2024 EN

The Income Tax Declaration Campaign (IRPF) is a crucial time for taxpayers in Spain, and in 2025 this process will be modernised with the introduction of new payment methods. From this year, taxpayers will be able to pay their taxes by bank card and Bizum, which promises to make the process more convenient and efficient. This important development was announced by Soledad Fernández, Director General of the Tax Agency, during the opening of the XXXIV Congress of State Tax Inspectors. Although the exact date of entry into force of this measure has not yet been
confirmed, the Tax Agency is working to have it operational for the next income tax campaign.

Historically, personal income tax payments were mainly made by direct debit or bank transfer, methods that can be cumbersome and require several steps. By accepting card payments and Bizum, the Tax Agency aims to simplify the process and allow citizens to make their payments instantly and securely from their mobile devices, responding to the demands of an increasingly digitalised society looking for practical and efficient solutions to manage their finances. With these improvements, the Tax Agency is not only facilitating tax compliance, but also promoting a more fluid and accessible relationship between the state and citizens.

The inclusion of payment methods such as bank card and Bizum in the IRPF 2025 campaign represents a significant step forward in the modernisation of tax administration in Spain. This initiative will not only make the filing process more accessible, but also reflects a commitment to innovation and adaptation to taxpayers; needs.

We look forward to hearing more about this exciting new development.

Carmen Moya López

In the Spanish registry system, the concept of "inmatriculación" refers to the process through which a property that has not previously been registered in the Land Registry is recorded for the first time. This process, governed by the Mortgage Law, is essential for providing legal certainty to property ownership. The recent amendment to this law, which came into effect in May 2024, establishes that the Land Registry will be managed electronically, using the "real folio" system, where the property is the fundamental element.

The first registration of a property in the registry can be done through various means. One method is the domain proceeding (Article 203 of the Mortgage Law), which is processed before a notary and requires the presentation of the title deed, the cadastral certification, and other documents that prove the absence of prior registration. The registrar reviews the documentation, and if there are no conflicts with other properties, the registration proceeds.

Another method is registration by double title (Article 205), which requires the submission of two public deeds proving the ownership of the property, with at least one year between them.The property description must be consistent between both deeds and match the updated cadastral certification.

Additionally, the Mortgage Law allows for registration through an administrative certification (Article 206), reserved for public administrations, or through administrative documents in specific procedures (Article 204), such as cases of forced expropriation or land consolidation.

It is important to note that the protection of public property is also reinforced in this process, requiring that the graphical representation of the property be coordinated with the Cadastre, which helps to prevent issues such as double registration. In exceptional cases, an alternative
graphical representation is allowed when it does not exactly match the cadastral certification.

Finally, the effects of the public registry's legal protection do not apply immediately, as at least two years must pass from the property's registration for third-party buyers to benefit from this protection, as stipulated in Article 207 of the Mortgage Law.

This legal framework aims to provide greater transparency and legal certainty to the process of property registration in Spain, ensuring the proper identification and protection of both public domain and private properties.

 

Sandra Gámez Chaves

After the third quarter of the financial year and during the month of November of each year, there is an obligation to report certain information to the Tax Agency about the company’s activity during the previous financial year. We are talking about Form 232.

What is Form 232?

Form 232 is an information return that is reported electronically to the Tax Agency when the requirements established for this purpose are met in relation to related-party transactions and/or transactions with tax havens (now called non-cooperative jurisdictions).

Who is obliged to file it?

Those corporate income taxpayers who carry out transactions with related persons or entities under the terms set out in article 18.2 of Law 27/2014 on Corporate Income Tax (LIS) and who exceed certain economic thresholds established in the regulations in force, both in a specific transaction and as a whole and without taking VAT into account, are obliged to file Form 232 and complete the ‘Information on transactions with related persons or entities (art.13.4 RIS)’.

What is the deadline for filing?

It will be filed in the month following the ten months after the end of the tax period to which the information to be supplied refers. Therefore, as a general rule, in the case of taxpayers whose tax year coincides with the calendar year, the deadline for filing the return is from 1 to 30 November.

What is a related-party transaction?

A related-party transaction in corporate income tax refers to those transactions carried out between entities or individuals that are connected in some way, either because they belong to the same business group, are shareholders of the same company, or have other significant ties. Specifically, they are those parties set out in article 18.2 of the LIS.

