Publications

Corporate income tax

Two part-time employees do not count as one full-time employee

Directorate General for Taxes. Resolution V2705-19 of October 3, 2019

In relation to property leasing, an economic activity can only be deemed to exist if at least one person with a full time employment contract is used for organization of the activity.

According to a strict interpretation of this rule, the DGT replied that this requirement may not be regarded satisfied as a result of having two or more workers with part-time contracts because at least one of them must have a full-time employment contract.

So, because in the described case there were two workers who each had contracts for 25 hours a week, and neither of them had full-time contracts, the requirements to consider that the company carries on an economic activity were not met.

Corporate income tax

Logistics buildings are depreciated according to the percentage determined for warehouses

Directorate General for Taxes. Resolution V2697-19 of October 2, 2019

A company had acquired a piece of land on which it planned to build a logistics building, with the aim of leasing it to an independent third company and it would be used to store furniture to be distributed to the various points of sale (physical stores).

The tax depreciation tables contain “Warehouses and tanks (for gases, liquids and solids)” and “Industrial buildings”, but not logistics buildings.

According to the definitions for the two terms in the Real Academia Española dictionary, the DGT concluded that the “Warehouses and tanks (for gases, liquids and solids)” caption more closely reflects the element concerned. However, this is a factual issue that the taxpayer is required to substantiate using any means of proof allowed by law and which would be assessed by the competent bodies of the tax authorities.

Corporate income tax

The provision for maintenance expenses is deductible if it is recorded correctly

Directorate General for Taxes. Resolution V2892-19 of October 21, 2019

A company is engaged in the wholesale sale of office furniture and equipment. Separately from the warranty it offered to the purchaser, it was going to sign maintenance contracts for multiyear terms, which would include both replaceable tangible elements of the equipment and consumables, travelling time and labor, for a fixed price payable in advance in the first year of all installments over the term of the contract (5 years).

Because the price of the service to be provided is collected in the first year of the term of the contract on the element to be maintained, it was asked whether a provision could be recorded in the accounts, calculated by reference to the requesting party's historical data (able to be substantiated from a financial and cost accounting standpoint) on the expenses associated with general maintenance of similar equipment.

The DGT explained that this is not a case of sales with a warranty associated with those sales, but rather of a separate and additional maintenance service for which a price is received. As a result, the special rule allowing deduction of provisions for expenses associated with the risks relating to repair and service warranties is not applicable, and none of the other rules on non-deductible provisions appear to be applicable either.

Therefore, any provision that might be recorded for maintenance expenses will be treated as a tax deductible expense if it has been recognized for accounting purposes consistently with accounting law and the requirements laid down in the law have been met in terms of being recorded in the accounts and recognized on an accrual basis, having revenues equal expenses, and being substantiated by supporting documents.

Personal income tax

Rules on exit tax for change of residence to another EU state also apply for Switzerland

Directorate General for Taxes. Resolution V2959-19 of October 24, 2019

An individual was going to relocate to Switzerland to study at university, and intended to return to Spain after the university course had ended. By reference to the value of the individual’s assets, the regime for capital gains due to change of residence would apply. The request concerned whether the rules reducing its effects where the change of residence takes place to another EU member state would be applicable.

The DGT referred to the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons having as its purpose to bring about the free movement of persons between the contracting states.

According to the provisions of that Agreement and its interpretation by the Court of Justice of the European Union in case C-581/17, the DGT concluded that the provisions for the case of a change of residence to another EU Member State had to be held applicable also in cases involving relocation to Switzerland.

Personal income tax

Dividends must be attributed to each shareholder according to their ownership interest, regardless of private arrangements among them

Directorate General for Taxes. Resolution V2779-19 of October 9, 2019

A limited liability company is owned by three individuals, in varying proportions. They were considering whether to pay equal dividends to each of them.

The DGT warned that the dividends would have to be attributed to each shareholder, for personal income tax purposes, in amounts determined by their ownership interests in the capital stock, regardless of any private arrangement that had been arrived at among the shareholders for their payment; and also advised of the effects for inheritance and gift tax purposes on shareholders receiving dividends above the amount determined by the percentage of capital stock they own.

Tax on increase in urban land value

Local councils may approve a reduction of up to 60% of the taxable amount only where the cadastral value is affected by a collective general appraisal procedure

Directorate General for Taxes. Resolution V2904-19 of October 21, 2019

The taxable amount for the tax on increase in urban land value is calculated by reference to the cadastral value of the land on the date the tax falls due. Local councils have the power to allow a reduction equal to up to 60 percent of the cadastral value for a period of up to five years, from entry into force of the cadastral value arising from a general collective appraisal procedure.

The issue examined for resolution related to a building inherited in 2017. The cadastral value of the building had been affected by two partial collective appraisals in 2013 and 2015, and the request concerned whether that reduction could be applied to calculate the taxable amount for the tax on increase in urban land value that had fallen due as a result of the inheritance.

The DGT disallowed this. Based on a strict interpretation of the law, it concluded that the reduction is only applicable where the new cadastral value of the building is affected by a general collective appraisal, not a partial appraisal.