Property Law and Tax Issues
Non Residents Income Tax (IRNR). Spanish Tax Reform 2015
As from the 1st January 2015 are modified various aspects of the Law of the IRNR, amongst others, those of exemptions, tax base and rates applicable. A draft of declarations is planned for information on Real estate income. The idea of tax haven is redefined. Initially can be named various regulations concerning the area of tax payers resident in the EU (the majority can be extended also to those resident in the States belonging to the European Economic Area, with effective Exchange of tax information).
Income obtained without permanent establishment
The regulations are altered to determine the tax base, for the non resident tax payers without permanent establishment. These tax payers are to be identified between an individual person or legal entity, the expenses deductible for the calculation of the tax base in referente to the LIRPF and the LISO, respectively. The present regulation in force allows both individual people as well as legal entibies to deduct, the expenses projected in the LIRPF (even though these be companies), as long as it can be proved that the mentioned expenses are directly relationed to income obtained in Spain.
Income obtained through permanent establishment
In the case of Income obtained by non residents with permanent establishment, the tax base will have incorporated the difference between the market value and the accounting value of the following patrimony elements:
Those that are affected to an establishment that closes its activity.
Those that were previously affected to a Public Deed in Spanish territory and are transferred abroad. In this case, the payment of the tax debt, if the elements are transferred to another member country of the EU, or the European Economic Area with which exists the effective exchange of tax information, will be postponed by the Inland Revenue Office until the date of its sale to a third person. The request of deferment should be presented by the tax payer and must provide sufficient guarantee for the acceptance of same. This does not exclude the payment of interest on arrears.
In the cases where an Agreement of double taxation is applicable will be allowed the deduction of estimated expenses for internal operations with the main house not in Spanish territory
The income attributed to the main house that corresponds to the mentioned estimated expenses, will be considered as income obtained in Spanish territory without permanente establishment.
The tax of this income will be payable on the 31st December of each year.
The permanent establishment should apply a withholding tax for the mentioned expenses that affect an establishment closing its activity.
Capital Gains for sale of shares or holdings
Concerning these profits, which would have been subject to the application of tax system for change of residency states (consult in the Individual Income Tax reform), that the profit will be calculated using as value of purchase the market value of the shares used in effect of the new system mentioned.
Option to pay tax as resident.
A new possibility is included additionally to that in force at present, whereby is allowed those resident in other member states of the EU or the European Economic Area with effective Exchange of tax information with Spain, to chose on paying tax as an Individual Income Tax payer. The regulation is addressed to the non resident tax payers with low income, to whom is wished that they may benefit, in the same manner as those resident, of the exemption of a certain minimum amount of their income. This optional system is granted when the income obtained during the tax period in Spain has been less than 90 per cent of the personal and family minimum that would be applied in accordance to his personal and family circumstances if he had been resident in Spain as long as the mentioned income is efectively payable during the period of the Personal Income Tax and that the income obtained out of Spain has been, also, less than the personal and family minimum.
Sale of the home in Spain.
To encourage the free circulation of the citizens within the EU, it is allowed that the non resident tax payers exclude payment of the capital gains tax obtained in the sale of their main home in Spanish territory, as long as the amount obtained in the sale is re-invested in the purchase of a new main home. In spite of the above, the obligation of the withholding tax of 3% on the compensation (Art. 25.2 of the Law) is maintained, anticipating the corresponding regularization of the resulting rebate.
Draft of declarations.
It is foreseen as we have mentioned above, that the Tax Department, with prior request from the tax payers, may provide, purely for their information, draft copies of the declaration, in spite of whether a declaration should be presented, exclusively concerning the real estate income as referred to in article 13.1H LIRNR, that is, the income attributed to urban properties for non resident individual tax payers.
Tax applicable of different income.
Dividends, interest and capital gains, at present at 21%, will be of 20 % for 2015 and of 19% for 2016.
Income obtained without permanent establishment, at present the general tax is of 24,75 %, it will be 24 %. However, when dealing with residents in a member country of the EU or the European Economic Area with whom exists an effective Exchange of tax information, the rate will be of 20% in 2015 and of 19% in 2016.
Income obtained with permanent establishment, the rate will be calculated as per that established in the Tax Law of Companies.
Complementary taxation on income transferred abroad by permanent establishment, payable with a tax of 20 % in 2015 and of 19% in 2016.
Non resident entities that carry out economic activity in Spanish territory, entibies in the system of attribution of non resident income, will pay tax in Spanish territory when the economic activity carried out, is located at 25% in stead of 35%.
The clauses anti-abuse is modified, concerning the area of the exemption of profit distributed by companies resident in Spanish territory to their mother companies resident in another member states of the EU (and in the European Economic Area, under certain conditions: Exchange of information, form and type of the companies), and also concerning the exemption of the levies paid by companies resident in Spanish territory their associated companies resident in other member states of the EU and EEA. This modification is aimed to simplify these regulations to clarify any doubts in its understanding. The clause states that the exemption “WILL NOT be applied when the majority of the Rights of vote of the company receiving the income owns, directly or indirectly, by individuals or legal entities that do not reside in member states of the EU, except (and this is the change, that for dividends head office-subsidiary, it is hoped to simplify the triple alternative certificate existing today in the regualtion) when the forming and operative of same responds to valid economic reasons and substantive company reasons. In the same area of exemption head office-subsidiary (that takes as a reference the new Guideline 2011/96/EU), is introduced the condition of head office, as well as when they own in the capital of another company the direct or indirect share of at least 5%, or when the value of the share be more than 20 millon euros, eliminating the possibility referring to the possible reduction up to a minimum of 3% when speaking of restructures or physical offers. Together with this is indicated that to calculate the yearly period of time, will be taken into account that the holding period of the share has been continuously held by other companies who comply with the cirumstances of Article 42 of the Commerce Code to form part of the same Group of Companies, independent of the residency and of the obligation to draw up the yearly consolidated accounts. The exemption of dividends of up to 1.500€ payable to non resident individuals is eliminated, to bring this into line with the changes being carried out in the Individual Income Tax.
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