Tax Bulletin May 2012


May 11, 2012 saw the approval of a new Royal Decree-Law (No. 18/2012) with measures to reinvigorate the Spanish economy, focusing on this occasion on reforming the financial industry and more specifically on the need to clean up credit institutions’ balance sheets in relation to impaired real estate assets.


In one new measure, the new royal decree-law adds to the loan loss reserve requirements already set out in Royal Decree-Law 2/2012 and, in another, it provides for the creation of asset management companies to set apart properties that have been repossessed or received in payment of property development and construction debts. And as a tax measure, Royal Decree-Law 18/2012 seeks to eliminate the potential tax costs that usually arise in these kinds of transactions.

To do this, it broadens the reach (effective for all taxes) of the special neutrality regime for business reorganizations (mergers, spin-offs, exchanges of securities or nonmonetary contributions of lines of business or certain assets) to the contributions of assets and liabilities made to these asset management companies in compliance with the provisions of Royal Decree-Law 18/2012.

It also exempts transfers of shares of these companies and of shares of credit institutions affected by combination plans from transfer tax under the “transfers for consideration” heading. In short, the aim is to exempt these cases from the application of the controversial article 108 of the Securities Market Law.
2.1. Corporate income tax. A taxpayer cannot be denied tax relief that was granted to another taxpayer for the same transaction (National Appellate Court. Judgment of January 26, 2012) 
2.2.  Nonresident income tax. Nonresident funds cannot be charged higher withholding tax than resident funds (European Court of Justice. Judgment of May 10, 2012 in joined cases C 338/11 to C 347/11) 
2.3.  Nonresident income tax. The application of the reduced 5% rate to dividends under the protocol to the tax treaty with the Netherlands does not require compliance with holding requirements (National Appellate Court. Judgment of February 16, 2012) 
2.4.  Nonresident income tax. The ownership of timeshare properties in Spain is determined according to Spanish law (National Appellate Court. Judgment of February 13, 2012) 
2.5. Administrative proceeding. Shifting of joint and several liability for malicious concealment of assets and rights (National Appellate Court. Judgment of February 6, 2012) 
2.6.  Review proceeding. Implementing proceedings retroactively does not allow substantive defects to be corrected (Supreme Court. Judgment of March 26, 2012) 
2.7.  Review proceeding. Proceeding for revocation due to patent infringement of the law may be brought by taxpayers (Murcia High Court. Judgment of January 25, 2012) 
2.8.  Electronic notices. The rules on electronic notices do not infringe the rules on tax notices in the General Taxation Law (Supreme Court. Judgment of February 22, 2012) 


3.1.  Corporate income tax. Goodwill derived from the indirect acquisition of companies through intermediate holding companies can be written off (Directorate-General of Taxes. Ruling V0608-12, of March 21, 2012) 7
3.2.  Nonresident income tax. Most favored nation provision concerning interest is bidirectional (Directorate-General of Taxes. Ruling V0569-12, of March 14, 2012) 
3.3.  VAT and insolvency proceedings. Various issues relating to the review of an insolvent party’s VAT (Central Economic-Administrative Tribunal. Decision of March 27, 2012) 
3.4.  VAT. The transfer of a waterfall without assigning the maintenance and monitoring agreement is not a transfer of an independent economic unit (Directorate-General of Taxes. Ruling V0477-12, of March 5, 2012) 
3.5.  Transfer and stamp tax. Acquisition of control over an entity as a result of a capital reduction with repayment of contributions to the shareholder that exercises its right of withdrawal is a transaction subject to article 108 of the Securities Market Law (Directorate-General of Taxes. Ruling V0566-12, of March 14, 2012) 
3.6. Review proceeding. Economic-administrative claim against assessment should be joined with appeal for consideration against penalty and handled as single economic-administrative claim (TEAC. Decision of March 1, 2012) 
3.7.  Inspection proceeding. An assessment issued in the name of an entity that has already been wound up is not void if the entity was the taxpayer of the tax in the reassessed year (TEAC. Decision of March 1, 2012) 
3.8.  Economic-administrative proceeding. The taxpayer-requested expert valuation procedure is a challenge procedure of which the taxpayer should be informed and which prevails over any economic-administrative claim that is filed simultaneously (Central Economic-Administrative Tribunal. Decision of March 15, 2012) 

4.1.  New financial reform 

5.1.  Housing rental market 
5.2.  Tax offense 
5.2.  Tax treatment of shareholders and partners of business entities 
5.3.  Pharmaceutical levy


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