Transfer Tax and Stamp Duty (non-residents) As a non-resident, you sometimes have to self-assess the Transfer Tax and Stamp Duty (ITP and AJD) with the Tax Agency.Titles of nobility are in any case self-assessed by the tax office, regardless of whether you are a resident or not. Tax losses under Spanish law can be carried forward without temporal limitation. (Except for the Community of Madrid). The CIT Law expressly provides that, if the deferral requirements are not met, the tax authorities can only regularize the tax advantage unduly taken but cannot claim the tax charge on the unrealized gains of the dissolved entity. A profitable business could use its acquirers tax losses. tax returns models to submit DAC6 events have not been submitted yet). (Under previous tax legislation, interest accrued under PPLs was tax-deductible where it complied with the general tax rules for the deductibility of financial expenses.). The CIT Law included transitional rules for acquisitions of shares before 1 January 2015. Claiming the remittance basis means you only pay UK tax on the income or gains you bring to the UK, but you: Claiming the remittance basis is complicated. Law 3/2009 regulating structural modifications of commercial companies also deals with financial assistance. The Spanish patent box regimen was amended to align it with the OECD requirement, specifically, with the recommendations under Action 5 of the OECD BEPS project, which provide a framework for the patent boxes regimes. The same rules apply if you make any foreign capital gains, for example you sell shares or a second home. The General Accounting Plan was approved by the Royal Decree 1514/2007. These measures focus on the elimination of hybrid asymmetries generated by: (i) certain payments (such as interest, royalties, etc.) The non-dom regime allows foreign nationals resident in Britain but claiming their domicile in another nation to avoid paying UK tax on their overseas income or capital gains for up to 15 . Please refer below to the KPMG link for referring jurisdictional tax measures and government reliefs in response to COVID-19. The CIT Law expands the scope of the definition of partial spin-off (escisin parcial) that can benefit from the tax neutrality regime. *Provided they are taxed in another country with which there is a DTT, *When taxed in another country with which there is a DTT. Generally, a transaction can be performed as a share deal, in which the shares in the target entity are sold, or as an asset deal, in which the assets (and normally the associated liabilities) are the objects of the transaction. Economic and Financial Affairs Council configuration (ECOFIN) adopted amendments to the DAC6 (EU Directive on cross-border tax arrangements), which introduce mandatory disclosure requirements for tax intermediaries of certain reportable cross-border arrangements to their local tax authorities. Losses on transfer of shares and PEs qualifying for participation exemption. Below is summarizing the provisional position of Spain regarding this Convention. tax saving or deferral). Spain has also included clauses to prevent abuse due to the use of hybrid mechanisms and clauses aimed at avoiding the artificial circumvention of permanent establishment (PE) status. You must report foreign income or gains of 2,000 or more, or any money that you bring to the UK, in a Self Assessment tax return. Under certain circumstances, goodwill and intangible assets with an indefinite life are amortizable for tax purposes. The Beckham taxation regime, and to be taxed as non-residents only for employee income produced in Spain (income generated abroad is exempt) at a rate of 24% up to a threshold of 600,000. They remain with the company or are extinguished. Losses derived from an intragroup transfer may be compensated with certain limitations. El equipo de especialistas de KPMG trabaja al ritmo de la operacin para ayudarte a crear valor a lo largo del cliclo de vida de la transaccin. non-voting shares, redeemable shares) and interest on profit-participating loans granted to group entities are characterized as dividends and could benefit from PEX. To mitigate adverse tax consequences from the reduced CIT rate (which was 30 percent before FY2015), the Spanish CIT Law introduced a tax credit that would apply on the recapture of accounting depreciations that were not deducted in FY2013 and FY2014. There is a clear intention on the part of the Spanish tax authorities to prevent abuse of the treaty by denying application of tax breaks to business decisions made strictly for tax reasons. To minimize the cost of debt, there must be sufficient taxable profits against which interest payments can be offset. However, a new subcategory is created: intangible assets whose useful life cannot be reliably estimated. This exemption does not apply to capital gains derived directly or indirectly from: The exemption does not apply to any gains on the transfer of holdings in entities resident in a country or territory classified as a tax haven, unless they reside in an EU member