Tax Newsletter - January 2019 | Legislation of interest
Tax Newsletter - January 2019 | Legislation of interest
The Annual Tax and Customs Control Plan for 2019
The Tax Control Plan for 2019 has been published in Decision of January 11, 2019 by the Directorate-General of the State Tax Agency (AEAT) (Official State Gazette of January 27, 2017).
The key new elements included in the various areas are set out below:
- In relation to information and assistance for the prevention of noncompliance, the following initiatives are notable:
- Ensure the correct operation of the Virtual Assistant for the Immediate Supply of Information (SII) system and continue with the design work on the VAT Virtual Assistant (AVIVA).
- Enhance assistance in the personal income tax return season. Under this heading, work will continue on taking the Renta WEB service forward with a new version of the investment securities program to develop it in a web environment and with the pre-completion of data by the Tax Agency based on the data extracted from forms 198 and 189. They also plan to increase use of the Renta WEB phone system called Le llamamos (“We’ll call you”) and strengthen Agencia Tributaria, the Tax Agency's mobile app.
- Prepare an assistance system for completing notifications of registration cancellation or status changes by taxpayers, including an assistant and a new form.
- Study the option of allowing VAT taxable persons not using the Immediate Supply of Information (SII) system to know the transactions reported by users of the Immediate Supply of Information system in which they have participated.
- In relation to the investigation and audit work on tax and customs fraud the plan stresses that audit and investigation tasks must focus not simply on adjusting irregular tax practices but on their preventive effects.
Other highlighted elements are (i) the sharp increase in information collected as a result of rolling out AEAT’s latest large projects (the Immediate Supply of Information (SII) system, the CRS -Common Reporting Standard- and the receipt of information from country-by-country reports, (ii) the work performed to analyze asset values and the existence of tax risks at legal entities with high net worth (with assets owned directly or indirectly) and (iii) the new mandatory disclosure of aggressive tax planning schemes and other techniques for hiding the ownership of income and assets, resulting from the transposition of Council Directive 2011/16/EU of February 15, 2011.
From those instruments:
- With respect to multinational groups and large companies, preventive steps will be encouraged targeted at protecting tax bases and providing legal certainty, such as, for example, Advance Pricing Agreements, simultaneous controls in various jurisdictions and Mutual Agreement Procedures (“MAP”).
There will also be impacts on the selection phase of cases to audit and audit work will be led by experts in international taxation. It is highlighted in this respect that (i) they will monitor effective application of the rules in the Multilateral Convention, that (ii) transfer pricing will be a priority area for audit work, and that (iii) particular attention will be paid to certain payments that may significantly erode tax bases such as intergroup services or royalty payments from the licensing of intangibles.
Lastly attention will be paid to the correct attribution of income to permanent establishments and a spotlight will be placed on identifying structures related to low tax jurisdictions that may be replicated to be used by multiple taxpayers.
- In relation to net worth analysis the aim of ensuring effective implementation of the CRS (Common Reporting Standard for financial statements) is highlighted as the cornerstone for the exchange of information system, and therefore, tax transparency. In this respect, it points to the work that is to be carried out on verifying the implementation by financial institutions of their obligations under the CRS.
It also highlights the fundamental contribution by the work of the new Central Unit for coordinating the Monitoring of High Net Worth Individuals and Entities, created in the National Fraud Investigation Office.
- In relation to the hiding of business or professional activities and the fraudulent use of companies, coordinated dawn raid operations are going to be stepped up with IT audit units.
- Regarding the new business models (digital economy), an initial study of FINTECH technologies will be conducted and monitoring procedures will be carried out to ensure proper taxation of the ownership and transfer of virtual currencies, and of the source of funds used in acquiring them.
- Highlighted in relation to VAT is the amendment of Council Regulation (EU) 904/2010 of 7 October 2010 on administrative cooperation and combating fraud, which will involve closer and more active participation among the various countries in the European Union to combat cross-border VAT fraud more effectively.
It also charts greater control over the taxpayer register for entities to exclude any that are potential clients to be used by criminal organizations to commit offenses.
Lastly, the following targets are underlined: (i) control of active organizations in the hydrocarbons industry, (ii) control over warehousing procedures other than customs procedures and (iii) control over input VAT refunds in acquisitions of goods made by non-resident travelers in Spanish VAT territory.
- In the field of corporate income tax, emphasis is placed on low activity companies on which a varied range of tax management and audit examinations will be conducted.
- In relation to control procedures on tax groups and entities, particular attention will be paid to the offset of net operating losses close to expiration of their statute of limitations and to VAT groups included in the advanced category in the special regime, by making use of the information on the Immediate Supply of Information (SII) system.
