LAW ON MEASURES TO PREVENT AND COMBAT TAX FRAUD (July 2021)

Law 11/2021 of 9 July (published in the Spanish Official Gazette on 10 July 2021)

We hereby inform you that the much-awaited Law on Measures to Prevent and Combat Tax Fraud, transposing Directive (UE) 2016/1164 of 12 July 2016, modifying several tax and gaming regulations, was published last 10 July in the Spanish Official Gazette, with effect from 11 July.

This Law introduces numerous measures and modifications, mainly in the field of taxation, which affect the main taxes, including the Corporate Income Tax, the Personal Income Tax, the Personal Income Tax for Non-Residents, the Value-Added Tax, the Inheritance and Gift Tax, the Property Transfer Tax, and the Wealth Tax, among others, as well as the General Tax Law.

In order to keep you duly informed of the modifications introduced, the most relevant ones are set out below, which have been distributed into the following categories:

REFERENCE VALUE

One of the most relevant developments with an impact on several taxes is the modification introduced in the Land Cadastre Act concerning the reference value, as part of the cadastral description of property, replacing the concept of «market reference value». However, this value does not affect current cadastral values.

The Cadastre shall be in charge of approving an annual report on the real estate market to serve as a basis to determine reference values, using value maps and average values. In principle, this method is intended to deliver values not exceeding the market value. The regulatory development for the implementation of these calculations is yet to be undertaken.

The taxpayer shall be informed of the value of their property via a notice published on the Cadastre Electronic Office by 30 October of the year prior to that in which the new value is to take effect, with a 10-day period to file allegations in the event of disagreement. However, allegations shall not suspend the procedure of publication of the new values on the Spanish Official Gazette during the 20 first days of December for public knowledge purposes, and their permanent availability on the Cadastre website thereafter.

The introduction of this new concept of the reference value of property located in the Spanish territory will have an impact on several taxes, since this value shall be taken as a basis to determine the Inheritance and Gift Tax and the Property Transfer and Stamp Duty Tax for real estate transactions, unless the value declared by the parties is above the reference value, in which case the higher value shall be used. If the reference value is not available or cannot be verified, the tax base will be the higher of the value declared by the interested parties and the market value.

The reference value may be challenged where the tax assessment is performed by the Administration, or if the taxpayer considers that the calculation of the said value was detrimental to their legitimate interests, by requesting a rectification of the relevant self-assessment.

Additionally, the reference value described above will also have an impact on the Wealth Tax, since a new «value determined by the Administration» is added to the currently applicable values (the higher of the cadastral value, the acquisition value and the value verified by the Administration), which points to the reference value. It is understood that this value will only affect acquired property where the reference value already existed at the time of accrual, or where the acquisition value was verified and replaced with the said value, which means that, in principle, it will not affect the value of previously acquired property.

EXIT TAX

The recently approved Law on Measures to Prevent and Combat Tax Fraud modifies the exit taxation regime (known as Exit Tax) for the Corporate Income Tax and the Personal Income Tax for Non-Residents, with effect from 1 January 2021, while maintaining unchanged the exit taxation regime for the Personal Income Tax (applicable to individuals residing in Spain for tax purposes).

Before addressing the analysis of the approved modification, it may be useful to take a quick look at the Exit Tax concept in respect of each of the aforesaid taxes.

 The concept of Exit Tax in the Personal Income Tax (Spanish IRPF)

In relation to the IRPF, the exit taxation regime applies to individuals who cease to reside in Spain and move to a different State, always provided that they had had residence in Spain for tax purposes for at least 10 out of the 15 tax years prior to the last tax year in which they are required to file an IRPF tax return. Upon the change of tax residence, the positive difference between the acquisition value and the market value of any corporate shares or equity they own is deemed to be a taxable capital gain, as long as the aggregate market value of such financial assets is above € 4,000,000, or € 1,000,000 if their ownership interests in such entities are above 25%.

In some scenarios, if certain requirements are met, this tax liability may be deferred or not imposed at all. The newly approved law does not modify the existing tax deferral regime.

 The concept of Exit Tax in the Corporate Income Tax (Spanish IS)

In relation to the IS, the Exit Tax applies to companies which relocate their residence for tax purposes out of Spain. Such companies must add to their taxable base the difference between the market value and the tax value of their assets, except where such assets remain allotted to a permanent establishment located within Spanish territory.