state and can demonstrate that their formation and operations are based on valid economic reasons and they engage in economic activities. Beckham law in Spain. Facilitated tax regime up to 600,000 Ask your employer to find out if you can claim. Also exempt from 1 percent capital duty are contributions in cash or in kind to the share capital or equity of a company and the transfer to Spain of the legal seat of a non-EU company. In Spain, taxation on income from employment has a general rate of 24% with a limit of 600,000 (after which the rate rises to 45%). Generally, the capital gains derived from the difference between the net book value and the market value of the goods and rights transferred because of the above transactions are not included in the transferors CIT tax base. Foreign-source BACKGROUND TO THE BENEFICIAL TAX REGIME Under the amendment, it is necessary in such cases to prove the existence of valid economic purposes and solid business reasons for incorporating the EU parent company. Effective from 25 June 2018, DAC6 should had been transposed into the legislation of each member state by 31 December 31 2019, and the obligation to report would had begun 1 July 2020. The requirements for the application of the EU Parent-Subsidiary Directive and EU Royalties Directive were modified in FY2015 to prevent abusive situations in which the majority of the participation in the parent company was held by non-EU resident companies. How To Save Taxes in Spain: Beckham Law for Expats - Balcells Group The most relevant measures for CIT purposes established in the GSB Law (with effect as from the tax periods commencing on 1 January 2021 and thereafter) that could affect M&A transactions relate to the Spanish participation exemption (PEX) regime. You can change your cookie settings at any time. This Bill includes, among other measures, certain amendments to Spanish CFC rules and exit tax with the aim of entirely aligning them with the EU ATAD. Funding an investment with equity has no Spanish adverse tax implications. As of FY2015, this tax neutrality regime was amended as follows. When it comes to tax residency, the days of nomads with no specific tax residency are over. Reduced IRC rate of 5% for income obtained outside Portugal. the majority of the capital stock or of the rights to share in the income of the entity has been acquired by a person or entity or by a group of related persons or entities after the end of the tax period to which the tax losses relate, such persons or entities hold less than 25 percent at the end of the tax period to which the tax losses relate, and, has not performed any economic operations in the 3 months before the acquisition, or, has performed a different or additional economic activity during the 2 years after the acquisition that generates a net turnover value over the 50 percent of the net turnover corresponding to the 2 prior years, or, is a passive holding company as defined in the Spanish CIT Law, or. The date of acquisition is crucial (for real estate only where the seller is a legal entity and for all assets where the seller is an individual, provided certain requirements are met). Consideration should also be given to using hybrids, which are instruments treated as equity for accounting purposes for one party and debt (giving rise to tax-deductible interest) for the other. KPMG International provides no client services. For tax periods starting on or after 1 January 2016, limitations on carryforward of tax losses were introduced for large companies. If you need help working out which country youre domiciled in, you can: There are additional rules for domicile and Inheritance Tax. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. Additionally, two further requirements have been introduced under the new regulations: the obligation to differentiate the ancillary services now also applies to the ancillary supply of goods. If no positive reserves exist, the share premium redemption would not have Spanish tax effects (i.e. UK residents who have their permanent home (domicile) outside the UK may not have to pay UK tax on foreign income. Income earned in Spain will be taxed at a rate of between 19% and 23% depending on the amount. The information collected is related to the website's regular management. As of 1 January 2015, the Spanish CFC rules were amended to include, among others, additional substance requirements to be met by the foreign subsidiary in order to avoid the imputation of the foreign low-taxed income. What is a Non-Dom regime? Find out about the Energy Bills Support Scheme, Residence, Domicile and the Remittance Taxpayers with turnover below EUR20 million in the 12 months before the beginning of the relevant FY may only offset 60 percent of their positive tax base (70 percent for FYs starting in 2017). Click here COVID-19 tax measures and government reliefs. The purpose of the FTT is to tax transactions that are not subject to any current indirect taxation. In such cases, where more than 50 percent of the companys assets by value consist of real estate