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The new Organic Law 2/2024, of August 1, 2024, on equal representation and balanced presence of women and men, published in the BOE on August 2, 2024 and coming into force on August 22, 2024, is based on the equality before the law of all citizens as set forth in the first article of the Spanish Constitution. In the same field, it is worth mentioning the Resolution of the United Nations General Assembly, which presents the balanced participation of at least forty percent of each sex in representative and decision-making positions as a parity threshold to eliminate bias in decision-making.

As a point of origin of the progress made by this new legislation focused on achieving equality in political and economic decision-making, we can place the Organic Law 3/2007, of March 22, which focuses on eradicating inequality so that the presence of men and women as a whole does not exceed sixty percent and is not less than forty percent.

This new text is intended to break glass ceilings and ensure that women are represented fairly and equally at all decision-making levels, as required by the Constitution and the European Union.

From this provision it is worth highlighting as a priority the already mentioned balanced presence of men and women, without exceeding sixty percent or being less than forty percent, both in higher and executive bodies of the General State Administration and in entities of the State institutional public sector, bringing with it several changes, among which we can highlight the Constitutional Court, the Council of State or the Court of Auditors.

Specifically, it sets out this balance in decision-making bodies such as boards of directors, constitutional bodies and management teams.

But it does not only stop there, it covers new sectors and areas such as sports, public procurement, foundations or the tertiary sector, modifying the Sports Law, the Public Sector Contracts Law and the Organic Law of the University System.

In terms of its impact, it directly affects companies, especially listed companies, which must ensure that at least 40% of the members of their boards of directors are women. Nor should they forget that minimum percentage in senior management positions.

On the other hand, transparency must not be left aside, since in the event of female representation exceeding sixty percent, this deviation must be justified in writing.

This new law presents a challenge and an opportunity for both companies and organizations. Those that best adapt to the new requirements will see this reflected in greater competitiveness and long-term sustainability. To do so, they will have to correctly apply this regulation by revising their selection, promotion and professional development policies to ensure that they can meet the new requirements.

Translated with DeepL.com (free version)

Our partner Miriem Diouri on behalf of MDG Advisors attended the Digital Business World Congress, the most relevant congress in Europe on exponential technologies and business growth with digital strategies. From 11-13 June at FYCMA, this event brought together more than 450 international speakers, global influencers and authorities who discussed new business models, disruptive innovations and leadership strategies.

During our participation, we explored the latest developments in artificial intelligence and technology presented at the fair. With 250 hours of content, DBWC offered deep insights into the impact of technology in key sectors such as banking, retail, life sciences and smart cities, as well as transformative technologies such as AI, Blockchain, VR/AR, Metaverse, MultiCloud, IoT, Cybersecurity and Big Data.

We take away valuable insights and knowledge to implement in our digital strategies!

In this article we are going to analyse the fourth presumption of obtaining income included in article 121 of the Corporate Income Tax.

This presumption deals with the existence of undeclared income if non-existent debts have been recorded in the accounting books, since the existence of a fictitious liability in the accounts is the counterpart of hidden profits, which must be included in the tax base.

The Tax Agency can consider as non-existent debts the balances of suppliers or creditors that do not change over time, obliging the taxpayer to prove the origin or reality of the same, to prevent the Administration from presuming that undeclared income has been obtained or that there is a fictitious liability and, therefore, the Tax Agency understands that we have registered a non-existent debt that increases our expenses and reduces the profit, reducing the Taxable Base of the Corporate Tax.

Furthermore, this same article of the law, section 5, indicates that the amount of the income resulting from the presumptions contained in the previous sections will be imputed to the oldest tax period among the non-prescribed ones, unless the taxpayer proves that it corresponds to another or others.

This implies for the taxpayer that, in addition to incurring the penalty for the income that has not been declared, he/she will generate higher late payment interest, as this will be calculated from the oldest non-prescribed tax period.

It is therefore important to review these items included in the Corporate Income Tax with non-existent debts or fictitious liabilities, in order to avoid these future problems with the Administration.

In its ruling of 13 March 2024, the Supreme Court once again addresses the deductibility of directors’ and administrators’ remuneration for corporate income tax purposes.

In previous rulings it had already established as a doctrine that non-compliance with commercial regulations regarding directors’ remuneration cannot necessarily lead to the loss of the material right to deduct an expense accounted for, accredited and remunerated for onerous services, effectively rendered, and that neither can the correction of the expense be justified as a non-deductible liberality.

On this occasion, unlike the factual cases examined in previous rulings, the articles of association did not establish the remunerated nature of the position.

