Tax Newsletter - February 2020 | Miscellaneous
EU updates tax haven blacklist
On February 18 the EU Council resolved to update the list of non-cooperative tax jurisdictions. See our Alert dated February 19, 2020 on this subject.
Digital services tax and financial transactions tax bills laid before parliament
On February 18 the council of ministers approved the decision to lay before parliament the bills creating the digital services tax and the financial transactions tax; the bills’ wording was finally published on February 28. For further information see our Alerts (available here and here), recalling the main features of the two taxes.
Directorate General for Taxes determines rules for treating certain types of entities created abroad as pass-through entities
Article 35.4 of the General Taxation Law provides that the following are parties with tax obligations: undistributed estates, joint property entities and other entities without a separate legal personality that form a separate business unit or separate set of assets that are taxable.
Moreover, the personal income tax and nonresident income tax laws add that the following are pass-through entities: entities formed abroad and having a legal nature that is identical or similar to that of pass-through entities. Formed under Spanish law.
Lastly, the Corporate Income Tax Law classes as pass-through entities partnerships other than those having a separate legal personality and corporate purpose, undistributed estates, joint property entities and other entities referred to in article 35.4 of the General Taxation Law.
The DGT has resolved a numerous issues submitted for resolution on the status or otherwise as pass-through entities of entities created abroad, but a host of doubts remain in this respect.
To resolve these doubts, the February 13, 2020 edition of the Official State Gazette published the DGT’s decision of February 6, 2020, on the treatment as pass-through entities of certain entities created abroad. According to this decision, the basic characteristics that an entity created abroad must have to be treated in Spain as a pass-through entity for personal income tax, corporate income tax and nonresident income tax purposes are:
- The entity must not have been a personal income taxpayer in the state where it was created.
- The income generated by the entity must pass through to its members or investors for tax purposes (it is not relevant whether it has been distributed).
- That income must preserve, under the legislation of the state where the entity was created, the nature of the activity or source from where it was obtained for every member or investor.
This decision has binding effects for tax authority bodies and entities on and after February 13, 2020, and its associated effects will be valid in respect of taxable events occurring on or after that date.
Tax agency’s 2020-2023 Strategic Plan published
The tax agency has published its 2020 – 2023 Strategic Plan on its website. The document is posted as a work in progress and may be modified at any time as new needs and priorities arise.
The purpose of the plan is (i) to serve as a key instrument of management and support for decision-making, (ii) to obtain a clear view of what is sought to be achieved and how, in the medium and long term, (iii) to identify priorities among all possible lines of action, measures and steps, (iv) adapt the organization to the changes and demands of the economic environment, nationally and internationally and (v) assign human and technical resources in alignment with the identified priorities.
AEAT publishes information notice with its position on insolvency processes
The tax agency has published on its website an information notice regarding its position and action criteria in insolvency proceedings. It notably contains the following measures:
(a) AEAT recognizes that it holds numerous claims that are affected by the agreements reached at creditors’ meetings and, for this reason, states its interest in increasing its participation at these meetings and in being demanding in the assessment of proposals for an arrangement, by paying particular attention to particular factors such as the existence or otherwise of write-offs, the length of potential debt rescheduling arrangements or the proportion of the tax agency's claim; all for the purpose of supporting proposals containing payment terms that benefit the collection of public claims.
(b) When faced with the potential existence of liquidity problems at insolvent entities, AEAT underlines that the Insolvency Law requires (in article 84.3) that post-insolvency claims must be paid when they become due; and that tax claims are inalterable. Therefore, if the insolvency practitioner decides to alter the payment-when-due criterion in the interests of the insolvency proceeding (subject to sufficient assets available to creditors), they must take that inalterable nature into account.
Where, under article 176.bis.2 of the Insolvency Law, an order for payment of post-insolvency claims must be implemented other than that defined in article 84 of the same law because it has been calculated that the assets available to creditors are not sufficient to pay them, this must be notified to the court and only then may a payment order be considered that defers payment of tax claims.
(c) AEAT observes that, at times, the insolvency practitioner encounters situations in which the insolvent debtor and its directors fail to fulfill their duty of collaboration and disclosure of information as envisaged in article 42 of the Insolvency Law, which may have serious consequences because it means the insolvency practitioner does not have the necessary information to perform their duties, one of which is filing tax returns.
For these purposes, remember that neither the insolvency legislation not the tax legislation state that the insolvent company is entitled not to fulfill its obligations to keep accounts and file its tax returns, and therefore, if these obligations are not fulfilled, the insolvency practitioner will have to take the appropriate measures.
For example:
- Where a material breach of the obligation to keep accounts occurs, the insolvency practitioner must apply to the insolvency judge for the insolvency proceeding to be classed as fault-based.
- Additionally, the insolvency practitioner must use their power to report the facts to the criminal judicial authorities.
If the insolvency practitioner acts in the described manner, the tax authorities will be able to take this into account (together with the other particular circumstances) to find whether the necessary diligence was applied to determine the existence or otherwise of tax liabilities resulting from the failure to file the self-assessments as a result of the inexistence of accounting information.
(d) AEAT recalls that, in scenarios involving the disappearance of the insolvent company, it must be removed within a month from the roll of traders professionals and withholding agents; which is the insolvency practitioner’s obligation.
(e) It determines, moreover, that, under the findings rendered by TEAC in its decision of February 26, 2019, it will not be allowed to net post insolvency claims against tax refunds and assets payable to the taxpayer arising in assessments filed after the insolvency order was issued, as it had been doing in the past. It also recalls that the Insolvency Law determines that the insolvency practitioner must notify AEAT of every insolvency order, for which there is a form that the insolvency practitioner must use.
AEAT considers however that the law does not determine the same type of obligation for scenarios of recommencement of insolvency proceedings, and therefore, for these cases, the recommencement of an insolvency proceeding must be notified by email to the enabled address, accompanied by the necessary documentation.
(f) In relation to the certificate of debts that AEAT issues to the insolvency practitioner, it recalls that a general clause is usually included relating to the correction invoices for VAT purposes, so that the insolvency practitioner can take into account that AEAT's debts will be increased by the change to the VAT taxable amounts as a result of issuing correction invoices.
AEAT adds that, if any such changes occur and are included in subsequent certificates, the insolvency practitioner must check them suitably to be able to match them to the relevant year.
(g) Lastly, AEAT considers that it can sign exceptional agreements to enable collection of its debts and to enable the insolvent debtor to pay the debts; but that to achieve this a number of minimum requirements must be considered (for example, all post-insolvency claims must have been paid and, if any, claims arising after the effective date of the arrangement). These exceptional agreements cannot ever be used in pre-insolvency scenarios. In those cases, the only options are to request deferred or split payment of the debts.
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