Corporate income tax
An exemption is not claimable for transfers of holding companies even if operating companies take part
Directorate General for Taxes. Resolution V1135-19 of May 23, 2019
The examined issue concerned an entity that transferred its interest in a second entity which qualified as a holding company for corporate income tax purposes. The assets of this holding company were wholly owned by a third entity that carried on an economic activity. According to the statements recorded in the deed of sale, the purchasers’ intention was to take control of this third entity, even though, for various reasons, the acquired interest was in a holding company.
In relation to this transaction, it was asked whether it qualified for the exemption under article 21 of the Corporate Income Tax Law for the transfer of shares in entities.
The DGT recalled that this exemption is not applicable to gains obtained from the transfer of holding companies and accordingly denied entitlement to the exemption in the examined case, without considering for these purposes the fact that the company’s main asset is the interest in a company that is not a holding company or that the purchaser’s real intention is to acquire the entity owned by the holding company.
Corporate income tax
Professional services provided free of charge by a shareholder to a company in non-statute barred years are shareholder contributions
Directorate General for Taxes. Resolution V1084-19 of May 21, 2019
The sole shareholder and sole director of a company did not receive any fees in respect of services provided to the entity. In an audit, a personal income tax adjustment was made for the period between 2010 and 2012 after pricing at arm’s length the services provided by the taxpayer to the company.
Since the company had been set up in 2006 and no adjustments had been made for the period between 2006 and 2009, the taxpayer asked whether the company's accumulated reserves for the period between 2006 and 2009 could be treated for tax purposes as shareholder contributions, in an amount equal to the value of the free professional services.
The DGT confirmed that, for tax purposes, pricing at arm's length price the professional services provided free of charge by a shareholder to its company gives rise to:
- An amount of income from the shareholder’s economic activities equal to the arm's length price of the professional services provided to the company.
- A deductible expense at the company in the same amount.
- A shareholder contribution equal to the amount not billed by the shareholder to the company, which therefore increases the cost price of the shareholder's ownership interest.
The DGT drew attention, however, to the fact that these adjustments are only allowable in relation to non-statute barred years. Therefore, the reserves relating to the 2006-2009 period cannot be treated as shareholder contributions for tax purposes.
Corporate income tax
Clarification of various issues regarding the tax credit for hiring disabled workers
Directorate General for Taxes. Resolution V1044-19 of May 13, 2019
The Corporate Income Tax Law allows a tax credit to be claimed, amounting to €9,000 per person per year, in relation to the increase in the average number of disabled workers in the workforce with degrees of disability of 33% or greater and below 65%, with respect to the average number of workers of the same type in the immediately preceding period; or to €12,000 for workers with degrees of disability of 65% or greater.
In this resolution, the DGT clarified various elements of this tax credit:
- Firstly, it was asked whether, in cases where an employee included in the average number of disabled workers in earlier years goes on leave, the worker must continue to be included in that average number during the leave period or, by contrast, it must be considered that the worker leaves and is then re-registered as an employee (so the leave period does not count). The DGT concluded that in these cases the worker on leave is not part of the average number of disabled workers (unless the worker may be treated as a registered employee during the leave period). Otherwise, disabled workers who must be registered as a result of their reinstatement after a period of leave will start to be included in the calculation of the average number of disabled workers.
- Moreover, it was examined how part-time workers must be treated for the purpose of calculating the average number of disabled workers. DGT considers that in these cases the proportion that the hired hours bear to full-time time hours must be included in the calculation.
- In relation to cases where the disabled workers enter a company as a result of a transfer of undertakings, the DGT concluded that they may be included to calculate the average number of disabled workers at the new company, and they stop being included in the calculation to be made by the transferring company.
- As for employees who become disabled while they are employed, they are allowed to be included in the calculation of the average number of disabled workers, even if they are already part of the workforce. Similarly, if a worker’s degree of disability falls to below 33%, that worker must stop being included in the calculation of the average number of disabled workers. And if a worker's disability increases from between 33% and 64% to 65% or greater, that worker must be included in the average number for each group in proportion to the length of time they had each degree of disability.
Corporate income tax
Nondeductible VAT is a deductible expense for corporate income tax purposes
Directorate General for Taxes. Resolution V1066-19 of May 2, 2019
The DGT has reiterated that input VAT incurred on purchases of goods and services that is not deductible under the VAT legislation is a deductible expense for corporate income tax purposes.