The concept of Exit Tax in the Personal Income Tax for Non-Residents (Spanish IRNR)

In relation to the IRNR, the exit taxation regime consists of the incorporation into the taxable base of the difference between the market value and the tax value of the following assets:

a.- those allotted to a permanent establishment in Spanish territory that ceases to operate;

b.- those that were previously allotted to a permanent establishment in Spanish territory and are now transferred abroad;

c.- those allotted to a permanent establishment in Spanish territory that transfers its business abroad.

Analysis of the approved legal change and its impact on the IS and the IRNR

Before the change introduced by the Law on Measures to Prevent and Combat Tax Fraud, where assets were transferred to an EU or EEA Member State, the taxpayer was allowed to defer the settlement of the Exit Tax (following the provision of guarantees, where appropriate, with late payment interest accruing) until such assets were transferred to a third party, which in practice would be tantamount to a tax deferral.

After the change introduced by the Law, this deferral regime is replaced by the possibility to pay the Exit Tax in five equal annual instalments (following the provision of guarantees, where appropriate, with late payment interest accruing). The first instalment is payable within the voluntary deadline for the tax return of the tax year in which the Exit Tax event occurs.

Instalment payment will no longer apply in the following cases, among others: if the involved assets are transferred to a third party or relocated to a third State (not a member of the EU or EEA); if the tax residence of the taxpayer is moved to a third State; if any of the instalments is defaulted.

Lastly, a cause of exemption from the Exit Tax is introduced, namely where the transferred asses are related to the financing or provision of guarantees, or to comply with prudential capital requirements or for liquidity management purposes, always provided that such assets are expected to return to Spanish territory to be allotted to a permanent establishment within a maximum period of one year.

INTERNATIONAL TAX TRANSPARENCY REGIME

The new developments introduced by the Law on Measures to Prevent and Combat Tax Fraud also include a modification of the international tax transparency regime, both for companies with tax residence in Spain, with effect from 1 January 2021, and for individuals with tax residence in Spain, with effect from 11 July 2021.

To put it briefly, this regime is intended to fight tax avoidance practices based on shell companies located in low-tax territories. For this purpose, company members with tax residence in Spain (holding at least 50% of the company’s share capital, shareholders’ equity, net profit or voting rights, either by themselves or together with related persons or parties) are allocated certain income not derived from the business activities of the company located in the low-tax territory (transparent subject), as if such income had been directly obtained by the said members.

In this context, the newly approved modification extends the scope of implementation of the said regime in a threefold way: by extending the number of entities in low-tax territories that qualify as “transparent subjects” for tax purposes; by including new income categories eligible for allocation; and by increasing the tax rate applicable to certain income categories. Conversely, the geographical scope of exclusion of the regime is extended.

Extending the number of entities in low-tax territories qualifying as “transparent subjects” for tax purposes

Until now, the international tax transparency regime only applied to income obtained in low-tax territories via entities with residence in such territories.

The newly approved law extends the regime so that it can also encompass income obtained via a permanent establishment located in a low-tax territory.

Including new income categories eligible for allocation

In general terms, income not derived from business activities falls within the scope of the international tax transparency regime.

Notwithstanding the foregoing, previous regulations further provided a detailed list of income categories subject to the said regime (including, among others, owned property not allotted to a business activity, owning shareholder’s equity in companies, and the transfer of own capital to a third party, unless such transfer is required by legal or regulatory provisions in connection with the performance of a business activity or is derived from the performance of a business activity, as well as the income obtained from the transfer of such assets).

The new legal reform extends the list of income categories that fall within the scope of the international tax transparency regime, thus including:

    • Income derived from insurance, credit, financial lease and other financial activities, unless such income is derived from the performance of a business activity.
    • Income derived from transactions on goods and services which are conducted with related persons or entities, where the non-resident entity or permanent establishment adds little or no economic value at all.

Increased tax rate on certain income categories

Under the previous regulations, income deriving from shareholders’ equity owned and income from the transfer of shares or ownership interests were excluded from the international tax transparency regime, always provided that the stock held in the non-resident entity represented at least 5% of its share capital and was maintained for a minimum period of one year, for steering and management purposes, with the appropriate material and personal resources available, and provided that the investee entity was not a pure asset holding company.

As a result of the approved modification, the above exclusion is suppressed, so that income derived from shareholders’ equity owned and income from the transfer of shares or ownership interests is now eligible for allocation, as long as the other requirements for the implementation of the international tax transparency regime are met.