not linked to its business activity and the acquirer receives more than 50 percent of the companys voting rights directly or indirectly, the transfer of the shares may be subject to VAT or transfer tax, to the extent that the parties involved in the transfer of shares act with the intent of avoiding the tax otherwise due on the transfer of immovable properties. The CIT Law also provides a special rule for derivatives when the legal holder of the shares is not the beneficial owner of the dividend, such as stock loans or equity swaps. Spanish accounting legislation was adapted to European legislation by Law 16/2007, which was designed to reform commercial accounting rules and harmonize them with EU rules. May benefit from tax losses of the target company (with certain limitations). Amount of the rates applied by the Beckham special tax regime News stories, speeches, letters and notices, Reports, analysis and official statistics, Data, Freedom of Information releases and corporate reports. It should be noted that Spain has opted for the principle purpose test as the standard for combating abusive tax practices. KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (KPMG International), each of which is a separate legal entity. On 30 November 2020, the Spanish Ministry of Finance released a draft bill to implement the EU Anti-Tax Avoidance Directive (Council Directive2017/952 of 29May 2017, known as EU ATAD2) into the Spanish CIT and Nonresident Income Tax (NRIT) provisions. Categories. These entities may only take 70 percent of the maximum depreciation rates for tax purposes corresponding to fixed assets. There are two main types of limited liability companies: Sociedad Anonima (SA) and Sociedad de Responsabilidad Limitada (SL). For a tax group, the tax deduction of the capitalization reserve is calculated on a tax group basis, although the accounting reserve can be recognized by any of the tax groups entities. Tax Agency:Special regime for impatriates art. 93 Ley IRPF (Personal Finally, a common issue on transaction structuring arises from the provisions for financial assistance. The Spanish regime applicable to foreign workers is established by Article 93 of Spanish IRS Law 35/2006. It is not a subsidiary of another company fulfilling the requirements to be regarded as the controlling company. We use some essential cookies to make this website work. Interest that cannot be offset immediately because of net operating losses can only be carried forward for offset against future profits of the entities within the tax group. The target companys assets or shares can be acquired through a branch. Non-Domiciled Tax Scheme Taxation Spain introduced a special tax regime for wealthy expatriates following in the wake of other countries. Interim dividends are allowed. The Spanish DST has finally been approved. The non-resident shareholder should comply, among others, with the following requirements. In exchange, the shareholders of the company acquired are given participation in the acquiring company and, if necessary, monetary compensation that cannot exceed 10 percent of the nominal value of the shares. The rates of this tax credit are 2 percent for 2015 and 5 percent for 2016 and future years. the individual cannot receive compensation that is deemed to be obtained by a permanent establishment in Spain; Under this special tax regime, employment income up to 600,000 is taxed at a rate of 24%, and employment income exceeding this amount is taxed at a rate of 45%. Tax-neutral regime for corporate reorganizations. Where the net interest expenses of a taxable year are below the 30 percent limit, the unused difference (up to 30 percent of earnings before income taxes, depreciation and amortization EBITDA) can be carried forward for 5 years. These standards aim to ensure that these regimes reward only substantial activity (nexus approach). Moving To Spain - When Will You Become Spanish Tax Resident? - Tax In general terms, the buyer may deduct the VAT paid on inputs from the VAT charged on outputs and claim a VAT refund where the VAT paid exceeds the VAT charged monthly or quarterly. Tax in Spain | Spain Tax Guide - HSBC Expat Tax liabilities are inherited when acquiring a business unit. Normally, the pushdown of debt has been a structuring measure to allow the offsetting of the funding expenses against the targets taxable profits. Anyone who has assets in Spain is obliged to pay Spanish wealth tax. We also use cookies set by other sites to help us deliver content from their services. Under a tax allowance included in Spanish CIT Law, only 60 percent of income obtained from, among others, the transfer of the qualifying intangible assets (e.g. Sales of real estate included in a going concern may not be subject to VAT and thus are subject to transfer tax, without the possibility to elect being subject to VAT. There are no advantages in Spain for a company with dual residency. The standard VAT rate is 21 percent. In addition, employment income is taxed globally, regardless of where it is generated, which also applies to