Archive for January, 2009

TAX INVESTIGATION PRIORITIES.- SPAIN 2009

Friday, January 30th, 2009

The Spanish Tax Office, AEAT, has published last week the 2009 Tax Investigation Priorities.

The plan can be downloaded here, and these are some of the main areas of focus for international investors:

  • Corporation Tax review.- A special emphasis is going to be placed on companies with high turnover and low profits, where taxable profit may have been reduced artificially.
  • International holding companies.- To review existing international corporate structures holding Spanish assets with a deemed “artificial arrangement”
  • Transfer Pricing.- To enforce new transfer pricing rules and statutory provisions with special focus on invoices from Spain to countries with a lower taxation system.
  • Property Holding companies (Sociedades Patrimoniales).- To review Companies that have benefited from the former special regimen for Sociedades Patrimoniales where capital gains were taxed at 15%.
  • Non Residents.- Special focus on non residents owning property in Spain and transfers of said properties, including working with regional tax offices regarding Wealth Tax up to 31/12/08.
  • Tax Identification Numbers.- There is going to be an increased activity in line with statutory obligations for international companies to be identified with a Spanish tax identification number
  • VAT and Indirect Taxes.- Continues been a classic and renovated focus is going this year where the new regimen of monthly VAT refund has been established.

Please find below an extract in Spanish of the main statutory provisions.

  • Control del sector inmobiliario. Durante el año 2009 aprovechando las novedades tecnológicas desarrolladas por la Dirección General del Catastro que permiten la determinación más exacta de los precios de mercado de los inmuebles objeto de transmisión, se desarrollarán programas de control de las transmisiones patrimoniales de inmuebles, especialmente de viviendas, al objeto de verificar que se adaptan al concepto de precio de mercado que se fija en el Impuesto sobre la Renta de las Personas Físicas y en el Impuesto sobre Sociedades. Se proseguirá con el control de las sociedades que, dedicándose a la actividad de promoción inmobiliaria, han declarado improcedentemente como sociedades patrimoniales al objeto de aprovechar la menor tributación de las plusvalías de estas entidades, no reuniendo los requisitos para ello, así como se realizarán actuaciones especiales de control en materia de subcontratación y operaciones inmobiliarias de adquisición, tenencia y transmisión de inmuebles por no residentes. Como novedad, se realizarán actuaciones de control sobre promotores y constructores a los que se les han efectuado imputaciones por declarantes del IRPF en concepto de pagos para adquisición de vivienda de nueva construcción que no se corresponde con los importes declarados en el Impuesto sobre Sociedades o en el Impuesto sobre el Valor Añadido, actuaciones que se completarán con el control de posibles declarantes indebidos de estas cantidades en el IRPF. También, en materia de control del sector inmobiliario, se mantendrá la práctica de importantes actuaciones de captación de información masiva y normalizada cuyo uso pueda resultar relevante a los efectos de detección de posibles bolsas de fraude tributario, especialmente en lo que se refiere a los desarrollos urbanísticos.
  • Investigación de operaciones de ingeniería fiscal y de interposición de sociedades sin nivel relevante de actividad económica. Las actuaciones se dirigirán a la detección de formas de fraude basadas en la utilización de figuras negociales anómalas o en el uso improcedente de determinados beneficios fiscales que suponen el desarrollo de estructuras de planificación tributaria abusivas. Entre las distintas operaciones de fraude complejo y que una vez identificadas serán objeto de comprobación, figuran las siguientes: disolución de sociedades transparentes y, en su caso, de sociedades patrimoniales, operaciones de fusión, escisión, aportaciones y canje de activos acogidas al régimen especial del Capítulo VIII del Texto Refundido de la Ley del Impuesto sobre Sociedades, aprobado por Real Decreto Legislativo 4/2004 , de 5 de marzo, o reducciones de capital con adquisición previa de acciones. Igualmente, se realizarán actuaciones de control sobre la deducibilidad de gastos financieros, provisiones de cartera y deducciones fiscales que pongan de manifiesto un vaciamiento de los resultados contables o bases imponibles de los obligados tributarios.
  • Se pondrá un especial acento en el control de aquellos sujetos que habiendo declarado un resultado contable relevante, mediante la realización de ajustes al resultado contable o a la base imponible o deducciones en la cuota del tributo, hayan procedido a presentar autoliquidaciones en el Impuesto sobre Sociedades con resultado muy reducido. Se potenciará el control de la procedencia de los beneficios fiscales aplicados por los contribuyentes, especialmente en lo referente a la deducción por reinversión de beneficios extraordinarios, además de los supuestos señalados en la letra e) anterior.
  • Se van a potenciar las actuaciones de control en materia de Fiscalidad Internacional. Especialmente relevante será el control de las operaciones en las que han existido precios de transferencia que en ocasiones suponen simplemente transferencias de rentas que debían tributar en territorio español hacia otros territorios de menor tributación mediante la mera realización de operaciones entre sociedades de un mismo grupo empresarial o vinculadas. Igualmente resultará relevante en este ámbito el control de las transacciones con paraísos fiscales, manteniéndose los controles en materia de fiscalidad inmobiliaria de no residentes en línea con lo establecido en el apartado d) anterior, el control de operaciones con contribuyentes deslocalizados y la aplicación de las normas anti-abuso de la legislación española. Finalmente, en desarrollo de las previsiones de actualización del Plan de Prevención del Fraude, se fomentará la participación de los órganos de inspección de la Agencia Tributaria en la realización de controles multilaterales junto con los órganos de inspección de otros países de la Unión Europea, realizando de esta forma actuaciones de comprobación coordinadas entre todos ellos para lograr una mayor eficacia en la lucha contra el fraude que se aprovecha de la existencia de jurisdicciones fiscales distintas, especialmente en materia de fraude en el IVA y en operaciones vinculadas.

