Tax Bulletin November 2012
Lately, we have seen a strong focus by the Spanish government and lawmakers on fighting tax fraud, both at home and abroad. A wide range of measures are being adopted (i) on the one hand, to encourage taxpayers to disclose unreported assets, through an apparently reduced taxation rate, and, (ii) as a counterpoint, to stiffen the consequences of keeping those assets concealed, which adds to the appeal of making the disclosure. In keeping with this focus:
Special tax rates have been approved in 2012 to encourage the repatriation of foreign income by corporate income taxpayers (tax rates of 8% and 10% on this type of income, where the requirements are not met for it to be exempt), and personal income tax, corporate income tax and nonresident income taxpayers have been given the option to be taxed at 10% on the assets they report (on the portion of assets acquired with income obtained in open tax periods). In all of these cases, the voluntary disclosure must be done by November 30, 2012.
The anti-fraud law has just been published (Law 7/2012, of October 29, 2012, mentioned below and described in detail in our tax law update 8/2012) which (i) places restrictions on cash payments starting on November 19, 2012, and (ii) establishes new disclosure obligations in relation to assets and rights abroad, which, if breached, alongside serious penalties, can mean that if those assets are detected, their value will be classified as undisclosed income (for corporate income tax purposes) or as an unjustified increase in assets (for personal income tax purposes) without being able to argue or support that they derive from a time-barred year.
A reform of the criminal code is being discussed by parliament and is expected to stiffen penalties, primarily where fiduciary structures or tax havens are used or where the evaded amount of tax exceeds €600,000, and to lengthen the statute of limitations period for tax offenses.
Added to all of the foregoing are the provisions and initiatives aimed to obtain and use information on assets and income abroad, in an international context which is increasingly aggressive towards countries that do not provide information. They include the Council Directive of February 15, 2011, on mutual assistance between the Member States in the field of direct taxation, the new tax treaties, the amendment of existing tax treaties with revised information exchange clauses, the negotiation of a new protocol with Switzerland, and the announcement of the creation of a new National Office for International Taxation to fight against international tax fraud.
1.1 Corporate income tax.- Essential requirement for information on the reinvestment tax credit to be included in the notes to the financial statements for it to apply (National Appellate Court. Judgment of September 20, 2012)
1.2 Personal income tax.- Legally separated spouse can elect to file joint return with the children who live with him once claim for separation is admitted (Valencia High Court. Judgment of May 8, 2012)
1.3 VAT.- Exemption cannot be disallowed for intra-EU supply if supplier acts in good faith and has adopted all reasonable measures to provide identification number (European Court of Justice. Judgment of September 27, 2012, Case C-587/10)
1.4 Real estate tax.- Beneficiary of condemnation will be the cadastral owner of condemned assets for real estate tax purposes (La Rioja High Court. Judgment of May 3, 2012)
1.5 Review proceeding.- The intention to appeal, properly evidenced in a timely manner to an administrative body, prevents it from rejecting an appeal formally filed after the time periods established in the law (Castilla y León High Court. Judgment of July 2, 2012)
1.6 Administrative proceeding.- Notice served at the premises of the taxpayer’s lessee is not valid for notification purposes (Castilla y León High Court. Judgment of July 13, 2012)
2. DECISIONS AND RULINGS
2.1 Corporate income tax.– Foreign-source dividends and capital gains disclosed and taxed at the special 8% rate need not be included in the book income for determining the minimum prepayment (Directorate-General of Taxes. Ruling V1919-12, of October 3, 2012)
2.2 Personal income tax.– Possibility to earn income from economic activities and salary income in relation to a same entity (Directorate-General of Taxes. Ruling V1827-12, of September 19, 2012)
2.3 Personal income tax – Dividend exemption does not apply to income derived from preferred shares (Directorate-General of Taxes. Ruling V1821-12, of September 19, 2012)
2.4 Personal income tax.– After the labor reform, the exemption for severance pay is conditional on administrative or judicial conciliation or judgment (Directorate-General of Taxes. Rulings V1803-12 and V1804-12, of September 18, 2012)
2.5 Personal income tax.– Deductibility of restoration work on a building used under lease or free of charge (Directorate-General of Taxes. Ruling V1768-12, of September 12, 2012)
2.6 Personal income tax.– Treatment applicable to attendance fees paid by a company to its directors (Directorate-General of Taxes. Ruling V1738-12, of September 7, 2012)
2.7 VAT.- Modification of taxable amount for cases of insolvency is not incompatible with the modification for nonpayment (Central Economic-Administrative Tribunal. Decision of September 20, 2012)
2.8 Collection procedure.- In cases of a shift of liability derived from a penalty, the automatic stay of penalties does not apply (Central Economic-Administrative Tribunal. Decision of September 6, 2012) 10
3.1 Anti-fraud law
3.2 Law on write-down and sale of real estate assets of the financial sector
3.3 Change to the modules under the simplified VAT method for 2012 and possibility of waiving that method
4. OTHER NEWS
4.1 Special Tax Return: Second report by the Directorate-General of Taxes