Tax Bulletin July 2012


In Royal Decree-Law 20/2012, of July 13, 2012, the Government finally approved the expected increase in the standard and reduced value added tax (VAT) rates (with the VAT rate charged on  certain goods and services also being increased from the reduced rate to the standard rate) which is set to apply from September 1, 2012.

Apart from this relevant change, the Royal Decree-Law also contains other measures of a tax nature. In the corporate income tax area, some of the measures already approved in earlier Royal Decree-Laws (affecting tax prepayments, the offset of tax losses, and the deductibility of finance costs and of the amortization charged on intangible assets having an indefinite useful life) have been further restricted. In the personal income tax area, the withholding tax rate applying to income from economic activities has been increased while the tax relief relating to tax credits for taxpayers who bought their principal residence before January 20, 2006 has been eliminated.

Royal Decree-Law 20/2012 has also introduced a new 10% tax on foreign-source income in cases that do not meet the requirements for applying the special 8% tax recently introduced for the same kind of income.

We would also highlight the new developments that have also taken place in relation to the so-called “tax amnesty” regulated by Royal Decree-Law 12/2012 (as amended by Royal Decree-Law 19/2012) and implemented by Order HAP/1182/2012, following the report published by the Directorate-General of Taxes (“DGT”) on its criteria for interpreting this special tax regularization exercise.

One of these criteria is that the rationale behind the “tax amnesty” legislation is that taxpayers can regularize unreported income and/or gains; accordingly, the regularization of spent bank account balances must be permitted, although regularization must be limited to the portion of the assets acquired with income and/or gains not yet statute-barred.
The DGT also argues that the special tax return and the traditional method for regularization are compatible and can be used simultaneously by the same taxpayer.


1.1 Corporate income tax.- Tax credit for reinvestment of extraordinary income does not apply to contribution of real estate to newly-formed company (Supreme Court judgment of June 4, 2012) 
1.2 Personal income tax.- Concerning reservation of right to purchase real estate assets of a company whose shares are transferred (National Appellate Court judgment of May 30, 2012) 
1.3 VAT.- Legal and financial advisory expenses borne by an entity for which a tender offer is made are part of its general expenses and the input VAT thereon can therefore be deducted (National Appellate Court judgment of May 10, 2012) 
1.4 Tax on large retail outlets (Cataluña).- Compatibility with tax on economic activities (Constitutional Court judgment of June 5, 2012) 
1.5 Valuation review procedures.- Sufficient reasoning by the tax authorities in real estate valuations (Castilla-León High Court judgment of April 9, 2012; Galicia High Court judgment of March 26, 2012)
2.1 Corporate income tax.– Net revenues used to determine prepayments and tax losses of a tax group will be net revenues of that group (Directorate-General of Taxes. Ruling V1154-12 of May 28, 2012) 
2.2 Corporate income tax.– Determination of prepayments applicable to enterprises of a reduced size (Directorate-General of Taxes. Ruling V1157-12, of May 28, 2012) 
2.3 Corporate income tax.– Expense derived from collective layoff deductible when it is authorized, even if authorization not notified to company until following year (Directorate-General of Taxes. Ruling V1092-12, of May 21, 2012) 
2.4 VAT: Application for refund of tax paid incorrectly.- Apportionment of burden of proof in applications for refund of VAT paid incorrectly (Central Economic-Administrative Tribunal. Decision of May 24, 2012) 
2.5 Economic-administrative proceeding.- In expedited proceedings inspection of case file is claimant’s right and tax authorities must guarantee exercise of such right if claimant so requests (Central Economic-Administrative Tribunal. Decision of May 10, 2012) 

3.1 Royal Decree-Law 20/2012 
3.2 Labor market reform. Personal income tax exemption on severance for dismissal and tax credits for job creation 
3.3 Agreements on timeshares in properties for tourism use 
3.4 General State Budget Law for 2012 
3.5 Autonomous Community Administrative and Tax Measures Law (Canary Islands)

4.1 Tax regularization: Report from the Directorate-General of Taxes 
4.2 Denunciation of Spain-Argentina tax treaty 



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