Notwithstanding the foregoing, if the income referred to above is allocated to a company with tax residence in Spain, only 5% of such income shall be incorporated into the taxable base, provided that the requirements detailed in the first paragraph of this section are met.

 Extending the geographical scope of exclusion of the regime

In addition to the non-implementation of the international tax transparency regime to entities or permanent establishments located in the European Union, now its geographical scope of exclusion is extended to the European Economic Area, suppressing the requirement to prove that the incorporation and operation of such entity or permanent establishment has a valid economic purpose. After the modification, the only requirement left to prove is the actual performance of a business activity.

CORPORATE INCOME TAX

In relation to the Corporate Income Tax, the Law on Measures to Prevent and Combat Tax Fraud has introduced several modifications in its taxation regime, the most relevant of which are set out below:

Variable Capital Investment Companies (Spanish SICAV)

The Law introduces new eligibility requirements for the 1% Corporate Income Tax rate, in particular, the requirement that at least 100 shareholders must own stock for a net value of € 2,500 or above during three fourths of the tax period (€ 12,500 for SICAVs with segregated asset portfolios).

The Law provides for a transitional dissolution and liquidation regime offering several tax benefits. Among others, SICAV members will not be taxed in respect of income deriving from the dissolution and liquidation of the SICAV, always provided that all monies or goods assigned to them upon liquidation are reinvested, subject to certain requirements, in the acquisition or subscription of shares or ownership interests in other collective investment undertakings.

Real Estate Investment Trusts (Spanish SOCIMI)

A special tax rate of 15% is levied on non-distributed profits for the year, excluding income taxed at the general corporate income tax rate and income under the reinvestment period.

International Tax Transparency Regime

The income allocation regime is extended, new income categories are included for allocation purposes, and the tax rate applied to certain income categories is increased, as we explained in the previously sent circular on the International Tax Transparency Regime.

Exit Tax

Where assets are transferred to a Member State of the European Union or the European Economic Area, the taxation deferral regime is replaced by the possibility to settle the Exit Tax in five equal annual instalments, as we explained in the previously sent circular on the Exit Tax.

PERSONAL INCOME TAX

Among the modifications introduced in the Personal Income Tax (Spanish IRPF), there is one with special relevance in our Autonomous Community (Balearic Islands), namely the modification of the taxation regime applicable to inheritance contracts with effect upon execution, that was amended at the Senate before its final approval by the Congress.

Inheritance contracts with effect upon execution

Before the Law on Measures to Prevent and Combat Tax Fraud entered into force, goods transferred under an inheritance contract were not taxed in the donor’s personal income tax return, as they underwent the same tax treatment as lucrative transfers by reason of death. This allowed for an update of the acquisition value of such goods upon receipt by the beneficiary, who would subsequently transfer them at a similar value and thus pay no personal income tax on the gain.

Therefore, in order to prevent tax avoidance abuses, the applicable regulations have been modified so that, if the acquired asset is transferred within 5 years from the date of execution of the contract or before the death of the donor, whichever is earlier, the beneficiary must take on the same value and date of acquisition that were assigned to the asset while held by the donor/deceased person. This provision shall only apply to goods transferred after the effective date of the Law, i.e. from 11 July 2021 onwards.

Sixty percent reduction in the income obtained from property rented for residential use

The legal text is amended in order to clarify that the 60% reduction in the net income derived from property rented for residential use shall only apply where the taxpayer has reported such income in their Personal Income Tax self-assessment, before any data verification procedure, limited control or tax audit including a verification of such income has been initiated.

The reduction shall not apply either where the positive net income balance is derived from non-reported earnings or from expenses which have been unduly deducted in the self-assessment.

International Tax Transparency Regime

The income allocation regime is extended, new income categories are included for allocation purposes, and the tax rate applied to certain income categories is increased, as we explained in the previously section on the International Tax Transparency Regime.

Reporting obligations on cryptocurrencies or virtual currencies by service providers and depositaries

A new reporting obligation is introduced for Spain-based persons and entities providing services on behalf of third parties to safeguard private cryptographic keys and to keep, store and transfer virtual currencies, as well as permanent establishments and entities in Spanish territory providing services of exchange between virtual currencies and legal tender or between different virtual currencies, or who act as intermediaries in such transactions in any manner whatsoever, as well as those making initial offerings of new virtual currencies in exchange for other currencies in Spanish territory.

