "eco" in labelling, as well as the use of sustainability labels, among others, without any kind of control or comparable reference.

Another of the points to be regulated by this legislation is to ensure that producers and consumers focus on the durability of goods. To this end, a new harmonised label will be created to give more visibility to products that have an extended guarantee period, and the guarantee will be made more visible.

In addition, this regulation will prohibit unfounded claims about the presentation of products as repairable, the durability of products and the encouragement to replace consumables earlier than strictly necessary.
To ensure that companies comply with their obligations, control mechanisms are implemented, such as third-party verification of environmental targets and commitments and the obligation to make the results of verifications available to consumers, thus ensuring transparency.

In addition, it is foreseen that the competent authorities will carry out audits to verify compliance with the provisions of the Directive and the member states will be able to impose effective, proportionate and dissuasive sanctions. Thus, companies that fail to comply with the new rules could be temporarily excluded from public procurement tenders and face fines of up to 4% of their annual turnover.

This Directive marks an important milestone in the regulation of environmental advertising in Europe, impacting both businesses and consumers, and is part of the EU's wider efforts to move towards a more sustainable economy and protect consumers from unfair commercial practices. It seeks to build consumer confidence in environmental claims and promote a more transparent and accountable market in terms of sustainability.

In addition, public administrations are committed to encouraging the adoption of sustainable and transparent practices in the marketplace, as well as facilitating business access to sustainability labels.

Member States will have to transpose the Directive into national law by 27 March 2026, and will have to apply this transposition from 27 September 2026. In Spain, the Ministry of Consumer Affairs has already started to process a Sustainable Consumption Law.

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There are currently several cases before the Supreme Court concerning applications for the refund of undue income arising from the payment of the aforementioned regional section of the IEH. Two controversies are raised in these appeals:

1. On the one hand, to determine whether or not the autonomous community section of the IEH is in accordance with EU law. The Supreme Court considered it appropriate to refer a question to the CJEU for a preliminary ruling, which is the one resolved in this judgment. 
2. On the other hand, in the event that the tax is not due (as mentioned above), it is necessary to determine who is entitled to claim a refund of the tax unduly paid. 

Once it has been decided that the autonomous tax bracket of the IEH is not in accordance with the law, the Supreme Court will have to rule on who is entitled to claim a refund of the tax. This question is not clear. The reason for this is that the operation of the IEH is different from that of the "céntimo sanitario" (or Tax on the Retail Sale of Certain Hydrocarbons -IVMDH-) which was annulled by the CJEU in its ruling of 27-2-2014. The "céntimo sanitario" was paid by those who purchased hydrocarbons (petrol, diesel...) at service stations. Therefore, its annulment gave rise to the right of those who refuelled at service stations to obtain a refund of the amount unduly paid. 

On the other hand, the autonomous region's IEH is a tax that is paid at the time of manufacture or import of the hydrocarbon; it is not paid at the time of sale at the service station.

In the case of the autonomous community section of the IEH, there is no doubt that those taxable persons (manufacturers or importers of hydrocarbons) who paid the tax through their corresponding self-assessments are entitled to request a refund.

But what is also at issue is whether or not the persons or entities, who financially bore the improper tax when it was passed on to them (e.g. owners of service stations or users of service stations), are also entitled to claim a refund of what was unduly paid.

Depending on the Supreme Court's ruling on who can apply for a tax refund (whether only manufacturers and importers, or also sellers - service stations - or final purchasers), it will have to be analysed which will be the appropriate way to try to recover the tax unduly paid.

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These incentives relate to:

• A Tax Relief amounting to 20% of the value invested in debt and shares in companies’ resident in any part of the World (only excluding certain Tax Haven).
• High tax benefits for young people (under 35 years) willing to move to the Community of Madrid.

Individuals not resident in Spain who become tax resident in the Madrid Region as of 2024, could apply a regional deduction of 20% of the acquisition value of the following financial assets in companies, regardless of the territory or country in which those companies are domiciled (with few limitations only in case of companies from tax havens territories) and without it being necessary for them to be traded or quoted on an organised market.

It should be noted that, as this is a deduction applicable exclusively to those paying Personal Income Tax, hence it might not be compatible with the Spanish Inpatriate Tax Scheme known colloquially as the “Beckham Law”.

Remember:

• In order to acquire the tax residency in the Madrid Region in 2024, the tax residency change should be executed before July the 1st.
• Investments eligible for deduction must be made in the year of change of residence and may be in companies resident in any country, tax havens are excluded only in few cases.

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The finally approved CSDDD does not differ from the content we published in our previous alert (click on the link in the previous paragraph to read it), except in:

• Subjective scope of application:

1,000 employees

An annual net turnover of more than €450M in the last financial year.

• The special regime in risk sectors is eliminated.
• Direct references to the management body and corporate social responsibility have been removed.
• A minimum limitation period of 5 years has been included.

The new rules - with the exception of reporting obligations - will apply gradually to EU companies and to non-EU companies that reach the turnover thresholds indicated in the EU:

• from 2027 for companies with more than 5,000 employees and a worldwide turnover of more than EUR 1.5 billion;
• from 2028 for companies with more than 3,000 employees and an aggregate turnover of EUR 900 million or more;
• from 2029 for all other companies including those with more than 1,000 employees and a worldwide turnover of more than EUR 450 million.

Following approval by the European Parliament, the timetable foresees that on 23 May EU ministers will give the final green light to the CSDDD following the Council's approval. Once published in the Official Journal of the European Union, Member States will have to implement due diligence within two years.

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Raúl Salas, Tax Law partner, and Elena Ferrer-Sama, Area Director of Tax Law, have collaborated in "The Legal 500: Tax Comparative Guide - Spain Tax" guide from Legal 500. This country-specific Q&A provides an overview of tax laws and regulations applicable in Spain.

You can consult the chapter in the following link

The scope of the Regulation extends beyond organisations established in the European Union ("EU") to those using Artificial Intelligence in the European market. This means that many multinationals, with a presence or commercial interactions in the EU, will also have to apply it.

The Regulation will be published in the Official Journal of the European Union and will enter into force 20 days later, being fully applicable after two years. This deadline is subject to certain exceptions determined by the categorisation of the risk associated with AI systems, as detailed in the attached information note.

What is IA?

According to the Regulation, an AI system is considered to be an AI system when it is machine-based, designed to operate with different levels of autonomy, demonstrates adaptive capabilities and can infer from the input it receives, for explicit or implicit purposes, how to generate outputs such as content, predictions, recommendations or decisions that can be inferred in physical or virtual environments.

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David Vegara, Chairman of the Advisory Board of RocaJunyent, invites us to read his Economic Note. In it, he analyses the economic situation from various perspectives, starting with the Italian context of political instability contrasted with economic growth apparently independent of politics. However, this "Italianisation" has negative long-term consequences, such as the lack of long-term plans and the loss of ground in terms of per capita income. Despite this, the Italian economy shows positive signs, with growth of 2.5% in 2023 and encouraging projections for 2024.

It also examines the situation in Germany, whose projected growth is modest due to the loss of economic pillars such as affordable energy and demand from China. It questions whether Germany is once again becoming "the sick man of Europe", highlighting the need for reforms to boost growth and productivity across Europe.

Mario Draghi is highlighted as a key player in Europe's economic rescue, presenting a report on how to improve European competitiveness. David Vegara discusses current challenges, such as the lack of growth compared to the US and the need to increase investment and innovation.

Finally, he anticipates a future in which public spending will play a crucial role in economic redistribution and stabilisation, which could lead to greater public intervention and, eventually, to a reunion between politics and economics.

Access the full Economic Note.