Tax Bulletin January 2013
To date, the elimination of international double taxation for Spanish companies investing in the United States or for US companies investing in Spain has been governed by the wording of the Spain-US tax treaty of 1990.
The economic circumstances both in Spain and the United States and the business dealings between the two countries have vastly changed since then, and the terms of the tax treaty were no longer suitable. For this reason, in July 2010, the Spanish and US tax authorities began talks to amend it and, after several rounds of negotiations, on May 25, 2012, they initialed a Protocol amending the tax treaty.
That Protocol has now been signed, on January 14, 2012, its main changes being the elimination of taxation at source on interest, royalties and capital gains on the sale of shares of companies other than real estate companies, and on the dividends paid to companies that are tax resident in another contracting state, as long as they have owned at least 80% of the voting rights during the 12-month period preceding the dividend distribution.
It also includes (i) a new “limitation on benefits” clause aimed at preventing the treaty benefits from being applied indirectly to taxpayers who are not tax-resident in the contracting States, (ii) technical improvements in the definitions of permanent establishment and exchange of information; and (iii) an arbitration clause to resolve potential problems arising between the Spanish and US tax authorities when interpreting the treaty.
Once it takes effect, which is scheduled to take place three months after the exchange of the ratification instruments, the treaty with the US will have undergone considerable technical improvement which, on the one hand, should prevent recurring litigation in relation to issues such as the taxation of royalties and, on the other, make direct investment by the companies from each country in the other state effectively easier.
- Corporate income tax. – Deductibility of expenses for services provided by a subsidiary to its parent (Supreme Court. Judgment of December 3, 2012)
- VAT. – VAT borne on the acquisition of a building subsequently demolished (European Court of Justice. Judgment of November 29, 2012, case C-257/11)
- Tax on large commercial establishments in Navarra. – Compatibility with tax on economic activities (Constitutional Court. Judgment of November 14, 2012)
- Tax on deposits at credit institutions in Extremadura. – Compatibility with the tax on economic activities and VAT (Constitutional Court. Judgment of November 14, 2012)
- Transfer and stamp tax. – Stamp tax exemption for subrogation and novation of mortgage loans does not apply to mortgage credit facilities (Madrid High Court. Judgment of September 26, 2012)
- Excise and special taxes. – Formal requirements must be met to apply the exemption from excise tax on oil and gas to the manufacture of products used to generate electricity (National Appellate Court. Judgment of September 24, 2012)
- Judicial review proceeding. – Stay of execution of the debt without need for surety (Supreme Court. Judgment of January 15, 2013)
- Inspection proceeding. – Private document provided to the Central Economic-Administrative Tribunal but not to tax inspectors lacks strength as evidence (National Appellate Court. Judgment of October 24, 2012)
- Penalty proceeding. – Legal presumptions do not in themselves justify the imposition of penalties (National Appellate Court. Judgment of December 13, 2012)
- Enforcement proceeding. – New assessments can be issued after judicial claim is upheld (Supreme Court. Judgment of November 19, 2012; Valencia High Court. Judgment of July 17, 2012)
DECISIONS AND RULLINGS
- Corporate income tax. – Relocation to Spain of entities formed abroad (Directorate-General of Taxes. Ruling V2211-12, of November 16, 2012)
- Corporate income tax. – Capital reduction to offset losses not computed to calculate the tax losses to which the absorbing company is subrogated (Directorate-General of Taxes. Ruling V2163-12, of November 8, 2012)
- Corporate income tax. – The exemption for income derived from the transfer of real estate acquired before December 31, 2012, applies to the assets acquired under a finance lease (Directorate-General of Taxes. Ruling V2129-12, of November 7, 2012)
- Corporate income tax. – Tax credit for investment in renewable energies. Change of view (Directorate-General of Taxes. Ruling V2112-12, of November 5, 2012)
- Corporate income tax. – Some clarifications on the deductibility of impairment loss on shares (Directorate-General of Taxes. Ruling V2100-12, of November 2, 2012)
- VAT. – Payments derived from execution of certain warranties have the nature of indemnity (Central Economic-Administrative Tribunal. Decision of November 15, 2012)
- Review proceeding. – Scope of limited review proceedings (Central Economic-Administrative Tribunal. Decision of November 29, 2012)
- Penalty proceeding. – 25% reduction applies for timely payment where deferral or payment by installment is requested and, due to the amount, a guarantee is not required (Central Economic-Administrative Tribunal. Decision of November 29, 2012)
- Collection proceeding. – Enforced collection notified by edict is null and void if notice was not left in the mailbox informing of option that the notification can be collected at the post office (Central Economic-Administrative Tribunal. Decision of November 6, 2012)
- Spain-US tax treaty.
- Amendment of the Excise and Special Taxes Regulations.
- Information on assets and rights abroad.
- Crimes against the Public Finance Authority.
- General State Budgets Law for 2013 and Tax Measures Law.
- Law on tax measures for energy sustainability.
- Special Tax Return (STR).
- Average sale prices for 2013 of certain means of transport for purposes of a review of values.
- Forms 390, 198 and 184. Filing of informative returns.
- Court charges: forms 696 and 695.