2022 ENG

On 1 July, Law 12/2022 of 30 June came into force in the Official State Gazette (BOE), regulating the promotion of occupational pension plans, which brings with it a series of tax implications, both in Income and Corporate Income Tax, as well as in Wealth Tax.

What are these tax implications?

– Personal income tax:

In relation to Personal Income Tax, a new limit is established for reducing the taxable base for contributions and contributions to social welfare systems in addition to the general limit of €1,500 per year, and applicable to contributions to simplified employment pension plans for self-employed or newly created self-employed workers and, on the other hand, of bringing the tax treatment of pan-European individual pension products (regulated in Regulation (EU) 2019/1238, of the European Parliament and of the Council, of 20 June 2019) into line with that of pension plans.

– Corporate income tax.

In relation to this tax, a new deduction of 10% is regulated in the gross tax liability for company contributions to company social welfare systems attributed in favour of workers with gross annual remuneration of less than 27,000 euros.

If the remuneration is equal to or higher than the aforementioned amount, the new deduction will be applied to the proportional part of those contributions that correspond to the gross annual remuneration received.

– Wealth Tax.

The exemptions typified in this tax are extended and this exemption is included for economic rights derived from contributions to pan-European individual pension products, as mentioned above in the case of personal income tax. This corrects the discrimination that has existed up to now against pension plans constituted in another EU Member State.

All these repercussions will have a positive impact on the taxation of taxpayers who have a pension plan constituted outside the European Union, in addition to the domestic implications.

If you have a pension plan, do not hesitate to ask our professionals about the new tax implications and how you can benefit from them.

Recently, the Tax Agency has approved two new forms, 172 and 173, in order to carry out a more exhaustive monitoring of the traffic of virtual currencies and their declaration.

Both forms are for the informative declaration of virtual currency balances (172) and for the informative declaration of transactions with virtual currencies (173).

The filing deadlines for both forms will be annual and must be filed in January of the year following the year to which the information declared corresponds.

MDG Asesores will be happy to help you and answer any questions you may have regarding the possession of virtual currencies.

To access the complete link to the Tax Agency, click here (in Spanish).

For years, virtual currencies, also known as cryptocurrencies, have been increasingly present in different transactions in national and/or international commerce and have always been exempt from taxation.

However, one of the new features of the 2021 income tax return is the declaration of cryptocurrencies through a specific box for this purpose, thus raising various questions or doubts about these monetary instruments.

Due to this and the repercussions they are having on tax matters, we feel it is necessary to briefly analyse their declaration to the Treasury in each of the taxes that could affect them:

 

– Personal Income Tax.

In Personal Income Tax, there may be different cases in which the income can be attributed to one or other of the incomes of this tax, depending on the origin of this income:

• Income from Movable Capital: in this income, interest, stacking (works similar to a fixed-term deposit) or other income generated by cryptocurrencies would have to be declared.
• Income from economic activities: in this case, if a person mines cryptocurrencies, it is understood that he/she is carrying out an economic activity (he/she would have to register with the IAE) and will be taxed on income from economic activities, as the Directorate General of Taxes has pointed out in recent consultations.
• Capital Gains and/or Losses: it goes without saying that the mere purchase of cryptocurrencies does not imply their declaration in the IRPF as there is no capital variation until the moment of their sale.
  That said, as with shares, a sale of cryptocurrencies will be taxed as Capital Gains and Losses, for the difference between the transfer value and the acquisition value to be computed in the Savings Tax Base. If instead of sale it is an exchange, the valuation rules for exchanges will be applied and it will be included in the Savings Tax Base. If there are partial sales acquired at different times, the FIFO method will be applied to calculate the capital gain or loss.

 

– Wealth Tax.

In this case, if an asset (excluding the main residence) exceeds 700,000 Euros, including a certain amount of cryptocurrencies, they must be declared in this tax as would be done with a capital in foreign currency, valued at market price on the date of accrual of the tax.

 

– Form 720.

The controversial Form 720, which we have already dedicated an entry in our blog to the recent jurisprudential dispute, is not subject to the declaration of cryptocurrencies held abroad in the financial year 2021. This is what the AEAT has recently stated in an informative note in which it declares that “the 720 model does not report virtual currencies […] and is not required for the 2021 financial year”.

However, everything suggests that it will be for the financial year 2022, as it is a requirement established in the recent anti-fraud law. In addition, the possibility is being considered that the Tax Agency may prepare an autonomous information obligation of Form 720 for the declaration of cryptocurrencies abroad. What many experts in the field have dubbed form 721.

 

– Value Added Tax.

In relation to VAT, the transfer of virtual currencies is exempt from taxation in accordance with Article 20.1.18 of the VAT Law, as the Directorate General for Taxation has stated in various consultations (V1885-21), considering cryptocurrencies to be foreign currency and hence their exemption.