Also underscored is the need to monitor tax groups with low net sales/revenues figures on a consolidated basis or with a very small number of members and groups in which there are no internal transactions.
- Regarding the control and review of information on the taxpayer register, the Plan emphasizes the need to clean up the registers, and mentions a new prevention strategy involving a review of new taxpayers entered on the register (“right from the start” strategy), and the inclusion of a taxpayer register control module in tax audit activities.
- Mentioned as an important axis of their work is the verification of taxpayers’ proper compliance with their tax obligations with the central government authorities, and the provincial authorities for the Basque Country and Navarra .
- In relation to customs fraud control it notably mentions the potential effects of Brexit and the resulting adaptation measures needing to be adopted.
General cooperation is extended to the remote filing of applications for correction of self-assessments
The decision rendered on December 21, 2018, by the Directorate-General of the State Tax Agency, extending the scope of general cooperation on tax management/collection matters to the remote filing of applications for correction of self-assessments, and approving the standard document for evidencing the appointment of a representative to be filed remotely on behalf of others was published in the Official State Gazette on January 7, 2019.
Approval of the 2019 General Budget Law for the Canary Islands autonomous community
On December 31, 2018, the Canary Islands Official Gazette published Law 7/2018, of December 28, 2018 on the 2019 General Budget for the Canary Islands autonomous community which includes, among other tax measures, a reduction of the standard Canary Islands general indirect tax rate to 6.5% as mentioned in our Tax Alert (Canary Islands Tax Alert dated December 31, 2018).
Tax credit for the creation of employment with the contract to support entrepreneurs
Royal Decree-Law 28/2018, of December 28, 2018, for the revaluation of public pensions and other urgent social security, labor and employment measures was published in the Official State Gazette on December 29, 2018.
Among the various amendments to labor and employment law, it repeals the contracts to support entrepreneurs in effect from January 1, 2019. A transitional regime has been provided, however, for contracts concluded earlier, which will continue to be governed by the legislation in force when they were concluded.
This repeal affects the corporate income tax incentives associated with those contracts, although they will stay in place for contracts executed before that date.
The VAT regulations have been amended in relation to invoicing, to tax management and audit work and procedures to implement the common rules on the procedures applicable to taxes other than income tax and excise and other special taxes
Royal Decree 1512/2018, of December 28, 2018 amending various Regulations in the field of VAT, invoicing, procedure and excise and other special taxes was published in the Official State Gazette on December 29, 2018.
The following new amendments are notable:
- VAT Regulations (Royal Decree 1624/1992, of December 29, 1992):
- Various technical adjustments have been introduced as a result of the implementation in Spanish domestic law of the new place-of-supply rules for telecommunications, radio or television broadcasting, and electronically supplied services, and the simplification of the requirements laid down to elect the one-stop-shop system made through the 2018 General State Budget Law.
- Along the same lines, it provides that the applicable legislation in relation to invoicing by taxable persons electing the special regimes applicable to telecommunications, radio and television broadcasting, and electronically supplied services will be the legislation of the member state of identification not of consumption. This amendment is also included in the Regulations on invoicing obligations.
- A few amendments have been included to facilitate the voluntary election to apply the immediate supply of information system (SII).
- It sets out the information that must be supplied by taxable persons on transactions performed in the calendar year before the date on which they are required to use the immediate supply of information system (SII).
- It will also be necessary to disclose the electronic refund documents which, since January 1, 2019, have become mandatory for refunds of VAT on export under the travelers’ scheme.
- Regulations on invoicing obligations (Royal Decree 1619/2012, of November 30, 2012). In addition to the described amendment in these Regulations:
- An update has been made to the list of VAT-exempt transactions for which it will be mandatory to issue an invoice and an exception to this obligation (as was already in place for insurers and credit institutions) has been provided for other financial institutions in respect of any exempt insurance and financing transactions they perform.
- The special invoicing procedure applicable to travel agencies acting for and on behalf of other traders or professionals in the marketing of those services has been extended to include the travel services subject to the special scheme for travel agencies.
- General Regulations on tax management and audit work and procedures and implementing the common rules on procedures to manage, collect and audit taxes (Royal Decree 1065/2007 of July 27, 2007).
- The supply of all information on transactions with subscription rights has been centralized at the custodian. Only in the absence of a custodian in Spain, will the disclosure obligation lie with the financial intermediary or with the public authenticating officer certifying the transaction.
- Rules have been set on the new options available to certain taxable persons so that their telecommunications, radio and television broadcasting, and electronically supplied services, provided to end consumers will always be taxed in the member state of consumption.
- It sets out an exemption from the obligation to file the information return for transactions included on the record books and other transactions (form 340) for taxable persons with an obligation to supply their invoicing records electronically for the purposes of the Canary Islands general indirect tax.
