The following are some brief references to the main fiscal novelties recently approved and which are applicable to the real estate sector.
Act 16/2012, December 27, on economic measures
Personal Income Tax: As a general rule, the deduction for usual residence is eliminated for dwellings acquired as of January 1, 2013.
Transitional system: It will nevertheless be possible to continue benefitting from such condition, pursuant to the conditions in force at December 31, 2012, for those taxpayers who, prior to January 1, 2013 acquired their usual residence or paid quantities for the construction, reform or extension thereof, and claimed the aforementioned deduction for such dwelling prior to the year 2013, unless they shall have benefited from the deduction for prior dwellings or from the exemption for reinvestment.
Those taxpayers who claimed deductions for contributions toward a home savings account, that has not been open for 4 years by December 31, 2012, may return any deductions claimed for this concept in the tax return corresponding to the year 2012, without default interest.
The assessment of payment in kind for the use of a dwelling by workers will be as follows: (i) If the dwelling is the property of the employer, this will be 10% of the cadastral value (5% for properties whose cadastral value was revised as of January 1, 1994), providing it does not exceed 10% of all other considerations from employment; (ii) If the dwelling is not the property of the employer, this will be the cost for the employer, and may not be less than the appraisal corresponding to the preceding case.
Transitional system: During the year 2013, the worker may continue appraising the dwelling as if it were the property of the employer, providing that: (a) The worker had been using the dwelling prior to the entry into force of this Act; and (b) The employer had been making such payment in kind prior to October 4, 2012.
Corporate Income Tax: For the years 2013 and 2014,depreciations are limited to 70% of the quantity that would have been tax deductible in the absence of this measure:
Assets to which this measure is applied: (i) Fixed assets, intangible assets and real estate investments, and (ii) Assets subject to the special leasing system.The following are excluded from this measure: (i) Small-sized Enterprises, except those elements that are depreciated in accordance with the special depreciation system for new fixed asset and intangible asset elements, for equity item elements for reinvestment, and for those assets that are depreciated in accordance with the special leasing system, and (ii) those assets that shall have been covered by a specific communication or authorization procedure by the Tax Authorities, with regard to their depreciation.
Any quantities whose depreciation is not tax deductible in accordance with the preceding section will be tax deductible as of the first tax period that commences in the year 2015, as follows: (i) Linearly for a period of 10 years; or (ii) Throughout the useful life of the equity item.
Effective as of January 1, 2013, the requirements for access to the system of entities devoted to the leasing of houses will become more flexible as follows: (i) The minimum number of dwellings leased or offered in lease is 8 (previously 10); (ii) The minimum period for the lease of each dwelling is 3 years (previously 7); (iii) The constructed surface area requirement for dwellings is eliminated.
Tax system of certain leasing agreements: with respect to the application of accelerated depreciation, and effective as of January 1, 2013, the placement into operating conditions of the asset will be deemed as having taken place at the start of its construction. Requirements:
- Prior notice should be given to the Tax Authorities.
- Lease payments should be made significantly prior to the end of asset construction.
- The period for asset construction should be at least 12 months.
- Assets should be unique in terms of their design and technical requirements, and should not correspond to mass production.
Transitional system: Equity items with respect to which the corresponding administrative authorization has been obtained relative to the moment of the placement into operating condition in a tax period commencing prior to January 1, 2013 will be governed by the provisions of legislation in force at December 31, 2012.
The possibility is introduced of applying adjusted book values with respect to assets appearing in the first balance sheet closed subsequently to December 28, 2012, providing that their depreciation has not been deducted in its entirety. The following may apply this measure: (i) Corporate Income taxpayers; (ii) Personal Income taxpayers who pursue economic activities and pay taxes via the direct estimate method; (iii) Non-Resident Personal Income taxpayers with a permanent establishment.
Adjustment coefficients are determined by Law. Adjustable elements are as follows: (i) Fixed assets; (ii) Real estate investments; (iii) Fixed asset and real estate investment elements acquired by leasing. The effects of the adjustment, of a resolutive nature, are conditioned upon the exercise of the purchase option; (iv) Equity items corresponding to concession agreements registered as intangible assets by concession companies that apply the accounting criteria relative to public infrastructure concession companies.
The exercise of this option applies to the entirety of adjustable elements, barring real estate, which may be performed individually. The option should be applied between the closing date of the balance sheet and the date of its approval. The tax will be 5% of the total capital gain.
The system applicable to the SOCIMIs becomes more flexible, effective January 1, 2013:
The possibility is introduced of listing SOCIMIs (Listed Real Estate Investment Companies) on a multilateral trading system, such as the Alternative Stock Exchange (of the Spanish, MAB). To date it was only possible to list them on regulated markets. The minimum capital is 5 million euros (previously 15 million) and their shares should be registered. Limitations to outside financing are eliminated (previously this could not exceed 70% of company assets). No minimum number of properties is required in their assets (this was previously set at 3 and none of them could represent more than 40% of company assets). The real estate acquired or promoted by the SOCIMI should remain leased for at least 3 years (previously the period was 7 years for properties promoted by the SOCIMI).
