The General Courts Official Gazette published on , as outlined in Council Directive (EU) 2016/1164 of 12 July 2016. This draft contains amendments to various rules, mainly in the field of taxation, in order to covert European Community law into domestic law within the Member States, implement measures to combat tax avoidance, and facilitate controls for the prevention of tax fraud.
The draft covers rules against tax avoidance practices which have a direct impact on the functioning of the internal market and amends various tax rules and regulations on gambling.
Law on Measures to Prevent and Combat Tax Fraud also aims to combat new forms and methods of tax fraud associated with new technologies. It intends to make it possible to prosecute inappropriate behavior by large multinational companies, and prevent abusive tax planning.
Measures contained in this Draft include:
1. Amendments to the General Tax Law
- Prohibition of extraordinary tax regularizations.
- Clarification on rules covering the accrual of interest for late payments.
- The accruing of interest on late charges is confirmed—now being 1% incremental charges for each month of delay up to 12 months. Beyond 12 months, the surcharge will be 15% with accrual of interest on late payment.
- The representation of non-residents is adapted to bring it into line with EU law.
- The reduction in sanctions for acts of agreement is raised from 50% to 65% and the reduction for early payment from 25% to 40%.
- The limitation on cash payments for certain cash transactions is hardened. The aim is to restrict these cash operations which are more difficult to trace and can therefore facilitate fraud. New limits are set in the case of transactions between entrepreneurs, reducing from EUR 2,500 to EUR 1,000; where the limit of EUR 2,500 is maintained for payments made by private individuals. The limit on cash payments is reduced from EUR 15,000 to EUR 10,000 in the case of individuals whose tax domicile is outside Spain.
- Three months after the entry into Law, enforcements will also apply to software or electronic systems which support accounting or business management processes. These systems must comply with certain requirements, guaranteeing: full reliability; record keeping in accounting, invoicing, or management software; and the possibility of imposing certification and standardization. Further, a new tax infringement has been established concerning the manufacture, production, and marketing of dual-use software which supports accounting, invoicing, or management processes. A specific penalty system will be established.
- The mandatory nature of the disagreement reports is eliminated—they become optional.
- The maximum period for initiating penalty proceedings based on settlements or resolutions made in inspection and enforcement stages is extended from three to six months.
- The obligation to report virtual currencies located abroad is introduced by means of Form 720, which will be subject to the sanctioning regime.
2. Tax havens
- The concept of tax havens is extended to include non-cooperative jurisdictions—the term used internationally.
- It will include those countries and territories characterized by:
- their opacity and lack of transparency,
- absence of regulations on mutual assistance,
- attracting profits with no real economic activity,
- low or no taxation.
- It will include those preferential tax regimes which are harmful to the establishment of certain countries or territories—for example, regimes which give favorable treatment to non-residents over residents.
- The government will be empowered to update the list of tax havens, which will then be reviewed periodically.
3. Exit tax
- Outlines the obligation to integrate the implicit income existing in the migration of companies outside Spain into the tax base, even in the case of transfers of assets to EU or European Economic Area Member States. In these cases, the right to split the payment of the exit tax over five years is granted.
- The term exit tax is introduced in the IRNR (Non-Resident Tax Income), in the event that the transfer of the activity is carried out by the permanent resident/establishment.
- In both the Corporate Tax Income and the Non-Resident Tax Income, when there is a change of residence or a transfer of assets or activities to Spain which have been subject to exit tax in an EU Member State, the value determined by the Member State of exit will be considered as the tax value in Spain, unless it does not reflect the market value.
4. Taxable Base for the purposes of Transfer Tax and Stamp Duty (ITPAJD) and Inheritance and Donation Tax (ISD)
- In the case of real estate, the Cadastre´s reference value becomes the taxable base value. This reference value is based on all property sales and purchases formalized before a notary public. It will be calculated with technical and transparent rules and will be publicly available from the Cadastre.
- The reference value is different from the cadastral value, therefore, taxes that use the cadastral value as a tax base (e.g. Personal Income Tax, Property Tax or Tax on Increase in Value of Land of an Urban Nature) will not be affected by this reference value.
- Reference values must be published in BOE.
5. International tax transparency
- In relation to international tax transparency (imputation of income to an entity resident in Spain but obtained from non-resident subsidiaries, when the taxation abroad of this income is lower than that which would have occurred in Spain), certain provisions of the ATAD Directive (Anti-Tax Avoidance Directive) have been incorporated into our legislation, among them:
- The imputation of income must be not only that obtained on subsidiaries but also that obtained on permanent establishments abroad.
- Holding Companies are no longer exempt—they are now governed by general rules.
- Attributable income (such as that derived from financial leasing, insurance, banking and other financial activities), is extended to include passive income, as well as income derived from related parties in which the non-resident entity or permanent establishment adds little or no value, provided that it does not derive from the performance of an economic activity. (At present, this income is only subject to transparency when it determines expenses that are tax-deductible in Spain.)
- The minimum threshold that determines tax-deductible expenses is increased for credit, financial, insurance and service provision transactions with resident related parties. The non-inclusion rule is to be limited to cases where two thirds of the income from these activities is not with related parties, instead of the current 50%.
- The rule allowing for the non-inclusion of dividends / capital gains in relation to foreign holding companies is eliminated.
- The requirement of a valid economic reason in relation to the general escape clause for entities resident in the EU (extended to the European Economic Area) is eliminated, and to be limited to cases where the taxpayer can prove that economic activities have been carried out.
6. Changes in customs matters
- The legal liability of customs representatives and of holders of warehouses other than customs warehouses (among others) is tightened. These amendments are made to both the VAT and the IGIC regulations:
- In the case of subsidiary liability, the Draft clarifies that this extends to any direct representative, not only the customs agent.
- Liability shall be incurred where debts arise from declaration procedures or from the verification of data on customs declarations.
7. Changes in VAT, IGIC
- VAT: The status of the parent company as a party in breach of the Special Group Company Regime is specified in greater detail. The party representing the group is obliged to comply with the material and formal obligations arising from this special regime.
- IGIC: Similar to the provisions on VAT, the keeping of books and registers is provided for through the electronic headquarters of the Canary Islands Tax Agency.
8. Cadastral Regulations
- The cases of incorporation of new constructions and alterations to be communicated by the Local Administrations and entities managing the Property Tax are extended.
- New communications systems are outlined. The information provided as a result of the duty to cooperate is covered by exemption from the obligation to declare, provided that the documentation proving the alteration is available.
- The effects of correcting discrepancies occur from the date on which the Administration becomes aware of them, not from the date on which the procedure is resolved.
- The tax base is adapted to the regulation of the reference value.
9. Personal Income Tax
- The acquirer of an asset by means of a contract / agreement on succession will be subrogated to the asset value and date of acquisition by the deceased, provided that it is transferred before the death of the latter. This prevents the updating of values and dates of acquisition, which would cause lower taxation. As above, the cases of incorporation of new constructions and alterations to be communicated by local authorities and property tax management bodies are extended.
- The requirements are adapted so that the special rule of Temporary Imputation in life insurance (in which the policyholder assumes the risk of the investment) does not apply.
- The non-applicability of the Deferral Regime is extended to investments in certain foreign collective investment institutions (listed investment funds and companies, EFTs).
10. Tax on economic activities
- The normal references for consideration as a corporate group are updated, to avoid the action of splitting the turnover of the corporate group that determines tax.
- It is established that the exemption from personal tax applies to both residents and non-residents.
For more information on how this Draft could affect you, contact your Auxadi team.