The DGT recalled that the Corporate Income Tax Law does not contain any special rule on this issue and therefore the accounting rule must be applied. Since the Spanish National Chart of Accounts states that non-deductible VAT forms part of the cost price of goods and services, it must be deductible to determine the corporate income tax base.
Personal income tax
Subsistence expenses are deductible from income from economic activities
Directorate General for Taxes. Resolution V1290-19
Starting on January 1, 2018, the Personal Income Tax Law provides that a taxpayer’s subsistence expenses incurred in the taxpayer’s activity are deductible to determine net income under the direct assessment method if they were incurred in restaurant and hospitality establishments and were paid electronically, subject to certain limits on amount.
In relation to the ability to deduct these expenses, the DGT confirmed that, although as a rule deductible expenses are associated with revenues (it is not allowed to deduct expenses incurred in the taxpayer’s private sphere), subsistence expenses are a special type of expense that may only be deducted on satisfaction of the requirements mentioned above, relating to amount and to (i) electronic payment and (ii) being incurred in certain types of establishments.
Although the DGT added that because the association of these expenses with revenues concerns factual circumstances, the circumstances and characteristics of the activity must be verified in these cases.
Personal income tax
The tax credit for international double taxation cannot be claimed until the return has been filed in the other country
Directorate General for Taxes. Resolution V1163-19 of May 28, 2019
The DGT examined the case of a personal income taxpayer who travels to spend a few periods in the year in the UK to provide services in that country for the parent company of the taxpayer’s employer, although the taxpayer's tax residence continues to be in Spain. The income obtained from the taxpayer’s work (performed in both Spain and the UK ) is paid in full by the taxpayer’s employer in Spain and withholding tax is deducted in that country. However, according to article 14 of the Spain-UK tax treaty and UK domestic legislation, the UK parent company is required to withhold tax on income from that country under a PAYE (pay as you earn) system.
In relation to whether the UK tax can be deducted in Spain, the DGT concluded as follows:
- It started by recalling that, if the conditions set out in article 14.2 of the tax treaty were satisfied, the income received for the work performed in the UK would only be taxable in Spain. Therefore deduction of the tax withheld in the UK would not be able to be claimed in Spain, although the taxpayer could apply to the UK tax authorities for a refund.
- If, however, under the tax treaty provisions, the UK could tax the income received for work performed in that country, Spain would have to eliminate the double taxation. Because the UK PAYE income tax is equivalent to Spanish personal income tax, it is deductible from the Spanish personal income tax liability. The procedure for deducting the tax is as follows:
- Insofar as when the personal income tax return form is filed in Spain the relevant UK tax return has not yet been filed, no amount may be included on the self-assessment return in respect of a credit to avoid double taxation. This is regardless of whether tax has been withheld in that country.
- After the tax has been reported, the taxpayer may correct the originally filed self-assessment return.
Personal income tax
The withholding percentage for directors’ compensation is separate from whether the company is part of a group
Directorate General for Taxes. Resolution V0861-19 of April 23, 2019
Tax is withheld from the compensation received by directors and board members for their services, at 35%. The withholding percentage is 19%, however, where the compensation comes from entities whose net revenues in the latest taxable period ended before payment of the compensation are below €100,000.
In this resolution of the issue, the DGT clarified that the applicable withholding percentage will depend on the net revenues figure of the company where the director’s or board member's services were provided, regardless of whether or not the company is part of a business group or regardless of its connection with other companies.
Personal income tax
Inbound expatriates cannot benefit from the exemption for work performed abroad
Directorate General for Taxes. Resolution V0856-19 of April 23, 2019
The personal income tax legislation contains a special system allowing individuals acquiring tax residence in Spain as a result of moving to Spain to elect (subject to satisfying a number of requirements) to be taxed in respect of nonresident income tax, with certain specific conditions.
Those specific conditions are that the exemptions under article 14 of the Revised Nonresident Income Tax Law cannot be claimed, which refers to the exempt income mentioned in article 7 of the Personal Income Tax Law.
As a result, if the worker elects the special inbound expatriates’ arrangement, that worker cannot benefit from the exemption contained in the Personal Income Tax Law for work performed abroad.