Thus, the High Court concluded as follows:

• The theory of the link cannot be applied in the tax sphere.
• Remuneration paid to directors for services which are their own and which must be understood as real and effective cannot be classified as a gift or liberality, which, as soon as they have been accredited and accounted for, must be considered as deductible expenses.
• The status of the expense as deductible is not lost by the fact that there is no provision in the articles of association. The mere fact that there is no provision in the articles of association is not to be regarded as an act contrary to the law. It is reiterated that this provision refers to very specific cases such as bribes and the like.

As can be seen, the key to the tax deductibility of the expense for directors’ remuneration will depend on whether the company can prove that the expense is real, that it is accounted for and that it corresponds to an effective provision of services by the directors that is correlated with the obtaining of business income.

 

Marina Guerrero Castronuño.

It is commonly known in our Autonomous Community of Andalusia that the Law on Transfer Tax ( Law 5/2021, of 20 October, on Assigned Taxes of the Autonomous Community of Andalusia), in its article 44, allows real estate professionals to benefit from a reduced Transfer Tax rate of 2% on the purchase and sale of real estate for resale.

As with all tax benefits, there are a series of requirements, which the professional must fulfil, among them:

– Buying the property with the sole purpose of selling it and, in addition, reselling it within a maximum period of 5 years.

– The resale of the property must be subject to and not exempt from Transfer Tax.

– Formal requirements: it is necessary to include a series of statements in the deed of sale and to provide the census form of registration under the corresponding Economic Activities Tax code (Form 036).

The law itself, in the same article, establishes that in the event of non-compliance with any of the requirements, the real estate professional must make a complementary declaration and pay the difference between the reduced rate of 2% and the general rate in force at the time of the purchase of the property, plus the corresponding interest for late payment.

In practice, it is very common for the owners to be aware of his obligation to resell the property within 5 years, but it is important that they are also aware of other situations that imply non-compliance with the requirements and, therefore, a significant extra tax cost. These situations include, among others:

– Decision to keep the property in the business assets. This normally implies that, even though the five-year period has not yet elapsed, it will not be fulfilled and therefore, at the time the decision is taken, the tax must be adjusted. This way of proceeding can lead to significant savings in late payment interest.

– Characteristics of the renovation/rehabilitation project. Acquisitions of properties that qualify for this tax benefit often involve a refurbishment project prior to resale. It is essential to analyze the refurbishment project as, on certain occasions, the project meets the requirements of the VAT Law to be considered as a rehabilitation, and therefore, the future sale will be an operation subject to and not exempt from VAT.

– Rental of the property. Regardless of whether the five-year resale period is met, the property must be used solely and exclusively for this purpose: its future sale.

All of the above situations imply the need to adjust the Transfer Tax at the general rate and, therefore, an increase in the tax cost for clients. Therefore, it is very important to keep track of the properties that have benefited from the reduced rate of Transfer Tax and above all, that the client is aware of the limitations to which he/she is exposed when using this tax benefit.

If you would like more information, we remain at your disposal.

Pablo Mallo Bárcena.

The contribution of private assets without economic consideration to the community property is an operation worthy of being studied from a tax point of view, especially after the last ruling of the Supreme Court.

 

The subjection to the Tax on Onerous Patrimonial Transmissions is discarded, since in this case we speak of gratuitousness, instead of onerousness. This fact in turn raises its possible taxation in the Tax on Donations, since it is an intervivos delivery free of charge. However,

the marital partnership, given its lack of legal personality, is not a taxpayer of said tax, reasoning set forth in Supreme Court Ruling No. 295/2021, of March 3, 2021, and reiterated again in the new ruling of January 10, 2024.

On the other hand, it is particularly interesting to study the taxation in the Personal Income Tax. Specifically, the ownership of the assets of the marital partnership must be attributed to each spouse in equal halves, which implies an alteration in the assets of the contributor, and it must be determined whether the same is considered a capital gain or a capital loss. The latter will be calculated by the difference between the transfer value and the acquisition value of half of the property being contributed, in accordance with articles 35 and 36 of the LIRPF.

 

From our firm, we recommend seeking specialized tax advice before carrying out this type of operation to study its cost, or once it has already been carried out, to include it correctly in the tax return, especially now that the income tax campaign is approaching.

 

Isabel María Díaz Rubio

On 27 December 2023, Royal Decree 8/2023 was published, amending the Law on the Solidarity Tax for Large Fortunes. This modification means that non-resident taxpayers who in 2022 were obliged to file Form 718 of the Solidarity Tax for Large Fortunes, can now recover part of the amount paid to the Tax Agency.