The reporting obligations cover the balances for each different virtual currency as well as the acquisition, transmission, swap, transfer, collection and payment in which the person or entity acts as an intermediary, including the duty to provide a list of the involved persons together with their respective addresses and tax identification numbers, the class and number of virtual currencies held, their price and the date of the transaction.

 Reporting obligations on cryptocurrencies or virtual currencies by the holder (tax form 720)

Reporting obligations on assets held abroad are extended to encompass virtual currencies or cryptocurrencies.

Penalties for non-fulfilment are the same as for any other failure to report. In this context, it should be noted that we are awaiting the ruling of the Court of Justice of the European Union (CJEU) in relation to the lack of proportionality of the penalties imposed and the imprescriptibility of unreported goods. According to the last updates, the CJEU Advocate General has already expressed the opinion that penalties are disproportionate and contrary to European Law, and we therefore expect the ruling to be against Spanish national regulations, which would consequently have to be amended.

PERSONAL INCOME TAX FOR NON-RESIDENTS

In relation to the Personal Income Tax for Non-Residents (Spanish IRNR), the main developments introduced by the Law on Measures to Prevent and Combat Tax Fraud are detailed below, with effect in tax periods starting from 1 January 2021.

Representatives

To date, non-residents subject to this tax were required to appoint a representative with residence in Spanish territory before the end of the tax filing period for their income obtained in Spain in the following cases:

    • if they operated via a permanent establishment.
    • if they obtained income from services provided, technical support, installation or assembly works associated with engineering contracts, and, in general, income from business activities conducted in Spain without using a permanent establishment.
    • if they were required to do so by the Tax Authorities based on the amount and special characteristics of the income received.
    • in the case of entities under the income allocation regime established abroad with presence in Spain.
    • in the case of persons or entities residing in countries or territories without an efficient exchange of tax information with Spain who owned goods located in Spain or held rights which were effective or exercised in Spanish territory (excluding securities traded in official secondary markets).

After the approval of the new Law, the obligation to appoint a representative is limited to those taxpayers who do not reside in another Member State of the European Union or the European Economic Area (in the latter case, always provided that there is a cooperation arrangement between their country of residence and Spain in terms of information exchange and tax collection).

Tax period for income obtained via a permanent establishment

A new closing event of the tax period is introduced for taxpayers operating via a permanent establishment, namely when the permanent establishment transfers its business abroad.

Exit Tax

Where assets are transferred to a Member State of the European Union or the European Economic Area, the taxation deferral regime is replaced by the possibility to settle the Exit Tax in five equal annual instalments, as we explained in the previously sent circular on the Exit Tax.

WEALTH TAX

En lo relativo al Impuesto sobre el Patrimonio (IP) las modificaciones aprobadas tendrán eficacia en la declaración a presentar del ejercicio 2021:

In relation to the Wealth Tax (Spanish IP), the Law on Measures to Prevent and Combat Tax Fraud introduces the following modifications with effect on the tax return to be filed for 2021:

Value of property (reference value)

As we previously stated, the introduction of the reference value will have an impact when determining the value of property located in Spain to be reported on the Wealth Tax return. However, this value will only apply to property acquired after the effective date of the Law (11 July 2021), and always provided that the relevant property has been assigned a reference value. Therefore, it will not affect property acquired before that date, as the reference value will only be included in Wealth Tax self-assessments for property that was transferred subject to the Property Transfer and Stamp Duty Tax or acquired subject to the Inheritance and Gift Tax where the reference value was already included in those tax returns.

Life insurance without right to surrender and fixed-period or lifetime annuities

Before the approval of the Law, life insurance policies without right to surrender were not subject to the Wealth Tax, since they were not considered part of the taxpayer’s assets due to their lack of an economic value, i.e. a surrender value. Following the legal change, where the life insurance policyholder is not entitled to surrender the total value of the policy, the value of the mathematical provision at the date of accrual shall be added to the policyholder’s total assets for wealth tax calculation purposes.

Therefore, the policyholder is now subject to the Wealth Tax for life insurance policies that cannot be surrendered where the beneficiary of such insurance is another person.

The valuation of fixed-period and lifetime annuities is adjusted according to the value described above if the same circumstances are given. However, this rule does not apply to temporary insurance where benefits are only provided in the event of death or disability.

