Effective benefit in the payment of fees

A recent Court decision from the Catalonian High Court of Justice (Tribunal Superior de Justicia- TSJ – case number 1947/2023) dated May 26, 2023 recently published analyses in depth the effective beneficiary issue in the royalty payments by a Spanish company to non-resident companies.

The TSJ ratifies the criterion that has been followed by the Tax Authorities and by other Courts in the last years, concluding that the tax exemption stated in the Spanish domestic legislation on royalty payments to entities resident in another EU country (article 14 of the Non-Residents Income Tax Law), is only applicable if the recipient is the effective beneficiary of the royalty.

Therefore, this exemption shall not be applicable if the recipient company is not the effective beneficiary of the royalty, but, for instance, a mere intermediary acting on behalf of other company which is tax resident outside the EU.

The exemption not being applicable in the case analysed, the TSJ concludes that the Spanish payer should have withheld the corresponding withholding tax in accordance with the applicable Tax Treaty between Spain and the country where the effective beneficiary is resident.

The same criterion stated in the Court decision would be applicable in the case of interest payments from a Spanish company to an EU or EEE company.

Access to the full judgment HERE

Unconstitutionality of measures introduced in the IS by RDL 3/2016

Yesterday the plenary of the Constitutional Court declared the unconstitutionality of Royal Decree-Law 3/2016, through which significant measures were introduced for the taxation of companies and tax groups. Specifically, the measures introduced in 2016 affected the following aspects of the Corporate Income Tax (CIT) settlement:

• Restrictions regarding the limits applicable to big companies for the set-off for the negative tax bases and deferred tax assets.

• The introduction of a new limit for big companies applicable to deductions to avoid double taxation.

• The obligation to automatically include impairments of shareholdings that had been deducted in previous years in the taxable base.

• Modification of the treatment of negative income derived from the transfer of shares in other entities.

This ruling will have an only impact on those taxpayers who had requested the rectification of their CIT self-assessments for previous tax years before the decision of the Constitutional Court was published.

For more information, you can consult the complete press statement from the Constitutional Court (in Spanish) HERE.

Income Tax Law: Transfer Pricing Accreditation

The National Audicence, in the statement dated May 31st 2023, has deemed that, in the transfer pricing adjustment carried out, the reference to the fact that the margins are excessively wide is not considered sufficiently expressive of the reasons that would justify the application of the median.

In the opinion of the NA, the rationale provided by the Tax Administration regarding the excessively wide margins is not considered sufficiently expressive of the reasons that would justify the application of the median in the manner expressed. Therefore, the Court has upheld the argument at this point and deemed appropriate the application of the lowest point of the arm’s length range determined by the Tax Administration.

 

Access to the full statement HERE

Modification of the calculation for limiting financial expenses

In relation to the calculation of the limitation of financial expenses for the purpose of determining the taxable base of the Corporation Tax, it should be noted that in the BOE of May 25, 2023, Law 13/2023 was published. This law, among other tax changes, modifies the wording of Article 16 of the Corporation Tax Law in its Fifth Final Provision; ‘Limitation on the deductibility of financial expenses’.

The main modification introduced in the wording of Article 16 of the LIS (Corporation Tax Law) refers to the fact that, for the calculation of the operating profitfinancial income from holdings in equity instruments cannot be added, when it corresponds to dividends in which the participation percentage is at least 5% and they have not been integrated into the taxable base of the Corporation Tax, as a consequence of being exempt under the application of Article 21 of the LIS (95% exemption).

This new regulation is applicable for fiscal years starting on or after 1 January 2024.

 

For more information, click  HERE

ETL GLOBAL Tax Working Group

ETL GLOBAL Tax Working Group, in which Audiconsultores ETL GLOBAL participates, had published a summary of the main tax incentives considered in the  European Union countries and in the UK with their respective Corporate Tax regulations. This can help companies to path themselves when they decide to start their international adventure.

It has been a pleasure to collaborate with the following European firms of ETL GLOBAL:

Acs Accountants (Belgium)
KODAP (Checz Republic)
In extenso (France)
DUTHILLEUL ET ASSOCIES (D&A) (France)
ETL Heuvelmann & van Eyckels GmbH StBG (Germany)
ETL-*Gruppe (Germany)
NEXUMStp S.p.a. (Italy)
Sheltons Group (Malta)
MDDP (Poland)
SWGK (Poland)
ETL GLOBAL Espanya (Spain)
Skattepunkten AB (Sweden)
mgr (UK)
ETL GLOBAL UK

You can consult it through this link, and we are at your disposal for any clarification you may need.

Income Tax Law – Considerations by the inspection for Related Operations

The Supreme Court, in the statement dated June 21st, 2023, has confirmed the TEAC criteria and considers that, when the services provided by the partner to the related party, and the service that the this entity provides to third parties is substantially the same, and the mentioned entity does not has the resources to provide the services, if it is not for the necessary and essential participation of the person (partner), not providing added value (or this being residual), it is correct to consider that the payment agreed in the transaction with third parties is an unrelated comparable transaction.

 

Access to the full statement HERE