The Spanish government recently announced the modification of the Wealth Tax Law when the taxpayer is an individual non-resident, and owns a real estate in Spain through a non-resident entity.
Until now, and based on the wording of the majority of the tax treaties signed with Spain, an individual non-resident, may be taxed in Spain when he/she indirectly holds an immovable property in Spain through a non-resident entity, and the immovable property represents more than 50% of the total assets.
Although the correspondent tax treaty allows the taxation for the Wealth Tax in Spain, in practice, the final and effective taxation was not possible provided that the Spanish domestic rule only regulates the taxation for those assets or rights located in the Spanish territory or when those assets can be utilized in Spain.
Considering the fact that the holding of securities in a non-resident company held by an individual non-resident, is not currently subject to taxation in the Spanish Wealth Tax, this means the impossibility to subject to taxation the ownership of a real estate located in Spain indirectly owned by the individual non-resident.
The above situation has been amended in the draft law document announced by the Spanish government that modifies the Wealth Tax Law, with the purpose the ownership of a real estate held through a non-resident entity may be taxed in Spain.
Considering there is a general exemption of EUR 700,000, the taxation for the Wealth Tax would be on general terms, when the value of the real estate is higher than this amount.
The final wording of the proposed modification will be discussed in the following weeks in the Spanish Parliament. It is also pending to decide if this modification of the Spanish Wealth Tax law will enter into force in year 2022 or in year 2023.
We will keep you duly informed on the progress of this important new regulation.
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We hereby remind you the deadline for the submission of the Model 232, related to the intercompany transactions, next November 30th. The extemporary submission must represent a penalty from the Tax Administration.
From Audiconsultores ETL Global we support the taxpayer with this obligation by collecting information and the compliance of the Model.
You can consult more information about the model in the previous Tax Flash
In three recent rulings of the Supreme Court of 21/07/2022 (rec. 5309/2022) and 26/07/2022 (rec. 5693/2020 and 4762/2020) it has been considered that financial expenses incurred in the financing of payments to members (dividends and restitution of contributions) cannot be classified as donations or liberties, and are tax deductible provided that they comply with the general requirements for deductibility of the expense.
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According to the criterion of the General Tax Direction published through the tax ruling V1405-16, date 06/04/2016, a non-resident individual is a taxable person for the Spanish Inheritance Tax purposes if the heritage includes not only (i) securities and shares issued by Spanish entities but also (ii) those issued by foreign entities which are deposited in offices of banks and other financial entities located in Spain, regardless of whether they are listed in different markets in other countries than Spain.
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According to article 13.4 of the Corporate Income Tax, Corporate Income Tax and Non-Resident Income Tax (IRNR) taxpayers acting through a permanent establishment in Spain, as well as entities under the income attribution regime incorporated abroad with presence in Spanish territory, must file Form 232 within the month of November 2022.
This form considers the information of the intercompany transactions, with special attention to specific operations and their volume. In this sense, our Transfer Pricing Department supports and come along with the taxpayers that consider the obligation to validate and submit the information for its formal presentation.
You can access to the regulation of this form HERE
We remind you EU companies that are not established in Spanish VAT territory have until 30th September 2022 to claim a refund of VAT borne in Spain during 2021 through the mechanism established by the tax authorities of the country in which they are established. The 30th September 2022 is also the deadline to request the refund of the Spanish VAT borne by non EU companies, through the submission of the 361 Form, directly filed before the Spanish Tax Authorities.
For any question in this regard, please do not hesitate to contact us.