- Regulations on Excise and Other Special Taxes (Royal Decree 1165/1995 of July 7, 1995).
- Technical adjustments have been included arising from the inclusion of the autonomous community tax rate for the tax on hydrocarbons in the special portion of the central government rate approved in the 2018 General State Budget Law.
- It has implemented the procedural obligations required for certain tax benefits for the purposes of the tax on hydrocarbons and the special tax on coal.
- The relevant technical adjustments have been made arising from the new legislation on the identification of packaging units of tobacco products and their traceability.
- Certain obligations and formalities for beer manufacturers have been simplified.
- The entry into force envisaged for January 1, 2019 for the new procedures introduced by Royal Decree 1075/2017 for sales en route and of aircraft and vessel fueling operations has been delayed on until July 1, 2019.
Lastly, through Royal Decree 1512/2018, of December 28, 2018 the places where it will be possible to authorize, subject to customs control, a duty-free shop at ports or airports have been determined to increase operators’ legal certainty.
Amendments have been introduced to various information returns (forms 187, 117, 190, 196, 198, 289 and 291)
Order HAC/1417/2018, of December 28, 2018, was published in the Official State Gazette on December 29, 2018 and amends the orders approving certain information returns. The new legislation notably includes:
- Form 187 (for the information return on shares representing the capital or equity of collective investment vehicles) and form 198 (annual return for transactions with financial assets and other transferable securities). The following has been clarified in relation to transfers of subscription rights:
- If they are subject to tax withholdings, they are reported on form 187.
- If they are not subject to tax withholdings, they are reported on form 198.
- Where a custodian in Spain is involved, only the custodian will have to file the form (187 and/or 198). In the absence of a custodian, the financial intermediary or public authenticating officers certifying the transaction will have to file the return.
- Form 187 does not have to be filed in cases of advance payments by the shareholder or investor making the transfer or obtaining the refund. This exclusion only applies to the shareholder or investor. In other words, all other parties with obligations participating in the transaction (financial intermediaries, public authenticating officers, management entities) will be required to file the form.
- A field has been included for reporting the expenses arising from the sale of subscription rights that are not taken into account for the purposes of the withholding.
- Form 117 (withholdings in relation to income from transfer or redemption of shares in collective investment vehicles and from transfers of subscription rights).
A few unclear names have been corrected on a few boxes.
- Form 190 (Information return. Withholdings. Salary income and income from economic activities, prizes and certain capital gains and attributions of income. Annual summary).
The form has been adapted to improve the quality of the information in relation to cases of exempt income in kind in which the companies or employers provide the service related to the first cycle of infant education to the children of their workers under indirect mechanisms and to allow any maternity and paternity public social security benefits received to be reported as exempt.
- Form 196 (Information return. Annual summary of withholdings from income from movable capital obtained as a result of the consideration arising from accounts at all types of financial institutions), Form 198 (annual return for transactions with financial assets and other transferable securities) and form 291 (Information return. Nonresident income tax. Accounts of nonresidents without a permanent establishment).
A field has been added to identify any accounts presumed abandoned as referred to in Law 33/2003, of November 3, 2003, on government property, with problems for identifying those reported.
- Form 289 (Annual information return on financial accounts in the field of mutual assistance) The countries with which exchange of information is made have been updated.
The Order came into force on December 30, 2018 and will apply for the first time to the annual returns for 2018 which will be filed in 2019.
Amendments to forms 309, 036, 030 and 034
Order HAC/1416/2018, of December 28, 2018, was published in the Official State Gazette on December 29, 2018 and amends various orders in relation to forms 309, 036, 030 and 034.
On form 309 for the non-periodical VAT self-assessment return (Order HAC/3625/2003, of December 23, 2003) the cases in which the obligation to file the return is envisaged have been broadened to include those of taxable persons electing the special schemes for agriculture, livestock and fishing and for the compensatory charge who owe amounts to the tax authorities as a result of the amendment to the taxable amount for fully or partially unpaid transactions.
Elsewhere, the inclusion in Spanish domestic law of the new place-of-supply rules for telecommunications, radio and television broadcasting, and electronically supplied services and the simplification of the requirements laid down to elect the one-stop-shop system (through the 2018 General State Budget Law) were behind the introduction of amendments to form 036 (Order EHA/1274/2007, of April 26, 2007) and to form 034 (Order HAP/1751/2014, of September 29, 2014).
Lastly, amendments have been made to form 036 (Order EHA/1274/2007, of April 26, 2007) and form 030 (Order EHA/3695/2007, of December 13, 2007) to add a new box to report the effective date of the change of tax residence.
The order entered into force on January 1, 2019.
