Personal income tax

DGT clarifies the personal income tax treatment for a property lease with a call option

Directorate General for Taxes. Ruling V3139-18, of December 11, 2018

A lease with a call option on a property gives rise to the following types of income:

  1. Income arising from the lease which is treated as income from movable capital for the lessor or from an economic activity, as applicable.
  2. The grant of a call option to the lessee generates a capital gain for the lessor/grantor which must be included in the general component of taxable income for the period in which the option right is executed.
  3. The transfer of the property as a result of exercising the call option gives rise to a new capital gain which must be recognized in the period when the call option is exercised and must be included in the savings component of taxable income. If it has been covenanted that the income arising from the lease of the residence and the price of the option received by the grantor must be discounted from the aggregate price agreed for the transfer, those sums must be subtracted from the transfer value of the property when calculating the capital gain or loss.

Personal income tax

Acquisition of treasury shares is taxed as withdrawal of shareholders

Directorate General for Taxes. Ruling V3133-18, of December 11, 2018

The ruling request came from the owner of shares in an unlisted Spanish corporation (sociedad anónima) which were going to be transferred to the company itself. The shares were going to be held by the company as treasury shares, or in other words they would not be redeemed.

The DGT adopted TEAC's interpretation to conclude that the definition of shareholder withdrawal as used in the Personal Income Tax Law is not restricted to the definition of shareholder withdrawal in corporate law, instead it covers every case where the shareholder ceases to have shareholder status at the company, including any acquisition of treasury shares by the company which does not involve redemption of the shares through a capital reduction.

For that reason, in the examined case a capital gain or loss for personal income tax purposes will arise which must be calculated under the rules set out for shareholder withdrawal.

Transfer tax

If the transfer is not documented, the tax will fall due when the return is filed

Directorate General for Taxes. Ruling V3126-18, of December 5, 2018

More than 20 years ago the sale of a property took place, which was not documented in writing or reported for transfer tax purposes. It is now intended to document the transfer to change the owner of the property at the Property Registry.

The transfer tax legislation provides that in transfers for consideration the tax falls due on the date the taxed transaction or agreement takes place and that, for the purposes of the statute of limitations, “on agreements not recorded in a document, it shall be presumed … that their date is the date when the interested parties comply with the provisions in article 51. The date of the private document prevailing for the purposes of the statute of limitations, according to this article determines the applicable legal treatment for the required assessment in respect of the transaction or agreement included in it”. That article 51 of the Transfer Tax Law lays down the obligation to file the documents containing the taxable events.

Because in the examined case there was no private transfer document when the transfer took place, the taxable event for transfer tax purposes takes place on the date when the interested parties meet their obligation to assess the tax. This date is the date prevailing for the purposes of the statute of limitations and the date that will determine the legal regime applicable to the required assessment. That is also the date for the actual value of the asset under the reported transaction.

Inheritance and gift tax

DGT recognizes that autonomous community legislation may be applied to the estate of a deceased resident of a third country

Directorate General for Taxes. Ruling V3151-18, of December 11, 2018 and ruling V3193-18, of December 14, 2018

Following the judgment by the Court of Justice of the European Union (CJEU), on September 3, 2014, the inheritance and gift tax legislation was amended to allow, in relation to the estate of a deceased resident of the European Union or of the European Economic Area, Spanish-resident heirs to be able to apply the relevant autonomous community legislation. This amendment, however, did not include cases where the deceased was resident in a third country.

The DGT has recognized that this legislation is contrary to the principle of the freedom of movement of capital, enshrined in article 63 of Treaty on the Functioning of the European Union, and therefore, under the principle of the primacy of European law and its direct effect on domestic law, the DGT confirmed that the legislation of the autonomous communities where the heirs are resident could be applied in the cases of two estates where the deceased were resident in Andorra and the Russian Federation.