Adaptation of the regulations to residents in a country outside the European Union

The right to opt for the specific regulatory system approved by the Autonomous Community where the highest value of the goods and rights on which the tax is levied is located (because such goods and rights are located, can be exercised or are to be fulfilled in Spanish territory) is now extended to residents in a country outside the European Union, while this option was formerly reserved to residents in a Member State of the European Union or the European Economic Area only.

INHERITANCE AND GIFT TAX

The developments introduced in this law, affect the following issues:

Taxable Base: Value of Property and Reference Value

In general, according to the Law on ISD, the value of property to be considered was the “actual value” of such property, but, given the existing litigation in relation to this concept, such term has been replaced by “value”, this latter being understood as the market value of the property.

An exception is made to the market value criterion in the case of real property, in which it is determined that value of the property must be equal to the reference value (as already explained in another circular sent in this respect) when the ISD becomes due.

In both cases, if the value reported by the interested parties is higher than these values, the reported value shall be included in the taxable base.

The reference value may be challenged where the tax assessment is performed by the Tax Administration, or in relation to a request for correction of the relevant self-assessment, in which case it shall be necessary first to fill the self-assessment with the reference value, paying or guaranteeing the payment of the tax liability and then, to request a correction of the relevant self-assessment because it is considered detrimental to the legitimate interests.

Where no reference value exists, or this value cannot be certified by the General Directorate for the Cadastre, the taxable amount must be the higher of:

    • The value reported by the interested parties and
    • The market value.

These values may be verified by the Tax Administration.

Accumulation of gifts as a result of inheritance contracts with effect upon execution

Law on ISD stipulates that the accumulation of gifts granted by the same donor to the same donee is considered as a single transfer for the purposes of determining the tax liability, provided that such gifts are made within a period of three years from the date of each gift. The Law also considers as a single transfer for tax purposes the accumulation of gifts in the case of “mortis causa” (on death) acquisition if the period between the gift and the inheritance does not exceed four years. This measure to prevent tax avoidance abuses is aimed at avoiding the use of several transfers to avoid the progressiveness of the tax, thus obtaining a tax relief.

Considering that the regulation did not envisage the accumulation of gifts as a result of inheritance contracts, an amendment is made so that accumulation may be applicable to gifts within a period of 3 years, and to inheritances within a period of 4 years.

Adaptation of the regulations to residents in a country outside the European Union

As with the IP, residents in a country outside the European Union are entitled to the implementation of the fiscal benefits of the Tax (previously, this was only allowed for residents of a Member State within the European Union or the European Economic Area).

PROPERTY TRANSFER AND STAMP DUTY TAX

The changes introduced in this law, affect the following issues:

Taxable Base: Value of Property and Reference Value

As with the ISD, the term “actual value” of the property to be included in the taxable base is replaced by the term “value”, this latter being understood as the market value of the property.

An exception is made to the market value criterion in the case of real property, in which it is determined that value of the property must be equal to the reference value (as already explained in another circular sent in this respect) when the ITP becomes due.

In both cases, if the value reported by the interested parties is higher than these values, the reported value shall be included in the taxable base.

The reference value may be challenged where the tax assessment is performed by the Tax Administration, or in relation to a request for correction of the relevant self-assessment, in which case it shall be necessary first to fill the self-assessment with the reference value, paying or guaranteeing the payment of the tax liability and then, to request a correction of the relevant self-assessment because it is considered detrimental to the legitimate interests.

Where no reference value exists, or this value cannot be certified by the General Directorate for the Cadastre, the taxable amount must be the higher of:

    • The value reported by the interested parties
    • The agreed price or consideration and
    • The market value.

These values may be verified by the Tax Administration.

Taxation of the purchase of gold from private individuals

The purchase of gold and jewellery from private individuals by entrepreneurs or traders engaged in this type of transactions in the business sector is subject to tax, within the ‘Property Transfer’ category.

VALUE-ADDED TAX

The Law on Measures to Prevent and Combat Tax Fraud has introduced minimal changes in the Value-Added Tax regulation. The change has been minimal compared to other tax categories, since this tax has been regularly updated in previous years and, therefore, the scope of its change, in terms of tax avoidance, was relatively minor.

In particular, the only change of some significance is related to the scope of application of the Special Regime for VAT Groups, in which the scope of liability of the parent company of the VAT group has been clarified, which now includes any infringements committed with respect to the obligations relating to (i) the payment of the tax debt, (ii) requesting an offset or the refund resulting from the group’s aggregate self-assessment return; and (iii) the truthfulness and accuracy of the amounts and categories provided by the subsidiaries included in the aggregate self-assessment return.

