Brussels investigates the Spanish law regarding the Statement of Assets abroad

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The Directorate General for Taxation and Customs sent a letter to the Spanish government last month informing  that the European Commission had opened an infringement procedure against Spain regarding the famous Form 720, a form designed to register the Statement of Assets abroad to avoid fraud. This form, created by the Spanish Inland Revenue service, requires taxpayers to report the assets they have in other countries. In the same letter the Commission grants Spain two months for claims.

The obligation to declare assets abroad came in 2012 after the government approved a rule which forced taxpayers to inform the tax authorities about the properties, accounts and investments abroad worth more than 50,000 euros. This obligation was issued at the same time as a tax amnesty, in a “carrot and stick” style: the government opened the window of the tax amnesty but hardened the situation for those who did not comply with it.

Taxpayers had to file Form 720 with this information before the 30th of April 2013. And ever since, if their assets abroad vary this must be communicated before 30 March each year.

However, the Tax Office contemplates sanctions of up to 150% on the undeclared amount and fines of up to 10,000 euros per item omitted. Also, in Form 720, obligations don`t prescribe ever; ie for assets abroad the normal expiration time of four years for tax matters does not apply.

For both these issues, immediately in 2013 a consulting office placed a complaint to the European Commission,  claiming the penalties contemplated in Form 720 are disproportionate, and that the unprescriptability is not allowed in European Community law.

Brussels is now following up on this complaint and has issued an infringement procedure against Spain.

 

 

 

 

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Bruselas investiga la declaración de bienes en el extranjero

Considera que las sanciones son desproporcionadas. Concede dos meses para alegaciones

La Comisión Europea ha abierto un procedimiento de infracción contra España por la declaración de bienes en el extranjero, el conocido Formo 720, por el que la Agencia Tributaria obliga a los contribuyentes a informar sobre el patrimonio que tengan en otros países. La Dirección General de Fiscalidad y Unión Aduanera de la Comisión Europea envió una carta al Ejecutivo español con fecha del pasado 19 de noviembre para informar de que “incoaba expediente”. La Comisión, señala la misiva, concede dos meses a España para alegaciones.

El inicio del proceso se produce tras la denuncia que presentó en 2013 el despacho DMS Consulting, de Palma de Mallorca, contra el Formo 720 por la desproporción del régimen sancionador. La norma que regula la declaración de bienes en el extranjero establecía una sanción de 10.000 euros por cada dato omitido y multas de hasta el 150% de las cantidades no declaradas.

Desde el Ministerio de Hacienda explican que estudiarán con detalle la carta de Bruselas y analizarán con detalle el asunto. Además, destaca que los objetivos de prevención del fraude de este Formo 720 son conforme a derecho comunitario. Y recalcan que este Formo es una de las medidas más ambiciosas de la lucha contra el fraude.

Alejandro del Campo, abogado del despacho DSM y el primero en denunciar la norma ante Bruselas, explica que otro de los puntos que investiga Bruselas es si es legal “la imputación como ganancias de patrimonio no justificadas los activos no declarados en plazo, sin posibilidad de alegar prescripción”. Hacienda considera que los bienes no declarados a tiempo son imprescriptibles, es decir que no se les aplicará la caducidad habitual de cuatro años para los asuntos tributarios. Precisamente la imprescriptibilidad y lo elevado de las sanciones son las cuestiones que investiga Bruselas.

La obligación de declarar el patrimonio en el exterior surgió en 2012 tras aprobar el Gobierno una norma por la que obligaba a los contribuyentes a informar al fisco sobre las propiedades, cuentas corrientes, inversiones y valores en el extranjero de más de 50.000 euros. Lo hizo en medio de la polvareda provocada por la amnistía fiscal en una decisión política que algunos expertos calificaron como el palo y la zanahoria: Abría la ventana de la amnistia pero endurecía la situación para los que no se acogieran a la misma.