New legislation on tax and cadaster matters in Royal Decree-Law 27/2018
Royal Decree-Law 27/2018, of December 28, 2018, adopting certain measures related to tax and the cadaster, was published in the Official State Gazette on December 29, 2018. We discussed this new law in our Tax Commentary dated January 2, 2019.
A package of tax, labor and social security measures designed to encourage artistic creation and filmmaking in Spain has been approved
Real Decree-Law 26/2018, of December 28, 2018 was published in the Official State Gazette on December 29, 2018, and has approved a package of urgent measures designed to encourage and protect the performance of artistic creation and filmmaking activities in Spain. We discussed this law in our Tax / Labor and Employment Alert dated January 2, 2019.
Form 233: Information return for expenses at authorized kindergarten or infant education institutions
Order HAC/1400/2018, of December 21, 2018 approving (among others) form 233: “Information return for expenses at authorized kindergarten or infant education institutions” was published in the Official Gazette on December 27, 2018.
This return must be filed by the kindergarten or infant education institutions in January of each year in relation to the information for the immediately preceding year. Exceptionally for the 2018 return, the filing period will end February 15, 2019.
The average selling prices for 2019 of certain modes of transport for the purpose of auditing values have been published
Order HAC/1375/2018, of December 17, 2017, approving the average selling prices applicable in the management of transfer and stamp tax, inheritance and gift tax and the special tax on certain modes of transport, was published in the Official State Gazette on December 24, 2018.
The order entered into force on January 1, 2019.
Amendment of the Personal Income Tax Regulations
Royal Decree 1461/2018, of December 21, 2018, amending the Personal Income Tax Regulations was published in the Official State Gazette on December 22, 2018. The amendments are essentially to adapt them to the measures introduced in the Personal Income Tax Law by the 2018 General State Budget Law (Law 6/2018, of July 3, 2018).
- It describes the calculation method for the maternity tax credit, following the increases introduced by the 2018 General State Budget Law for cases in which costs relating to minding children under three at kindergarten or infant education institutions have been paid.
- The contents are specified for the information return to be filed by the authorized kindergarten or infant education institutions.
- The regulations have been adapted to the new regime applicable to tax credits for large families or dependents with disabilities.
- It has set by regulation the limits determining the withholding and reporting obligations set out in the Personal Income Tax Law, applicable on or after January 1, 2019.
- Effective from January 1, 2019, it has removed the exemption from the obligation to keep tax records for taxpayers who keep accounting records that comply with the Commercial Code except for any taxpayers carrying on business activities that determine net income under the normal direct assessment method.
- Specification is given of the requirements that must be met by insured lifetime annuities under contracts containing reversion mechanisms, defined benefit periods or counterinsurance mechanisms in the contracts referred to in article 38.3 (exemption for reinvestment of lifetime annuities) and additional provision three (individual systematic saving plans) of the Personal Income Tax Law.
These requirements will not apply to life insurance contracts concluded before April 1, 2019 under which the benefits are received in the form of an insured lifetime annuity.
Publication of the annual equivalent rate for the first quarter of 2019, for the purpose of characterizing certain financial assets
On December 22, 2018 the Official State Gazette (BOE) published the decision of December 19, 2018, by the Office of the General Secretary for the Treasury and Financial Policy, which, as is now the custom, sets out the reference rates that will apply for the calculation of the annual effective interest rate for the purposes of characterizing certain financial assets for tax purposes, this time for the first calendar quarter of 2019. The rates are as follows:
- Financial assets with terms of four years or less: 0.017 percent.
- Assets with terms between four and seven years: 0.330 percent.
- Assets with ten-year terms: 1.165 percent.
- Assets with fifteen-year terms: 1.693 percent.
- Assets with thirty-year terms: 2.142 percent.
In all other cases, the reference rate for the period closest to the period when the issuance is made will be applicable.
The 2019 non-working day calendar for central government public services has been published
The Official State Gazette (BOE) of December 11, 2018 published the Decision of November 29, 2018, of the Secretary of State for the Civil Service, providing for the purposes of calculating time periods, the non-working day calendar within the scope of the central government public services for 2019.
Form 763 for the self-assessment of the tax on gambling activities has been amended
Order HAC/1363/2018, of November 28, 2018 in relation to form 763 (self-assessment of the tax on gambling activities) was published on December 22, 2018 in the Official State Gazette.
Specifically, it has adapted the self-assessment form to the new legislation in the 2018 General State Budget Law which determined that (i) in all gambling cases (except in the case of charitable mutual sports betting run by the government and random combination draws for advertising or promotional purposes) the tax base (to which a single rate applies) will consist of net prize revenues and (ii) a 50% reduction to the rates to be charged in the autonomous cities of Ceuta and Melilla.
This Order came into force on December 23 and will be applicable for self-assessments relating to the fourth quarter of 2018 and thereafter.