Anti-Fraud measures draft bill transposing (EU) Council Directive 2016/1164 of 12 July laying down rules against tax avoidance practices that directly affect the functioning of the internal market, and Council Directive 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union and amendment of various tax rules.
On 23 October 2018, the Spanish Treasury opened public hearing proceedings on the draft bill, the main aims of which are to strengthen antifraud controls and transpose previous European Union Directives.
The following highlights the main tax changes that would take place, if any, after the corresponding enactment.
1.1 Personal Income Tax
- Unit linked life insurance in which the policyholder assumes the investment risk: a purely technical adaptation is introduced to update the applicable rules.
- Acquisition of property through agreements or agreements as to succession: the value and date of acquisition that the testator had on the property are maintained, provided that the property is transferred before the latter’s death (i.e. in these cases neither the value nor the date of acquisition of the acquired asset is updated).
- Homogenizing investments in listed investment funds and companies (“ETFs”):
- From January 1, 2020, it will no longer be possible to apply the deferral regime to transfers of ETFs listed on foreign stock exchanges. A transitional regime is foreseen for transfers acquired prior to that date.
- Exemption from the obligation to withhold or deposit on account income from repurchase or transfer of holdings or shares in IICs registered abroad.
- Adaptation of the International Tax Transparency regime under the same terms as explained in Corporation Tax. ¬†
1.2 Inheritance and Gift Tax
- The tax base no longer refers to the concept of “real value”, but to the “market value” of the property or right that is transferred or acquired, understood as “the most likely price for which a property free of charges could be sold, between independent parties”.
- For real estate, a new form of valuation is established with reference to a new value that will be published on the Land Registry website.
- This valuation will also apply to Inheritance and Gift Tax, Wealth Tax and Tax and Property Conveyances and Documented Legal Acts.
- A transitional regime is foreseen until the publication of these reference values, through the preparation of an annual report on the real estate market that will serve to establish different value modules for each municipality. ¬†¬†
1.3 Wealth Tax
- Unit linked life insurance. Insurance for which the policyholder does not have the power to exercise full surrender rights will be calculated by the value of the policy reserves at the time tax is accrued, on the taxable base of the policy holder, or the holder of the economic rights, in the event that the latter is not the policy holder.
- Temporary or life annuities from life insurance will be valued at their surrender value and, failing this, at the value of the policy reserves.
- The previous section applies to real estate. ¬†¬†
1.4 Tax on Property Conveyances and Documented Legal Acts
- As in the case of Inheritance and Gift Tax, a new form of general calculation of the taxable amount is introduced with reference to the market value instead of the actual value. For real estate, a new form of valuation is added, as already mentioned.
- In value verification procedures, the concept of “value” is replaced by that of real value, in order to adapt to the jurisprudence of the Supreme Court on valuation by referring to land registry values
- Application of the Tax on Transfer of Assets arrangement to private purchases of gold and jewelry items by retailers. ¬† ¬†
1.5 Value Added Tax
- Subsidiary liability for payment of VAT is extended to all persons or entities acting in the name and on behalf of the importer (now limited to customs agents).
- Liabilities with respect to import VAT will extend to tax debts arising from declaration procedures or verification of data from customs declarations.
- Owners’ customs bonded warehouses will be vicariously liable for the payment of excise duties corresponding to the removal or abandonment of goods from these warehouses. ¬† ¬†
1.6 Corporation Tax
- The so-called “Exit Tax” (income integration tax mechanism in the event of transferring assets abroad) is amended in the event of transfer from Spain to an EU or EEA Member State. Specifically, the deferral option is eliminated and replaced by a 5-year payment of the debt.
- There are changes to the International Tax Transparency regime, namely including of income obtained by permanent establishments abroad, eliminating exemption from assignment of dividends and capital gains from significant shareholdings and adding new cases of income subject to tax integration.
- Exemption from the withholding or payment on account obligation on income from redemption and transfers of holdings or shares in certain IICs.¬†¬†
1.7 Non-Resident Income Tax
- The so-called “Exit Tax” is amended for permanent establishments: taxation for ceasing trading or transferring assets abroad. Possibility of splitting the payment of the tax over 5 years if the transfer is within the European Union.
- Regulation of mutual agreement procedures and resolution of tax disputes in the European Union.
- The definition of a tax haven is broadened and the possibility of entering and exiting the concept of tax haven is made more flexible according to different criteria. ¬†¬†
1.8 General Tax Law
- Charges for unprompted late tax returns:
- will be 1%, rising another 1% for each full month of delay. Once 12 months have elapsed, 15%.
- are excluded for those who regularize amounts for the same item from other tax periods within three months after receipt of tax settlement for non-appealable, equal and unsanctioned conduct.
- In publishing the list of tax debtors, those jointly and severally liable will be included and the debt threshold to be included on the list is lowered to 600,000 euros (previously 1 million euros). ‚ÄĘ
- In the Tax Inspections, the extended report for notices of disagreement is will no longer be mandatory and the sanctioning percentage reduction are increased in the event of signing the notice of agreement (from 50% to 65%) and for prompt payment for all types of notices (from 25% to 40%).
- The time limit for initiating the sanctioning procedure is increased from three to six months.
- New reporting obligations are provided for in Form 720 for virtual currency (cryptocurrencies) and certain service providers trading with this currency. ¬†¬†
1.9 Other Changes
- The penalty system for excise duties is amended, and new infringements are provided for the existence of negative differences in products manufactured and others for non-compliance with the requirements necessary to apply an exemption or reduced tax rate.
- Dual-use software is prohibited, establishing the obligation to guarantee the integrity, conservation, traceability and inviolability of computer systems
- So-called “tax amnesties” are prohibited.
- Cash payments are restricted: 1,000 euros in the case of an entrepreneur or professional (before 2,500) and 10,000 euros in the case of nonresident individuals who are not acting as entrepreneurs or professionals (before 15,000 euros). However, the limit of 2,500 euros is maintained for payments made by individuals not acting as entrepreneurs or professionals. Additionally, in the sanctioning procedure for these conducts, a new reduction of 50% is included in the sanction for voluntary payment without allegations or appeals and specific procedural rules are regulated.
- The land register regulations are amended, new forms of registering securities are foreseen by means of communication and the effectiveness of procedures to correct discrepancies is brought forward to the documentary evidence thereof, instead of being effective from the agreement of the State Administration.