 

Los contribuyentes tenían que presentar el Formo 720 con esta información antes del día 30 de abril de 2013. Y desde entonces si su patrimonio en el exterior sufre variaciones tienen que comunicarlo antes del 30 de marzo de cada año. En caso contrario Hacienda contempla unas sanciones de hasta el 150% de la cantidad no declarada. Multas de 10.000 euros por cada dato omitido. Y consideraba que los bienes correspondían al último año no prescrito por lo que también tendrían que pagar el impuesto correspondiente (IRPF o Sociedades). Ahora Bruselas investiga si algunos puntos de la norma que lo regula son legales.

 

 

@beanavarro: Bruselas expediente a España x su norma estrella contra fraude fiscal,el #Formo720 xa declarar bienes en extranjerohttps://t.co/TMfnMmU75u

Five Spanish Non-Resident Taxes

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If you own a property in Spain you should know that there are some taxes that apply, even if you are a non-resident.

Income Tax
All non-resident owners of a Spanish property have to pay an annual tax to account for their “share” of the property. Even though it is called an “income tax”, it is not actually based on your level of income, but on a “deemed” or “notional” income, which is a percentage of the rateable value of the property multiplied by the non-resident tax rate of 24.75%.
This tax is based on the calendar year and it is always due within 12 months of the end of the tax year. So, for the 2014 tax year, tax needs to be paid before 31st December 2015.

Property or IBI Tax
Property Tax in Spain is referred to as IBI and, like the United Kingdom, this tax will be levied by your local council in Spain. The council will assign a rateable value to your property and then, your rates or property tax will be a percentage of this amount. The percentage will depend on your council, but in most cases it will be somewhere between 0.5% and 1%. So, if you had a rateable value of €50,000 and your local percentage was 0.75%, then, your annual rates bill would be €375.
This tax is also based on a calendar year,and will normally be payable between June and September each year; again, this will depend on your local council.

Rental Income Tax
Up until the end of 2009, Rental Income Tax was 24% of the gross income you received on any rentals. So, if you generated €1000 by renting out your property, then, you would have to pay €240 in tax. You could not offset any expenses – i.e. cleaning, utilities, insurance, mortgage interest, marketing, management fees etc.
However, since January 2010, the rules have changed, which means that you can now offset expenditure when calculating what income, or effectively profit, will be subject to tax of 24.75%.
In theory, rental income tax returns need to be submitted each quarter, to account for income received in the preceding 3 months.

Capital Gains Tax
When non-resident owners sell aproperty, they make a capital gain or a loss upon the sale, which is the difference between what they paid for the property and the proceeds of the sale. The buyer of the property should always withhold 3% of the sales value and pay this to the Spanish tax office, as an “advance” of the buyer’s potential capital gains tax. It is then up to the buyer to calculate their gain or loss, and, if a gain has been made,it will be subject to 21% tax. The buyer should pay the 3% within 1 month of the sale date, and the seller then has an additional month to submit their calculation of a gain or loss and the corresponding tax returns.
Inheritance Tax
Inheritance Tax for non-residents is a tax on the beneficiaries and not on the deceased, as it is in the United Kingdom. The tax rates themselves can vary depending on the relationship of the beneficiaries to the deceased, the amount that is being gifted, their age, and even their wealth in Spain. In the very worst situationtax rates can reach levels of 81%!
The other major issue for Britishcitizens is that transfers between husband and wife in Spain are not tax exempt as they are in the United Kingdom. So, if a spouse were to die, then the surviving spouse, in most cases, will need to pay inheritance tax (as well as probate), in order to take on the additional 50% share of the property.
It will normally take about6 months to deal with the probate issues in Spain and pay any outstanding inheritance tax, before the property deeds can be altered.
No Inheritance Tax is payable if the property is owned by a British company, since even if a shareholder dies, the company can continue in existence and the shares passed on to a beneficiary under British rules. Please be advised that this requires SPECIALIST advice.