TAX ON ECONOMIC ACTIVITIES

The changes introduced in the Tax on Economic Activities (Spanish IAE), are detailed below:

Exemption from the tax for individuals 

Exemption from the tax for individuals applies to both residents and non-residents in Spanish territory.

Tax exemption according to Net Revenues 

IAE regulations provide for an exemption from this tax for taxpayers having a Net Revenues (NR) figure below EUR 1,000,000.

However, in the case of a company which is part of a group of companies, there were some discrepancies between the provisions established in respect thereof by the legislator and the interpretation of the Law made by the Tax Administration.

On the one hand, the Tax regulations set out that, where the company was part of a group of companies, the NR figure to be considered should relate to the total NR of all the companies comprising the group, provided that the group’s parent company was obliged to consolidate its financial statements, otherwise, it should be considered the individual NR figure of the taxable company concerned.

On the other hand, the Tax Administration argued that, in such cases, the aggregate NR figure of all the companies comprising the group had to be considered, regardless of whether the parent company was obliged to consolidate the financial statements.

These discrepancies continued until the Supreme Court, in two cassation rulings in 2018, ruled that, for the purposes of applying the exemption from the IAE, the NR figure of all the companies comprising the group should be considered only if the parent company thereof was obliged to consolidate the financial statements, otherwise, it should be considered the individual NR figure of each taxable company concerned. This criterion, which was in accordance with the legislation in force at that time, was informed by our firm to the customers affected.

The above criterion must be considered as the prevailing one until the entry into force of the Law on Measures to Prevent and Combat Tax Fraud, since the legislator, in a move which was very criticised by legitimate voices and for the purposes of preventing the application of the mentioned criterion set down by the Supreme Court, changes the regulations on the exemption from the IAE by determining that, where the company is part of a group of companies, the NR figures must relate to the group, regardless of whether there is an obligation to file consolidated financial statements.

REVOCATION OF THE TAXPAYER IDENTIFICATION NUMBER OF LEGAL ENTITIES

With effect from 11 July 2021, date of entry into force of the Law on Measures to Prevent and Combat Tax Fraud, the system for revocation of the taxpayer identification number (Spanish NIF) is amended, toughening the consequences of such revocation. This measure is aimed at eliminating inactive or shell companies, so that no transactions may be carried out through them.

In this sense, the measures approved are as follows:

    • Expiry of validity of the NIF for identification purposes.
    • Impossibility for credit institutions to make debits or credits to bank accounts or deposits in which the company whose NIF is revoked appears as holder or authorised entity.
    • Impossibility to grant deeds or execute them in a public deed before a Notary Public.
    • Prohibition to carry out registrations with public registries.
    • The public registry with which the company affected by the revocation is registered shall include a note in the margin of the open sheet of the company stating that henceforth no registrations may be made.
    • Revocation must appear on all certificates issued by the registry on the entity holding the revoked NIF.

All these consequences shall cease if the NIF previously revoked is reinstated.

For the purposes of ensuring the implementation of the above measures, notaries public are required to comply with the following:

    • In all deeds of incorporation of an entity, notaries public must include the NIF.
    • Notaries public must check the list of revoked NIFs before authorising a public deed.
    • The notary public must refrain from authorising any public deed relating to an entity whose NIF has been revoked.
    • General Council of Notaries shall submit to the Tax Office information concerning transactions that are not compliant with the obligation to inform the notary public of the NIF data to be included in the deed, as well as the payment methods used and, where appropriate, the refusal to identify the payment methods.
    • General Council of Notaries shall establish a system so that notaries public may inform the Tax Office of the entities whose NIF has been revoked and not reinstated and which intended to grant a public instrument. 

GENERAL TAX LAW AND OTHER AMENDMENTS

Finally, and as culmination of the information sent about the amendments to the Law on Measures to Prevent and Combat Tax Fraud, there follows an overview of the amendments introduced in relation to the General Tax Law and other amendments we consider are of interest to you.

Prohibition of tax amnesties

Tax amnesties are expressly prohibited.

This prohibition is remarkable taking into account that it can be prohibited by one government and enabled by another or even by the same government.

 Late payment interest

Late payment interests are not required if after obtaining an incorrect tax refund, this has been adjusted voluntarily, without prejudice to the possible surcharge for late filing of the tax return without the prior request by the Administration.