PAUL KRUGMAN, A NOBEL ON SPANISH ECONOMY

Saturday, January 24th, 2009

Dr Paul Krugman, Nobel Prize for Economics 2008, published The Pain in Spain in The New York Times.

The article, in his regular column The Conscience of a Liberal, is dated Monday January 19th 2009, one day before President Barack Hussein Obama took his Oath of Office.

What did inspire Dr Krugman to write about Spanish pains in a NY paper on such relevant day for America?

Let me say upfront that I admire Dr Krugman’s economic theory and his ability to communicate in plain English with a broader audience.

Having said that, I would have appreciated that before making an economic analysis on a complex situation like the EU monetary policy and Spain, and before having entered into an international comparative analysis with the US Federal system and Florida; Dr Krugman had selected better the forum, the length and the timing needed to give an accurate picture to US readers.

In order to elucidate properly the issue of Spain’s current economy, Dr Krugman may have needed several pages, and not just a short column in The NY Times.

For me the question is, what does make someone of Dr Krugman’s intellectual caliber to sacrifice academic precision for the sake of mass communications? A sign of our times?

In his defense, I must say that at least Dr Paul Krugman took the time to spice his article by comparing Florida to Spain and the US Federal system to the EU, making a more interesting reading for a broader audience.

I leave our readers to assess the comparison and the arguments used and would appreciate any comments on this topic.

IP ESCROW AND INTERNATIONAL TAX PLANNING

Saturday, January 24th, 2009

Branded By Blog posted Software Database and Website escrow- do businesses really need it?.

In the article, UK solicitor Izaz Ali outlines the importance of using escrow as a protection for electronic IP as well as a sound business development tool.

Izaz mentioned in his article that ¨Escrow comes in to play when two parties hand over something valuable (money, contracts, software etc) to a trusted third party (who acts as the agent) to release the valuable item when certain conditions are met¨

From an international tax perspective, placing IP on escrow under certain circumstances, and in an appropriated jurisdiction may provide an advantageous tax planning tool for transactions involving software or electronic IP.

Using escrow for tax planning purposes involves careful tax planning and legal drafting of the arrangements between the parties and the escrow agent.

Any tax strategy must consider tax residence issues for the parties, escrow jurisdiction, contractual drafting and the appropriate timing for execution and completion.