Prior to the publication, non-resident taxpayers in Spain, obliged to file the ISGF for their assets and rights located in our country (real obligation), were not entitled to the application of the minimum exemption of 700,000 euros, unlike resident taxpayers.

Consequently, a new possibility has been opened to request a refund of 11,900 euros plus the corresponding late payment interest for all those non-resident taxpayers who filed Form 718 in the 2022 tax year.

Should you require any further information, MDG Advisors will be pleased to advise you and help you receive your refund.

MDG Advisors Team

Tax management is a crucial aspect of tax administration at both national and international level. In the area of international double taxation, the choice between exemption or deduction plays a fundamental role in optimising the taxes paid by taxpayers. However, it is important to note that this choice cannot be changed after the voluntary deadline, which underlines the importance of making informed and strategic choices from the outset.

International double taxation occurs when a taxpayer is taxed on the same income in two or more countries. To avoid this scenario, many countries have established double taxation agreements that allow taxpayers to choose between two options: exemption or deduction.

Exemption means that income earned abroad will not be taxed in the country of residence, while deduction allows taxes paid abroad to be deducted from the tax payable in the country of residence. Both options have significant tax planning implications and can greatly impact the taxpayer’s final tax burden.

It is crucial to understand that the choice between exemption or deduction is a strategic decision that must be made in an informed and conscientious manner.

Recently, the High Court of Justice of the Balearic Islands in a ruling of 4 December 2023 concluded that these are two different and incompatible tax regimes, so the taxpayer must opt for the application of one of them at the time of filing his self-assessment and that the taxpayer must opt for the application of one of them at the time of filing his self-assessment.

As we have mentioned throughout this article, the choice between exemption or deduction to avoid international double taxation is a crucial process in the tax management of taxpayers with international income. The impossibility of changing this choice after the voluntary deadline highlights the importance of careful consideration and tax planning. By understanding the implications of each option and seeking professional advice, taxpayers can optimise their tax situation and meet tax obligations effectively.

Carmen Moya López

We were honoured to receive a visit from Alicia Izquierdo, Councillor for Innovation at Malaga City Council, at MDG Advisors. During her stay, we explored the transformative impact that technological development has had on traditional services in the province of Malaga.

We discussed how the integration of technology has revolutionised various sectors, from customer service to administrative management, and how this has contributed to improving the efficiency and quality of services offered to citizens.

We thank Alicia Izquierdo for her visit and her interest in learning first-hand how MDG Advisors is contributing to innovation and technological development in our province. We are committed to continue collaborating with Malaga City Council and other entities to promote initiatives that drive progress and improve the lives of our citizens.

As anticipated in a previous publication of this blog dated May 11, 2023, the enactment of Law 11/2023 of May 8, published in the Official State Gazette (BOE), has represented a relevant event in the modernization of the Spanish notarial system.

This law, by incorporating Directive (EU) 2019/1151 of the European Parliament and of the Council dated June 20, 2019, has introduced substantial changes in the field of company law, promoting the adoption of digital tools and processes.

The updated legal framework has generated significant modifications in the Notary Law, facilitating the performance of certain notarial and registry procedures telematically. This development eliminates the need for the physical presence of grantors or interested parties in certain procedures.

As for the innovations implemented, with effect from November 9, 2023, it is worth highlighting the establishment of a single electronic notary office at the national level, under the supervision of the General Council of Notaries. This centralized office not only reflects a change in notarial management, but also facilitates the execution of all digital notarial services.

In addition, the formation of an exclusive computerized index has been established, managed by the General Association of Notaries, which merges the indexes of documents notarized individually by each notary. In this sense, the Association will be in charge of informing the tax administrations about the relevant information contained in this index, having tax impact.

Similarly, it establishes the power for notaries to issue authorized copies through the use of qualified electronic signatures, the latter being equivalent in conditions to the traditional copies in physical format.

Additionally, the execution of various legal acts and transactions by videoconference and by means of the use of qualified electronic signature through the notary’s electronic office is authorized.

Likewise, those involved have the possibility of carrying out different procedures through electronic appearance, such as the presentation of background information, the formalization of legal acts or transactions, the request for copies, and the request for identification of notarial documents.

These modifications, among others, signal a notable advance in the execution of notarial procedures in Spain, adjusting to European guidelines and leading to a substantial improvement.

From MDG Advisors we advise you to stay informed about future updates to take full advantage of this digital evolution.

Sandra Gámez Chaves.