pensions. If you are living and working in Spain, you are liable to pay income taxes on your income and assets and will need to file a Spanish tax return. May gain benefit of existing supply or technology contracts. Carried forward tax losses can be transferred together with a branch of activity to the acquiring entity. Spanish or European Union (EU) economic interest group. The most relevant, in terms of their potential impact on M&A transactions, are summarized hereto. Special rules establish the specific depreciation percentages in force, which depend on the type of industry and assets involved. It should also be noted that the period of benefit of the special schemes in Spain is six years (the year of registration and the following five years) and in Portugal ten years. Abolishing the non-dom regime would raise more than 3.2 billion each Regarding Spanish domestic earnings-stripping rules, it must be pointed out that they allow that dividends received from qualifying subsidiaries increase the tax EBITDA limit. Following the OECDs BEPS recommendations, as of FY2015, expenses derived from operations with related parties that, due to a different qualification, do not generate an income or generate income that is exempt or subject to a tax rate under 10 percent, are not deductible. Non-doms are individuals who are resident in the UK, but who claim on their tax return that their permanent home ('domicile') is abroad. It will take only 2 minutes to fill in. In general terms, no local or state taxes are payable on the purchase of shares. SPAIN - Amendments to special tax regime for inbound expatriates - BDO The goal is to attract high-achievers who relocate to Spain on the back of a job contract. Tax on foreign income: 'Non-domiciled' residents - GOV.UK Tax regime for travel agencies in Spain Published posts: 1324. As a result of these amendments, for tax years starting in 2016 and later, the amortization expense of intangible assets must be recognized for accounting purposes in order to be tax-deductible. These cookies are essential for browsing and using the website. Moreover, certain Spanish treaties contain anti-treaty shopping provisions that may restrict the ability to structure a deal in a way designed solely to obtain tax benefits. Several potential acquisition vehicles are available to a foreign buyer, and tax factors often influence the choice. Dividends, capital gains and other capital income are exempt from taxation in Spain, provided that they originate from abroad and there is an international double taxation treaty (DTT) with the country of origin of the respective income. In general terms, services subject to the tax include digital services developed by large multinational companies having a connection or nexus with Spain, based on the existence of users located in the Spanish territory. The net assets acquired are recorded on the consolidated balance sheet at their fair values, and goodwill arises to the extent that the consideration exceeds the aggregate of these values. When applying for the benefits of this regime, it is critical to have a relevant sound business reason for the merger, other than merely achieving a tax benefit (i.e. Not have been resident in Spain in the 10 years prior to the displacement. TIVUL tax due depends on the holding period of the property and the lands cadastral value. setting transfer prices at market value). To be reportable, an arrangement must be cross-border, involving one or more member states, and include, at least, one hallmark. No previous liabilities of the company are inherited (except for tax liens if real estate assets are transferred), unless the acquisitions made by one or several persons or entities constitute a going concern (even in this case it is possible to request a certificate of tax liabilities from the tax authorities and limit the liabilities to those disclosed in the certificate). The draft bill law transposes the Directive in line with the wording of the ATAD 2 Directive. According to the literal wording of the law, where both parties to the transaction are subject to Spanish tax, the authorities can adjust the results of the party whose benefits have been increased, so that there is usually no impact on the cash tax payable by the group (although losses can become trapped in certain situations). Individuals acquiring tax residence in Spain as a result of being posted to this country may opt to be taxed according to the Non Resident Income Tax (NRIT) rules during the year in which they acquire their Spanish tax residence status and the five following tax years. Spanish CIT Law incorporates the tax regime for mergers, spin-offs and other reorganization transactions covered in EU directives. Your domiciles usually the country your father considered his permanent home when you were born. Distribution of pre-acquisition retained earnings of the acquired company, in certain cases, should be recorded as a reduction in the value of the participation acquired (for both accounting and tax purposes). a document for each group entity (local file).