Nonresident income tax
The sale of bitcoins is taxed in Spain if the company providing the storage service is located in Spain
Directorate General for Taxes. Resolution V1069-19 of May 20, 2019
The requesting party has been resident outside Spain since 2005. He has a certain number of bitcoins that he could sell in exchange for euros. He asked about the obligation to be taxed on that transaction in Spain.
According to the DGT, sales of bitcoins in exchange for euros entail the receipt of income equal to the difference between the price obtained and the cost price, which qualifies as a capital gain or loss. This is treated as income obtained from the transfer of intangible movable property, and therefore treated as income obtained in Spain in the case of goods located in Spain.
For these purposes, the bitcoins are regarded as located in Spain if the entity with which the storage service of the codes that allow them to be managed and used on their website takes place is located in Spain.
Transfer and stamp tax
Clarification as to who the taxable person is for the purposes of stamp tax on mortgage loans after the recent amendments
Directorate General for Taxes. Resolution V1133-19 of May 23, 2019
As a rule, the taxable person for stamp tax purpose is the person acquiring the asset or right and, in their absence, the parties who request or apply for the notarial documents, or the parties in whose interests they are issued. Royal Decree-Law 17/2018, however, has laid down a special rule determining that the taxable person in deeds for loans secured with a mortgage is the lender.
The following clarifications were made in relation to this amendment:
- The general rule applies to (i) loans or credit facilities with security other than a mortgage (pledge or antichresis rights, for example), (ii) the creation of mortgage rights not related to loans or credit facilities, (iii) finance lease transactions, and (iv) transactions for removing security related to mortgage loans or credit facilities (although the removal of a mortgage is exempt from tax).
- The special rule applies to transactions for the assignment of mortgage loans or credit facilities, although, because in these cases both transferor and transferee are lenders, it appears to make sense for the taxable person to be the transferee of the loan, in that they are the person who expresses financial strength in that acquisition. The special rule also applies to transactions for novation of mortgage loans, irrespective of the exemption provided by Law 2/1994, of March 30, 1994, on subrogation and amendment of mortgage loans for these transactions.
Moreover, following the entry into force of the amendments introduced in relation to transfer and stamp tax by Royal Decree-Law 17/2018 and, later, by Law 5/2019, the exemption system for secured loans is as follows:
- Deeds for subrogation or novation of mortgage loans or credit facilities meeting the requirements set out in Law 2/1994: in these cases, insofar as the exemptions are associated with the item subject to the tax, they remain fully in force, regardless of whether the taxable person is now the lender, because it is the transaction itself that is exempt.
- Deeds for mortgage loans or credit facilities, signed with the developer or end customer, relating to officially sponsored housing where the other requirements set out in the legislation are met: as in the previous case, insofar as the exemption is associated with the item subject to the tax, it remains fully in force, regardless of whether the taxable person is now the lender, because it is the transaction itself that is exempt.
- Provision of security to fund purchases of properties where the seller is SAREB, companies majority owned by SAREB, or bank asset funds. In this case, there are three different scenarios:
- Exemption for the provision of security of any type, where the taxable person is SAREB: This exemption is associated with the taxable person, because the taxable person must be SAREB. Therefore, any change to the taxable person also changes the meaning of the exemption. With the new special rule on determining the taxable person, SAREB is exempt for transactions on loans secured with a mortgage in which it acts as lender, but for transactions where it acts as borrower the exemption disappears. This exemption ceased to be valid on June 16, 2019, although:
- In the case of deeds recording lending transactions secured with a mortgage, the exemption has ceased to be valid.
- The exemption continues to be applicable if security is provided in relation to preexisting loans or as security provided outside loans, in other words to secure other types of obligations.
- Exemption for the provision of security to fund purchases of other real estate assets from SAREB: This exemption is associated with the item subject to the tax, and therefore remains fully in force regardless of the change of taxable person (which only takes place when the security provided is a mortgage and is simultaneous with the loan, in other words, when it involves a deed for a loan secured with a mortgage).
- Exemption for novations of loans covenanted by mutual agreement between lender and debtor, according to Law 2/1994, where lender status lies with Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria: This exemption is also associated with the item subject to the tax, and therefore remains in force.
- Exemption for transactions for mortgages provided to housing cooperatives: This exemption is associated with the taxable person, and therefore has ceased to apply when the taxable person becomes the financial institution providing the loan. This exemption ceased to be valid on June 16, 2019.