In conclusion, Form 232 is a compulsory information return with the aim of obtaining greater tax transparency. Failure to file it may be subject to a penalty, as well as failure to justify the elements required in the return itself. Therefore, it is essential to maintain an optimal assistance in this matter, so, for further information, do not hesitate to contact MDG Advisors.

Jesús Raya Zamora.

It is true that once the summer holidays were over, it was time to get down to work with the third quarter taxes, but there has been a new TEAC resolution that gives taxpayers a hand, and we consider it convenient to take a few minutes away from the third quarter taxes to keep you informed, as it has a considerable economic impact on the taxpayer’s personal income tax.

The Central Economic Administrative Court (TEAC) has agreed in its recent Resolution, number 8685/2023 of 19 July 2024, to unify criteria regarding the calculation of the exemption contained in article 7.p) LIRPF (work carried out abroad).

To put ourselves in context, let us recall that article 7 p) of the Personal Income Tax Act establishes that ‘the exemption shall apply to the remuneration earned during the days spent abroad, with a maximum limit of 60,100 euros per year’, and to find out how to calculate this exemption, we had to go to article 6 of the Personal Income Tax Regulations:

“The exemption shall have a maximum limit of 60,100 euros per year. For the calculation of the remuneration corresponding to work carried out abroad, the days that the worker has actually been abroad must be taken into consideration, as well as the specific remuneration corresponding to the services rendered abroad.

In order to calculate the amount of income accrued each day for work carried out abroad, apart from the specific remuneration corresponding to the aforementioned work, a proportional distribution criterion shall be applied, taking into account the total number of days in the year’.

And we always wondered, what would happen to taxpayers who had travelled abroad for less than the duration of the calendar year, would they also have to make the proportional distribution to calculate the exemption taking into account the TOTAL number of days in the year?

Yes, and let us not forget that this has been the criterion used by the Directorate General of Taxes in many rulings issued to taxpayers, which clearly disadvantages taxpayers who have travelled abroad with an employment contract for a fixed period of less than one calendar year.

And this is precisely the criterion addressed in resolution 8685/2023 of 19 July 2024 of the TEAC.

The TEAC concludes that only in cases where the employment relationship has covered the entire financial year should the content of article 6.2 of the RIRPF be applied without exception, with the consequent division between the 365 days.

However, when the employment relationship extends over a period of less than one calendar year, the amount of non-specific earned income accrued during the days spent abroad must be calculated using the number of days corresponding to the duration of the employment contract in the calendar year in the denominator.

Once this change of interpretation has been analysed, the Personal Income Tax of taxpayers in 2024 can be calculated on the basis of this new criterion adopted by the TEAC, but there will be many self-assessments of Personal Income Tax filed in previous years that will require review in order to rectify them and request a refund of undue income, since the exemption applied at the time was less than that permitted on the basis of this new criterion adopted by the TEAC.

Therefore, MDG Advisors is at your disposal to answer any questions you may have in this regard, to provide you with the best advice on this change of criteria in the IRPF.

Leticia Cayuela Mayor.

Do you consider yourself to be a large company? According to the criteria of the Tax Agency, a large company is one that has achieved a turnover of more than 6,010,121.04 Euros in one year.

This consideration gives rise to a series of census and tax changes from the following year onwards:

– Notification to the Tax Agency of the status of Large Company through census form 036.
– Monthly submission not only of VAT self-assessments, but also of withholdings and payments on account, Electricity Tax and Tax on Alcohol and Beverages.
– Preparation of record books through the electronic supply of invoicing records (SII).

– Obligation to calculate corporate income tax instalments in accordance with Article 40.3 of the Corporate Income Tax Act.

It is important each year to review whether these requirements are met, not only to report that this volume of transactions has been exceeded, but also to report that, even though this requirement has been exceeded previously, it has ceased to be met. In other words, if the turnover for a financial year is less than 6,010,121.04 Euros, it would also be necessary to report the loss of status as a Large Company, with the consequent change in the frequency of the self-assessments to be filed.

Given that we are about to start the last quarter of the year, if you think you are going to exceed this threshold, and you have any doubts about how to notify the authorities, we are at your disposal.

Isabel María Díaz Rubio.

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.