The following obligation is established for the distribution of profits to shareholders:
100% of the profits from dividends deriving from stakes in:
- Other SOCIMI or similar, non-resident entities.
- Entities whose main corporate purpose is the acquisition of urban real estate for lease and that are subject to the same system established for SOCIMIs in terms of the distribution of profits and investment.
- Collective Real Estate Investment Institutions.
At least 50% of the profits from the transfer of real estate and stakes described in the preceding section.
At least 80% (previously 90%) of all other profits (lease proceeds).
Main characteristics of the tax system for SOCIMIs: 0% levy on Corporate Income Tax. Special 19% levy on dividends distributed to shareholders whose stake percentage in the SOCIMI is equal to or greater than 5% and such dividends are exempt or taxed at a rate lower than 10% at their place of residence.
Withholdings to shareholders: the general system will be applied and, where appropriate, the provisions of international conventions for the avoidance of double taxation.
With regard to their shareholders: (i) IS (Corporate Income) or IRNR (Non-Resident Personal Income) Taxpayers with a permanent establishment will be taxed normally, without the possibility of applying the deduction for avoiding double taxation. (ii) IRPF (Individual Income) or IRNR (Non-Resident Personal Income) Taxpayers without a permanent establishment will be taxed normally, without the possibility of applying the 1,500 Euros exemption in the case of dividends collected by individuals, or the exemption for the sale of listed securities in Non- Resident Income Tax legislation.
Non-Resident Income Tax: As of January 1, 2013, only those entities with residence in tax havens will be subject to the Special Real Estate Tax of Non-Resident Entities.
Transfer Tax and Stamp Duty: The nonsubjection to Stamp Duty of the Transfer Tax and Stamp Duty is introduced for provisional writs of attachment ordered at the motion of the competent Administration, which were previously subject to but exempt from such tax.
Local Taxes: Within the scope of the Real Estate Tax, and effective January 1, 2013, the exemption is eliminated for those properties that form part of Historical Heritage and that are subject to economic activities, unless any of the exemptions are applicable to them as envisaged in Act 49/2002, December 23, on the tax system for not-for-profit institutions and tax incentives for patronage. With respect to such properties, City Councils may regulate a tax rebate of up to 95%.
As of January 1, 2013, the optional rebate (up to 95%) of the Tax on Building, Installations and other Works is extended to the Real Estate Tax and the Tax on Commercial and Professional Activities when these undertake economic activities declared to be of special municipal interest or utility on the grounds of social, culture or employment development circumstances that justify such declaration.
Act 17/2012, December 27, on the General State Budget for the year 2013
Value Added Tax: Within the scope of the Value Added Tax and effective as of January 1, 2013, second or subsequent deliveries of building in exercise of a purchase option during the year with respect to leasing agreements with a term of less than 10 years will be exempt.
In relation to the new case of taxpayer investment in work execution, established by Anti-Fraud Act 7/2012, October 29
The Binding Response to Consultation number V2583-12, December 27, from the Directorate General of Taxation clarifies certain situations in relation to taxpayer inversion in work execution, establishing that: (i) the recipient should act as employer or professional. Public entities, individuals, associations, cooperatives and other not-for-profit entities should provide the prime contractor with express and certified notice that they are acquiring the good or service in their capacity as employer or professional; (ii) the operation should be performed within the scope of a process for the development of land, construction or building restoration. This means that the works for preservation and maintenance of the buildings and all ancillary works deriving therefrom will not give rise to taxpayer inversion; (iii) the operations should be the result of contracts formalized directly between the developer and prime contractors. Therefore, ancillary works such as the repair of dampness, tiling and similar tasks performed following delivery of the final works, but during the warranty period, will cause taxpayer inversion, providing that such works derive from the main contract for urban development, construction or restoration; (iv) taxpayer inversion will likewise be applied in mixed contracts (for example, those in which the design and execution of work is commissioned for a fixed price) included under processes for the urban development of land, construction or restoration of buildings, irrespective of the relative weight granted in the contract to the service rendered and to the execution of the work.
In personnel assignment operations it is necessary to assign personal exclusively to the execution of the real estate work that fulfills all of the aforementioned requirements.
The taxpayer investment rule will apply to works certificates by which payments are made as of October 31, 2012.
The new Invoicing Regulation approved by Royal Decree 1619/2012, November 30, establishes that in cases of taxpayer investment, the invoice will make indicate “Inversión del sujeto pasivo”.