 

In conclusion, cryptocurrencies, regardless of their type or origin (Bitcoin, Ethereum, Dogecoin, Binance Coin, etc.), are beginning to be targeted by the Tax Agency to avoid any type of tax evasion in our country, so if you are a user of these types of currencies and have doubts about the taxation of these monetary instruments, do not hesitate to contact our MDG team to solve all your questions.

During the latest years, it has been (surprisingly) understood by the Tax Authorities in Spain, that a property situated in our country owned by a Non Resident entity, was supposed to “generate” rental income in Spain, for the mere availability of the asset for related parties such as directors or shareholders of the entity, and consequently, the entity had to pay Non Resident Taxes in our country.

The criteria of the Tax Authorities has been maintained during a long period, and it was supposing that the foreign entities had to declare in Spain rental income when the real estate assets were used by nobody, at market values.

A recent tax consultation of “Dirección General de Tributos” (consulta vinculante v2993-21 ), has led to a massive change on this criteria : the entities will not have to pay taxes in Spain if the properties have been vacant and the company can prove it sufficiently.

This change of criteria will minimize significantly the tax cost of having a property in Spain, owned by a foreign entity.

We trust you find this information useful, and we remain at your disposal for any clarification you may need.

MDG Advisors – Non Residents Department

As we previously mentioned in our blog, on 13 March 2021 the International Taxation and Double Taxation Agreement between Spain and the United Kingdom in relation to Gibraltar was approved, marking a turning point in the tax treatment of individuals and legal entities that have a tax relationship with Gibraltar.

The agreement, which came into force on 1 January 2022 for those years whose tax year coincides with the calendar year, establishes new mechanisms for the tax residence treatment of individuals and companies, in addition to regulating a new administrative cooperation procedure for the exchange of information.

– Purpose of the Agreement.

The purpose of the Agreement is to mitigate or eliminate tax fraud and the negative effects on Spanish public finances as a result of the tax benefits that Gibraltar has enjoyed until now.

Rules are also established to resolve any conflict regarding the tax residence of individuals and, in turn, to prevent companies with tax residence in Gibraltar from carrying out economic activities in Spain.

– Tax residence of legal entities.

Legal entities incorporated under Gibraltar’s domestic law will be exclusively resident in Spain in the following cases:

1. That the majority of their assets directly or indirectly are situated in Spain,

2.The majority of the income accrued in a calendar year is derived from sources in Spain,

3. That the majority of the individuals in charge of the effective management are tax residents of Spain, 4.
4. That the majority of the rights over the capital or voting rights are under direct or indirect control of individuals or legal entities resident for tax purposes in Spain, or legal entities linked to residents for tax purposes in Spain.

Points 3 and 4 will not apply to legal persons incorporated in Gibraltar before 6 November 2018 and which as at 31 December 2018 jointly demonstrate that:

– It has a fixed place of business in Gibraltar with a sufficient number of employees and sufficient qualifications and operating expenses appropriate to the activity carried on.

– It is subject to corporate tax in Gibraltar.

– Since 01/01/2011 or its incorporation and up to 31/12/2018 it has carried on its business without interruption.

– More than 75% of their income in respect of the year prior to 31/12/2018 is derived from sources in Gibraltar.

– Less than the following percentage of income in respect of the previous financial year to 31/12/2018 derives from Spanish source income: 5% turnover above 6 million euros. 10% between 3 and 6 million euros or 15% not exceeding 3 million euros.

 

– Tax residence of individuals.

Article 2.1 of the Agreement establishes that they will have exclusive tax residence in Spain in any of the following circumstances:

(a) If more than 183 overnight stays are made during the calendar year in Spain. In addition, sporadic absences will be added to the place where individuals make the majority of their overnight stays.

1. b) If the spouse or similar, ascendants or dependent descendants have their habitual residence in Spain.
2. c) If the only permanent home at their disposal is located in Spain.
3. d) If 2/3 of their net assets in accordance with Spanish tax legislation are located in Spain.

Regarding the transfer of residence, it is worth mentioning that Spanish nationals who transfer their residence after the date of signature of the Agreement and non-Spanish nationals who have spent at least one full tax year in Spain, will not lose their Spanish tax residence during the tax period in which the change of residence takes place and the following four tax years.

The same applies to Gibraltarians who have spent at least four years in Spain. They would not lose their Spanish tax residence until after four tax years following the transfer of residence to Gibraltar.

– Other issues of interest.

The Agreement establishes mechanisms for the elimination of double taxation (Art. 2.3), in accordance with the provisions of its domestic legislation. Thus, in the case of Spain, international double taxation is provided for in Article 80 LIRPF or 31 and 32 LIS.

It also establishes mechanisms for administrative cooperation and exchange of tax information on tax matters and exchange of information, in accordance with Article 3 of the Agreement.

– Conclusions.

This Agreement marks a turning point for the elimination of Gibraltar’s tax benefits and the loss of its status as a tax haven, which, we note, continues to be included as such on the list of tax havens in Royal Decree 1080/1991, as amended by Royal Decree 116/2003.