 Surcharges for late filing

One of the approved amendments that favours the adjustment by the taxpayer in relation to tax debts is the change of the percentages of surcharge for late filing which, until now, were 5%, 10% and 15% for the first three, six and twelve months of delay, respectively, following the expiration of the statutory deadline, and 20% for delays exceeding twelve months, in which case late payment interest becomes payable from the end of that twelve-month period.

These percentages have been decreased and now surcharges are equal to 1% for each complete month of delay, with no late payment interest, and equal to 15% for delays exceeding 12 months plus late payment interest. These surcharges do not include any penalty.

The table below is included for comparison purposes:

Period Delay Previous Regulation Current Regulation
Up to 1 month 5% 1%
Up to 2 months 5% 2%
Up to 3 months 5% 3%
Up to 4 months 10% 4%
Up to 5 months 10% 5%
Up to 6 months 10% 6%
Up to 7 months 15% 7%
Up to 8 months 15% 8%
Up to 9 months 15% 9%
Up to 10 months 15% 10%
Up to 11 months 15% 11%
Up to 12 months 15% 12%
After to 12 months 20% 15%

Likewise, surcharges will not be imposed on taxpayers who voluntarily make an adjustment to their tax position, by means of a tax return or self-assessment corresponding to other periods, in respect of the same item or under the same circumstances or from a prior adjustment by the Administration.

Please note that the new system of surcharges will be applied to those surcharges imposed before 11 July 2021 which have not become final.

 Penalty proceeding

Another amendment aimed at reducing the penalty amount in the adjustments is the increase of the reduction applicable to penalties deriving from an adjustment made by the Administration.

In this sense, the percentage of penalty reduction is increased to:

     – 65% in case of penalties related to notices of assessment with agreement (previously the percentage was 50%).

     – 40% in case of prompt payment of penalties (previously the percentage was 25%).

The new penalty reduction system will also apply to penalties imposed before 11 July 2021, as long as they have not been appealed and have not become final.

Likewise, the increase of the reduction for prompt payment shall also be applied under the following circumstances:

    – It is proven before the Tax Administration that the filed appeal or claim against the penalty or assessment is discontinued before 1 January 2022.

    – The amount of the penalty is paid in the voluntary period commencing on the notification by the Tax Administration after that discontinuance has been substantiated. 

Penalty for the manufacture, production, marketing or use of computer systems which allow the handling of accounting and management data.

A new tax infringement is defined which seeks to avoid the production and possession of computer programmes and systems which allow the handling of accounting and management data, for which a penalty in the amount of EUR 150,000 is imposed on manufacturers, producers and marketers for each fiscal year in which sales have been made and for each different type of computer system or programme which is subject of the infringement.

The use or possession of these computer systems or programmes will be punished with a fine in the amount of EUR 50,000 for each fiscal year.

This penalty system will entry into force on 11 October 2021.

 Debtors list

The threshold amount due (debt and penalty pending payment) for inclusion on the debtors list is lowered from €1,000,000 to €600,000 and jointly and severally liable parties are required to be included on the list, with the possibility of being excluded from the list if the debt is satisfied.

House entry and search by the tax inspection

If the tax actions include to enter a constitutionally protected house of a taxpayer or to carry out searches therein, the Tax Administration must obtain the taxpayer’s consent or a court approval.  In the latter case, the court approval to enter a constitutionally protected house may be obtained before the formal commencement of the relevant tax proceeding.

Payment deferrals

Requests for deferred, split or netted payments in a voluntary period, as well as for suspension and payment in kind, in the case of requests which have already been rejected and the relevant payment has not been made in another payment period, do not prevent commencement of the enforcement period.

Limit on cash payments

In general, the limit on cash payments is lowered from €2,500 to €1,000.

The limit on cash payments is lowered from €15,000 to €10,000 in the case of private individuals having their tax domicile outside Spain and who do not act as entrepreneurs or professionals.

The new limit on cash payments system will apply to any payments made after the law comes into force, even if they relate to transactions arranged before the limit was set.

Suspension of statute of limitations periods due to COVID-19

In general, the expiry and statute of limitations periods were suspended from the date of entry into force of the state of emergency until 30 May 2020.

However, in the case of statute of limitations periods, the suspension will only apply to periods which, without including that suspension, end before 1 July 2021.

In Palma de Mallorca, 21 of July  2021

Mª Angeles Mesas / Angel Carbonell

Leave a Reply

Your email address will not be published.