GUERNSEY AND THE UNITED KINGDOM-DOUBLE TAX TREATY SIGNED

Thursday, January 22nd, 2009

As reported by the OECD the Bailiwick of Guernsey and the United Kingdom have today signed a bilateral agreement for exchange of information for tax purposes bringing to 10 the number of such agreements entered into by Guernsey, including:

This particular agreement is especially significant given the close economic and political relations between Guernsey and the United Kingdom.

Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration welcomed the new agreement as an important development. Given the current financial crisis, he noted, “it is now more important than ever that countries implement international standards of transparency and exchange of information.”

“Guernsey has signed nine tax information agreements with other countries within the past year, making its commitment to international standards in these areas clear and strengthening its reputation as a legitimate financial centre,” Mr. Owens said. “Guernsey has shown that the standards can be implemented quickly where there is a real willingness to do so.”

A bit of history to understand the relationship between Guernsey and the United Kingdom.

The Bailiwick of Guernsey is a British crown dependency off the coast of France. As well as the island of Guernsey itself, it also includes Alderney, Sark, Herm, Jethou, Brecqhou, Burhou and other islets. There are 10 Parishes in Guernsey. Together with the Bailiwick of Jersey, it is included in the collective grouping known as the Channel Islands. It is known in French as Guernesey.

According to the official States of Guernsey webpage, everything began in 933 AD when the Channel Islands became part of the Norman Realm. In 1066, the Duke of Normandy landed his army in Sussex and became William I of England. The Channel Islands, however, remained part of the Duchy of Normandy and continued to be governed as such.

When Continental Normandy was lost in 1204 the Channel Islands remained loyal to the King of England as the King promised to rule the islands as though he was the Duke of Normandy (i.e. observing the Duchy’s laws, customs and liberties). The special tax exemption regime in respect of the Kingdom of England was maintained since those times.

This arrangement has been confirmed in charters of successive sovereigns that have secured for the islands their own judiciaries and freedom from the process of the English Courts. Indeed the Islands are independent in all matters with the exception of international representation and defence for which the United Kingdom is responsible.

My experience of the States of Guernsey fiduciary and Trust system as well as the financial and business environment in general has been very positive. I also recommend Guernsey as a fabulous place to visit.

HOW MANY BEANS MAKE FIVE? DETERMINING THE ADVISORY CAPACITY

Monday, January 12th, 2009

How to select these days a savvy business proposition?

When asked about it, Tony, a successful English investor told me “you must know how many beans make five”.

The old British expression “he knows how many beans make five” indicates a clever fellow, or someone who is able to resolve problems with common sense – also referred to as the less common of the senses.

The expression may date back to the abacus, an accounting tool with wooden beads (beans) used for computations.

Back to the question, the importance of knowing how many beans make five can not be underestimated in today’s world.

Despite the many solutions offered by GBEC.- “Googling“, “Blogging” “Emailing” or “Chatting”, our common sense and human brains are still essential. This is particularly true in the 21st Century Accounting, Tax and Legal advisory world.

Thinking about this, I came up with a 5 letters acronym – LADOO – which also resembles the name of a nice Indian sweet. This may well act as a representation of the 5 beans to be counted by the modern tax adviser.

  1. Listening to what the client really wants.- Tax planning propositions must not tax clients’ life.
  2. Analyzing all the facts.- Consider all past, present and future projections
  3. Determining all applicable Legislation.- Refer to Civil & Commercial / Domestic & International
  4. Optimizing the economy of the options.- Balancing results vs costs
  5. Organizing a clear proposal.- Including SMART actions in Plain English

Therefore, in the course of your practice, if a client asks you how many beans make five, please come up with something better than just responding: One, One and a half, Half and Two.

Thank You Tony!

BANK OF ENGLAND 1.5% INTEREST RATE-LOWEST IN 315 YEARS HISTORY

Friday, January 9th, 2009

The Bank of England cut interest by 0.5 percent, reducing Base Rate to 1.50 percent – the lowest in its 315 year history, reports HSBC

In its statement, the BoE expressed concern over the increasing pace of contraction in activity and the sharp drop in output. “The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending …,” they said – suggesting that the Bank may have to use alternative tools to fight the lending drought. We expect further cuts in the months to come.