Duties of a Company Director of a Spanish Limited Company (Sociedad Limitada – SL)

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The Sociedad Limitada (SL), the Spanish name for Limited Liability Company  (LLC), is the most common form of company in Spain and is similar to a limited company in other countries.  Like any form of company, a Sociedad Limitada (SL) is aimed at performing all sorts of commercial activities subject to commercial law. It is composed of a limited number of partners, it requires a minimum of capital, and the liability of the owners is also limited.

To incorporate a Sociedad Limitada in Spain the appointment of a company director is required.  It can either be a Sole Director, Joint Directors, Joint and Several Directors, or a Board of Directors composed by a minimum of three members.

This article provides an overview of the implications and duties of a company Director of a Sociedad Limitada.
Duties of a company director

 

A company director manages and runs the day-to-day decisions of the company and has full authority to represent the company in all activities related to the company’s corporate purpose.  This authority cannot be limited as regards to third parties.

 

In the case of the joint directors, each director can act independently and represent the company. However, in the case of joint and several directors, all members must agree on all acts or contracts entered into by the company.
The first director’s duty is to comply with tax and social security issues. Below are the instances in which a Director must register as an “autónomo” (freelancer), a legal figure in Spain, as regulated in the Additional Provision 27th of the General Law of the Spanish Social Security RDL 1/1994 of June 20th(Disposición Adicional 27ª de la Ley General de la Seguridad Social (RDL 1/1994 de 20 de junio):

  • Directors with effective control of the company must register as an autónomo (freelancer) in Spain;
  • If the director has been assigned a wage;
  • Whenever the director has actual control of the company (at least half the capital);or when the director happens to be the ultimate beneficiary.
  • When he has a stake equal to or greater than a third of the capital;
  • When the director exercises functions of management and has a percentage of at least 25% of shares in the Company.

The role and responsibilities of the directors are usually regulated in the statutes of the company, or through a Shareholders’ Agreement, which will delimit their role and how to perform their obligations. However, the Spanish Corporations Act regulates a number of basic obligations that the directors must comply with as representatives of a company:

  • Perform their duties diligently and loyally to defend the interests of the company.
  • Must not use the name of the company to conduct business of their own, or take advantage of their position to make business operations for personal gain.
  • Have the obligation to inform the other partners of any conflict of interests with the company, especially those involving competition.
  • Must keep secret any confidential company information, even after their removal or resignation, and should never share any information that may entail negative consequences for the interests of the company.

If they fail to fulfil these obligationsthey may have to respond with their own assets for the damaged caused.
Directors are also responsible for the following duties:

  • Lodge the incorporation deed at the Mercantile Register;
  • Update the shareholders’ book;
  • Call general meetings;
  • Represent the company;
  • Prepare and disclose the annual accounts and the directors’ report;
  • Call a general meeting to dissolve the company, if it is to be dissolved;
  • Challenge resolutions of the general meeting when they are contrary to the objects of the company; and
  • Keep the minutes book

 
Third party liability

The Spanish Corporations Act states that a corporation may have a cause for dissolution when “it causes losses that reduce the company`s worth to less than half its initial capital.” To avoid this situation the company must raise its capital or reduce it to a sufficient extent, as long as it is not appropriate to request the filing for bankruptcy.
If the company is clearly in the event of dissolution the director is required to call a general meeting within 2 months to adopt the agreements to, either approve the dissolution of the company, increase capital, or agree on a capital reduction. If the director fails to comply with this obligation he or she may be liable for all amounts owed to any creditor acquiring the company after its dissolution.

Conclusion

Being a company director is a serious commitment. Directors represent the company and manage its daily activities, and in principle, are not liable for the acts or debts of the company, provided they act diligently and in accordance with the law. It is, therefore, imperative that directors know the limits of their duties in accordance with the law, statutes or, where appropriate, derivatives of a Partnership Agreement.

 

 

 

EU new Inheritance regulations affecting EU residents in Spain

The Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession is applicable from 17th August 2015.