Furthermore, this regulation is a first step towards closer international relations between Spain and the United Kingdom and their pursuit of common interests in relation to Gibraltar.

Finally, it should be noted that this regulation represents a turning point in the taxation of organisations that were trying to benefit from the 10% or 20% Gibraltar tax despite carrying out the bulk of their operations in Spain or having real estate in this country, since, with this Agreement, the formal aspects of the incorporation or management of the organisation are set aside in favour of having tax residence where the bulk of the organisation’s business or management is materially located and, consequently, its taxation.

Leticia Cayuela, partner of the Tax & QC area is appointed member of the Board of National Experts of the Spanish Association of Tax Advisors (AEDAF).

The AEDAF is a group of tax advisors at a national level who value the best fiscal and tax tools in order to provide the maximum experience to the associate and, at the same time, try to achieve a quality and fair tax system through their contribution.

Likewise, in order to give visibility to associates under 40 years of age and to fight for common interests, this Association has created the “AEDAF Youth Group” at a national level where Leticia Cayuela has become part of it together with ten other young people, after meeting the academic and professional requirements demanded by the Association.

For MDG Asesores this means a step forward in its commitment and experience in the field of Compliance and Tax and an advance in the quality of its service from the hand of great professionals.

Link of interest: https://www.aedaf.es/es/cai-y-secciones/grupo-de-jovenes-573

MDG Team.

MDG Advisors continues its expansion by appointing Leticia Cayuela Mayor as a partner in the Tax and Quality Control area.
Leticia has a degree in Business Studies from the University of Almeria, and a degree in Economics from the University of Malaga. She furthered her academic training with a Master’s Degree in Finance, Banking and Insurance from the University of Malaga. With a clear vocation for the area of taxation of companies and individuals, she studied the Master’s Degree in Tax Consultancy at the Universidad a Distancia de Madrid – Centro de Estudios Financieros (UDIMA-CEF).

Leticia represents MDG in the Spanish Association of Tax Advisors (AEDAF), and in January 2022 she has been appointed member of the group of young experts at national level.
Leticia joined MDG Advisors in October 2012, a firm where she has spent almost all of her professional career, with a wide and extensive experience in the field of taxation, both international and national, and in corporate taxation.

Recently, from MDG Asesores we have won a new case against the Regional Economic Administrative Court (hereinafter, TEAR) in relation to the deadlines that the Tax Agency has to notify the taxpayer and its challenge.

In this specific case, on 15/05/2020, a deferral was requested for the payment of Non-Resident Tax in relation to the capital gain obtained from the sale of a villa. In response to this request, on 24/08/2020, the Tax Agency issued a request for information and we had 10 working days to reply.

On 03/09/2020 we requested an extension of the deadline to reply to this request, which was extended until 25/09/2020. The Tax Agency ignored the extension, so on the last day of the deadline, the taxpayer opted to pay the debt in full.

The problem of the case arises when the Tax Agency, considering the request unheeded, agreed on 15/09/2020 to file the request for deferral, but notifying the taxpayer on 9 November 2020, about a month and a half after the taxpayer had settled the debt with the Tax Agency.

MDG Asesores filed a claim before the Regional Economic-Administrative Court of Andalusia against the 5% surcharge imposed by the Tax Agency and based on article 167.3 of the General Tax Court Law, which states that “only the following grounds for opposition will be admissible against the order of enforcement: a) total extinction of the debt […]”; since the debt had been paid in full within the voluntary period before the resolution of the request for deferral of payment was given.

Recently, the TEAR has issued a decision against this collection procedure, having upheld our claim and annulling the contested act, so our client will soon receive the executive surcharge that he had to pay illegitimately for an amount of 89,206.47 Euros.

At MDG Asesores we study each specific case and analyse all possible avenues under tax law to help our clients to obtain an estimation of their claims and to obtain a refund of payments made unduly.

You can find the full resolution by clicking here.

MDG Team.

The Court of Justice of the European Union (CJEU) has declared illegal the regulation of the Model 720, which obliges taxpayers to declare assets abroad that exceed the amount of €50,000.

The CJEU understands that, despite being a purely informative model, there are several legal issues that call it into question, which are as follows:

• Infringes “obligations under the free movement of capital” on European territory as it penalises untimely non-compliance/compliance.
• The tax administration can act without limitation in time for the regularisation of this form and, on the contrary, the CJEU rejects this imprescriptibility.
• According to the CJEU, the penalties imposed by this form for failure to regularise it correctly are “very high”, with fines of 150%, which the court described as “disproportionate” and “discriminatory”.

As for the continuity of tax form 720, the Government has already announced that it will remain in force, with the exception of the appropriate modifications to be made to adapt to the ruling of the European High Court.

If you are a taxpayer of this model and you want to resolve any questions or queries that may have arisen, do not hesitate to contact our team to resolve them and analyse the best way to proceed in accordance with the law. MDG Asesores will be delighted to help you.

 

MDG Team.