In the last years, the European Union has made progress in its efforts to try to achieve a fiscal harmonisation that supports the proper functioning of the common market and generate greater synergies for all its members. As the European Parliament, itself, explains, “the fight against harmful evasion and tax avoidance has recently become a political priority.”
In this context, the EU takes a few years to end realities such as the one known as hybrid symmetry’. As its name suggests, it is an anomaly and under this concept are understood those situations in which, as a result of the different fiscal rating between the different countries, results of desimposiciorn (deduction in one country not included in another) or double deduction of payments, expenses or expenses may occur.
With the publication of Royal Decree-Law 4/2021, of 9 March (RDL) the ATAD 2 Directive is incorporated into the Spanish regulations, amending the Corporation Tax Act (LIS) and the Non-Resident Income Tax Act (TRLIRNR).
This RDL, which entered into force on 11 March 2021, is applicable to the financial years initiated from 1 January 2020 which have not been completed at that date. In reaction, LIS Article15a, and TRLIRNR Article 18, paragraphs 6 and 7, establish, in the case of related transactions and in the functioning of the cases, that an expense shall not be deductible for an entity resident in Spanish territory (or a permanent establishment located in Spain of a non-resident entity) in the following cases:
- when the correlative income is not taxed on another entity resident in another country
- where such expenditure is also deductible for the other entity.
In addition, the entity resident in Spanish territory must be taxed for income corresponding to expenses that have been tax deductible in another country.
The incorporation of the ATAD 2 Directive is intended to avoid these operations between Spain and other member states of the European Union, and between Spain and third party countries or territories, provided that the parties involved in the operation are related persons or entities. It also applies when the asymmetry takes place within the framework of a structured mechanism, and the entities themselves, the transactions they carry out, or the income derived from these operations, have different tax rated in Spain and in the other country.
The rule itself defines what is meant by a structured mechanism; being an agreement, business, scheme or operation in which the tax advantage derived from asymmetry or consideration in its conditions or considerations, or that has been designed to produce the results of such asymmetry, unless the taxpayer or a related person or entity has not been able to know them reasonably and do not share a tax advantage.
It should be noted that RDL is related to the concept of persons or entities linked for the purposes of the anti-ageing legislation, so that, in the cases of linkage as per in Article 18 of the LIS, it is appropriate to add those included in paragraph 12 of the new Article 15a – considering, as a case of linkage, a threshold for the participation of voting or economic rights of 25%.
It also includes two other concepts of related persons or entities such as “acting together” with a person or entity with respect to voting rights or capital ownership, and “significant influence” on the management.
Although the Spanish regulations already included some such measures for transactions between affiliated parties (e.g. the delivery of funds from a non-resident parent to a subsidiary resident in Spain where it is treated as a Loan, and capital in the area of residence of the parent company cannot be deducted in Spain as interest if applied in the country of residence of the parent company as dividends), this rule tries to avoid another type of asymmetry that is not previously covered in Spanish regulations.
This transposition has occurred in Spain within a period of time that we can consider to the limit of the provisions of the Commission of the European Union. So it is advisable that, regarding international groups and companies, their structures and operations should be reviewed, analysing whether they would be subject to regulation, with their implications under the Spanish regulations and that of other countries involved.
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