The statement also highlighted sterling’s depreciation and pointed out that recent falls in the pound may help exporters to limit the impact of the global slowdown. Indeed sterling has fallen dramatically, losing 24% of its value in the last 12 months. After the announcement the pound rallied touching a high of $1.5372 and closing above $1.5100 versus the dollar.

German industrial orders for November dropped by 6 percent m-o-m, while the expected decline was just 1.1 percent. The y-o-y rate (minus 24 percent) registers a new record low the second time in a row.

Today’s data kicks off with the UK Industrial Production (Nov) and PPI (Dec) at 9.30 GMT. Eurozone numbers for retail sales will be out at 10.00, followed by German industrial production at 11.00GMT. However, most focus today will be on US non-farm payrolls at 13.30 GMT, where many are expecting a downside surprise, despite yesterday’s lower than expected jobless claims for the week ending 3 January (falling to 467k while the consensus was 545k).

TAX PAYERS AND BABY BOOM

Friday, January 9th, 2009

The Economist reports this week on Quebec’s efforts to improve its demographic prospects and how taxpayers contributed to it.

The cradle’s costly revenge explains how the use of cash incentives for new births coupled with some generous parental leave policies increased 8% the birth rate in 2006.

Baby boom is a big word, according to Céline Le Bourdais, a demographer at Montreal’s McGill University, and it may be more appropriate to speak of a little baby bump as the policies had very little effect after 2006.

These news will add to the debate of tax policies used as a tool to influence the Economy and many other areas of our lives !!!

STRATEGIES FOR A SMART 2009

Tuesday, January 6th, 2009

Happy New Year 2009 and May this year be a SMART year.

In konsilia.es/blog we look forward to continue our learning and be able to contribute to greater clarity in these interesting times.

How the World and the Economy will evolve in 2009 is difficult to assess even for the best Economists.

In The New York Times online edition an interesting article reads It’s called the Economist not the Futurist. In this article Stephanie Clifford says “…About 2008: sorry,” reads a note from the issue’s editor, Daniel Franklin, in the prediction edition for 2009. Who would have seen the financial crisis coming, Mr. Franklin asked? “Not us. The World in 2008 failed to predict any of this,” he said.

Learning from previous years the best thing we can do is to continue our focus on the opportunities ahead.

By wishing you a SMART 2009, I would like to bring your attention to SMART, a good criteria to enhance our Projects for this year.

The word SMART is applied to a person having or showing a quick-witted intelligence. Another meaning we all learn in our Project Management 101 is the criteria to set clear goals. As defined by Projectsmart “…The acronym SMART has a number of slightly different variations, which can be used to provide a more comprehensive definition for goal setting:

S – specific, significant, stretching

M – measurable, meaningful, motivational

A – agreed upon, attainable, achievable, acceptable, action-oriented

R – realistic, relevant, reasonable, rewarding, results-oriented

T – time-based, timely, tangible, trackable

With this in mind, may this year 2009 be a year of SMART Projects!!!

Today is the Three Kings festivity in Spain , a day for gifts and good wishes and I want to bring to your attention a couple of interesting articles for both investors and entrepreneurs to act upon:

The Harvard Business Review brings us the article Marketing your way through a recession, which gives some tips to ensure a successful 2009.

The Economist Ready for a Rally? bring some good perspectives for equity investors.

For all of us let’s have a great year and remember the importance of the SImple Bare Necessities

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International Tax Law Barrister, Lawyer, Abrogado & Attorney, Leon Fernando del Canto of Konsilia, offering services relating to international tax planning, tax advice, private clients, international law, serving Spain, United Kingdom, Europe.

Tax Precision is the trading name of León Fernando del Canto Gonzalez, a Barrister regulated by the General Council of the Bar in England and the Colegio de Abogados de Jerez de la Frontera.