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March 30, 2009

Fee pressure strikes firms in Spain

New tax and accounting rules in Spain have come at the worse possible moment, according to the International Accounting Bulletin’s Spain survey (see Spain survey:Firms prepare for challenges ahead).

Firms are experiencing increased workloads as clients comply with a new General Accounting Plan (Plan General Contable – PGC) introduced in January last year and new related party tax rules introduced in February this year. However, clients are in survival mode and resisting fee increases.

Fee income from UHY Fay & Co’s audit and consulting business remained static in the past year, while it should have grown.

“We have been trying to collect more fees thanks to [the PGC] because it requires a lot more advice to clients,” managing partner Bernard Fay said. “But the funny situation is that clients are not accepting increases in fees right now. They want to include everything in whatever has already been agreed.”

The PGC takes Spanish accounting standards for non-listed companies a step closer to IFRS and companies need to upgrade accounting processes and train staff.

Moore Stephens Hispania international liaison partner Jorge Blanquer said work is flowing from both the PGC and new related party tax rules, but the timing is unfortunate.

“If you are an entrepreneur/owner of a company, the main point now is to survive and accounting and bookkeeping stuff is secondary,” he said.

The implementation of new regulation is made more difficult because some accounting rules are still being developed by regulators. Many points are unclear and new interpretations are arriving from regulators almost daily, Blanquer said.

The benefits of the PGC on BDO Audiberia Auditores’s bottom line have also been tempered by fee pressure but the firm’s president, Alfonso Osorio Iturmendi, said fee pressure is good for BDO.

“Our cost structure, personal costs and general costs are lower than all the larger groups, so we are in a very good position to be more competitive than the rest of our competitors in the market,” he said. “In many cases we have to reduce our fees to be competitive in the market. But generally speaking I think it is a very good opportunity for a firm like BDO.”

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