According to the new regulation, EU citizens residing in Spain will be subject to the Spanish succession law despite their nationality, unless they have a written will.

Succession laws in Spain abide by the force heirship provisions and it is fundamental for international residents in Spain to have their will in good order, in addition to the one in their countries.

Konsilia has been serving the international expatriate community in Spain since 1982 and we are very happy to draft your will or advice on any other legal or tax issues related to Spanish residence. Please contact Jose Manuel Diaz at josemanuel@konsilia.es

Spain – Regional Administrative Tax Court Acknowledges the Application of EU Law over Previous Discriminatory National Law

The Madrid Regional Administrative Tax Court (known as “TEAR”) in a decision dated 29 November 2011 (notified on 27 December 2011) acknowledges the application of EU Law over previous discriminatory National Law on the treatment of EU resident pension schemes (in this particular case, a UK pension fund). In this regard, the TEAR specifically refers to the Spanish National High Court of Justice (“Audiencia Nacional”) which delivered a judgment regarding withholding taxes levied on three Dutch pension schemes in Spain.

The TEAR states that the tax treatment suffered by the non resident UK pension fund in Spain during FY 2004 was discriminatory under EU Law compared to a resident Spanish pension fund. The TEAR stressed that the Spanish tax law was discriminatory on the grounds of nationality as well as violating one of the four main principles of EU Law, namely the free movement of capital (Art. 63 TFEU). In addition, the TEAR reiterates that since 1 January 2010, the Spanish domestic legislation was amended as a result of said discrimination in order to be compliant with EU principles. Continue Reading

Code of Conduct Accepts Jersey’s ‘Zero-Ten’ Tax Regime Amendments

In June 2008 the States of Jersey introduced changes to Jersey’s system of corporate taxation in the form of its ‘Zero-Ten’ tax regime.

The new regime was formulated to comply with the EU Code of Conduct on Business Taxation, while retaining Jersey’s competitive position as a leading international finance centre. The standard rate of corporate income tax was fixed at 0%, with most financial service companies taxed at a rate of 10%. Continue Reading

Questions regarding the prevalent Tax Law of the European Union

Once again the Campus of Jerez was the centre point for a development framework of a special forum which involved tax advisors, students, university professors and personnel from the Tax Office.  On this occasion, a new conference took place on questions of the prevalent taxation within the European Union which the University of Cadiz imparts within its Tax Advisory Master in conjunction with the Financial and Tax Law given at this University.

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European Commission vs Spain.- Transfer Tax on real estate companies

The European Commission has been very active during the last years regarding Spanish Tax position when a non resident element is involved. Our posting today deals with a matter involving transfer tax and stamp duty in the context of M&A.

During the last decades, individuals acquiring Spanish property owned by a Spanish Company (SL)  have been forced to create a double company structure to own the shares of the Spanish company.

In many cases the two shareholders were based offshore and increased substantially the costs of owning property in Spain. The reason was that this acquisition will save the application of a real estate transfer tax which was extended to the disposal of shares.

Spain has been applying for many years a transfer tax charge of 6-7% for the disposal of shares of companies owning real estate assets in Spain. Interestingly enough, the application of this tax was not included in the Transfer Tax Act but in Law 24/1988 on the securities market.

Article 108 of Spain’s Law 24/1988 on the securities market establishes that a 6-7 percent transfer tax  (7 percent in most autonomous regions) applies to the transfer of securities of a company whose real estate assets in Spain represent more than 50 percent of its total assets, or whose assets include securities in another entity whose real estate assets in Spain represent at least 50 percent of its total assets, if the acquirer gains control of the real estate entity as a result of the transfer.

The European Commission has asked Spain to modify its transfer tax provisions relating to the acquisition of securities in real estate companies, arguing that the provisions are not consistent with article 5 of Council Directive 2008/7/EC concerning indirect taxes on the raising of capital.
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