Tax benefits of the “Mbappé Law” for the Community of Madrid

On July 11, Bill PL-3/2024 was published in the Official Gazette of the Madrid Assembly, which regulates the new deduction for investments by new taxpayers from abroad that they may apply to their Personal Income Tax when become tax residents in the Community of Madrid as of January 1, 2024. Journalistically, it has been dubbed the “Mbappé Law.”

The deduction will be 20% of the acquisition value of those financial assets in which the taxpayer invests in the year of acquisition of the tax residence or in the following year (and in the case of investment in financial assets of Spanish entities, the investment may also be made in the year prior to the acquisition of the aforementioned residence), and may be applied in the year in which the investment occurs and in the 5 immediate and successive years in the event of insufficient quota integral.

Access to the full Draft Law  HERE

VAT. Concept of “Single Supply”

On October 8, 2023, the European Union Court of Justice (EUCJ) issued a ruling on the free delivery of a tablet or smartphone as a reward for subscribing to a new magazine. The EUCJ determined that granting a subscription gift constitutes an ancillary supply to the principal supply of periodicals, which falls under the concept of “supply of goods for consideration” and should not be considered a free supply of goods (self-consumption).

The EUCJ based its judgment on the premise that granting a subscription gift to new subscribers serves as an incentive for subscription, solely aimed at increasing the number of subscribers to the magazines published by the claimant, thereby enhancing their profits. In other words, the delivery of the gift does not have an independent purpose from the perspective of the average consumer, who agrees to pay at least one month’s subscription fee to receive the gift. The subscription to these magazines, on one hand, and the gift of a tablet or smartphone with a unit value of less than 50 euros per new subscription, on the other, form a set in which the subscription constitutes the main supply, while the gift is an ancillary supply whose sole purpose is to incentivise the subscription.

This criterion, consistent with previous EUCJ rulings, might help us in interpreting when we are dealing with ancillary supplies for VAT purposes.

Access to the full sentence HERE

Increased inspections in Transfer Pricing matters

Considering the actual relevance of the Transfer Pricing topic, from our Transfer Pricing department, we would like to inform you that we have recently observed an increase in inspections in this area, as a key point in the inspection processes of Corporate Tax by the Tax Authority.

Therefore, compliance with transfer pricing regulations is crucial, not only to avoid penalties but also to ensure fiscal efficiency and transparency in all transactions between related entities, both domestic and international.

With Arely Almaguer as the head of the transfer pricing department, bringing international experience, Audiconsultores ETL GLOBAL is at your disposal to provide strategic advice to identify opportunities for tax optimisation with robust compliance documentation and risk identification, as well as the development of well-founded transfer pricing policies in the event of any inspection by the authority.

Taxation of Non-Residents in Spanish Wealth Tax – Deductibility of Loans for Real Estate Acquisition

The General Directorate of Taxes (DGT) has admitted, in its binding consultation V0010-24 dated 13 February 2024, that a loan granted to non-tax resident individuals in Spain to acquire a property in Mallorca is deductible in their Wealth Tax, even if said loan comes from an English financial institution.

In the analysed case, the non-tax resident individual acquired a property located in Mallorca financing the operation with a personal loan from a Spanish bank, and is considering refinancing this loan with a personal loan from an English bank since they offer more favourable conditions.

Thus, the DGT concludes that, to the extent that the first loan was deductible due to its purpose (the acquisition of a real estate located in Spain) and provided this is evidenced by any valid means in law, the new loan will also be deductible for the same reason. This conclusion would be applicable regardless of the type of loan granted by the financial institution, as it would ultimately have been dedicated to financing the acquisition of the property in Spain.

Access the full binding consultation HERE

Non-Residents Income Tax: Non-deductibility of expenses in property leases by residents from outside the European Union

The Spanish Central Economic-Administrative Court (TEAC), in its resolution dated 20 March 2024, confirms the non-deductibility of expenses in property leases by taxpayers residing in non-EU countries. This decision considers that the fact that the special rule on the deductibility of expenses and the reduced tax rate of 19% only apply to residents of the EU and the European Economic Area do not imply an incompatibility of the Spanish legislation with European Union Law nor a possible violation of constitutional principles.

Access to the full resolution HERE

Non-Resident Income Tax. Rental of real estate located in Spain by a resident in Germany

The Central Tax Court (TEAC), in its decision dated 20 March 2024, has reiterated, in line with previous resolutions, that the income obtained by a resident in Germany from the lease of a property located in the Spanish territory is subject to taxation in Spain, without entitled the non-resident taxpayer to benefit from the reductions provided for in the Personal Income Tax Law (specifically, the 60% reduction for being a residential lease).

We will be attentive to confirm if this criterion, which is certainly questionable, is modified if this case reaches the Courts of Justice.

Access to the full resolution HERE