The Spanish Anti-Tax Fraud Act Has Been Passed

ANALYSIS

Tax The Spanish Anti-Tax Fraud Act has been passed

Analysis of the most important features of the recently passed Anti-Tax Fraud Act, which deals with different measures to combat tax fraud, as well as other issues of interest from a tax perspective.

DIEGO MARTÍN-ABRIL Y CALVO Of counsel, Gómez Acebo & Pombo

PILAR ÁLVAREZ BARBEITO Associate Professor, Financial and Tax Law, Universidad de La Coruña Academic counsel, Gómez-Acebo & Pombo

he Official Journal of Spain pu- The main purpose of this Act is to combat tax blished on Saturday 9 July 2021 fraud in order to strengthen the tax system's the Measures to Prevent and Com- revenue-raising capacity and adapt it to the bat Tax Fraud Act, transposing current reality, although it is true that, in light Council Directive (EU) 2016/1164 of the numerous changes to tax legislation it Tof 12 July 2016 laying down rules against tax includes, it can be said that its objective goes avoidance practices that directly affect the beyond the aforementioned framework, rea- functioning of the internal market, amending ching other tax policy objectives. In view of the various tax rules and concerning the regulation above, we highlight below some of the most of gambling. relevant aspects of the legal text.

July 2021 1 1. Anti-Tax Avoidance Directive (ATAD) with what Spain has already been doing in some respects, it is now also opting, with Firstly, reference should be made to the respect to certain elements of the tax trans- amendments that, in line with Council Di- parency rules, to maintain higher standards rective (EU) 2016/1164 of 12 July -ATAD-, of protection than those provided for in the are incorporated in relation to internation- Directive - for instance, the inclusion of certain al tax transparency rules and the so-called types of income not expressly referred to in exit taxation, the provisions of which will the Directive as imputable. Finally, and this take effect for taxable periods starting on or may be very relevant, undertakings that have after 1 January 2021. first-tier holdings abroad under exemption schemes will foreseeably be subject to these As regards the exit tax, and with respect to rules, since Article 100(4) of the Corporate those cases where the change of residence Income Tax Act has been eliminated. has been to another EU Member State, the deferral established by Spanish law for the 2. Tax havens / non-cooperative payment of the exit tax is modified to adapt jurisdictions it to the provisions of the Directive, which does not envisage such deferral, but rather In the context of the fight against tax ha- the possibility of paying the tax in instal- vens, in addition to assuming the interna- ments over five years. On the other hand, tional denomination of non-cooperative in the Non-Resident Income Tax legislation, jurisdictions, this concept is extended, in which currently regulates the transfer of accordance with criteria of tax equity and assets abroad from a permanent establish- transparency and on the basis of a series of ment located in Spanish territory, a new case criteria specified in the Act that will serve, of exit tax is introduced for the transfer, not in turn, to update the list of countries and of an isolated element, but of "the business" territories that are regarded as such, as well carried out by the permanent establish- as the list of harmful tax regimes. In those ment, in addition to amending the afore- cases in which Spain has a treaty to avoid mentioned provision relating to the payment double taxation, the tax legislation relating in instalments. to non-cooperative jurisdictions will also be applicable, insofar as it is not contrary to the In relation to international tax transparen- provisions of the aforementioned treaty. Al- cy, several changes have been introduced. though this new regulation came into force Thus, the imputation of income under these on the day following publication of the Act rules will not only affect income earned by in the Official Journal of Spain, in practice, undertakings in which the taxpayer has an it will not take effect until the list of non-co- interest, but also income earned by its per- operative jurisdictions is approved, which manent establishments abroad. In addition, will be done by Order of the Minister of Fi- income not previously provided for, such as nance (until now it was a regulatory rule). that derived from capital (finance) leases or Consequently, the possible compatibility of a from insurance, banking and other financial Treaty for the Avoidance of Double Taxation business activities, will also be the subject and the consideration of certain countries of imputation. On the other hand, in line as non-cooperative jurisdictions merits spe-

2 July 2021 cial monitoring of the legislation approving be wound up and liquidated, so that these jurisdictions with a view to the review their shareholders can transfer their in- of certain "anti-paradise" rules.) vestment to other collective investment schemes that meet the requirements for 3. Corporate Income Tax (other provisions) maintaining the 1 per cent corporate income tax rate. At this point, the question On the other hand, there have been several arises as to whether this reinvestment amendments affecting the corporate income must be made in domestic collective in- tax that were incorporated during the passage vestment schemes (as it appears to be) or through the lower House of Parliament of the whether it can also be made in schemes in Bill -introduced by the Cabinet on 13 Octo- other countries. ber 2020-, among which we would highlight the following: — Article 36(2) of Act 27/2014, which regulates the investment in film productions — With effect for taxable periods begin- relief, incorporates new requirements ning on or after 1 January 2022, addi- that, in order to be able to apply the tional objective requirements are laid aforementioned relief, producers who are down for shareholders of open-ended responsible for the execution of foreign investment companies (SICAVs) so that productions of feature films must comply the latter can apply the 1 per cent tax with. However, with regard to some of rate, thereby strengthening the collective these requirements, the transitory ar- nature of these companies. rangement set out in the forty-second Transitory Provision, now added to the In this regard, Article 29(4)(a) of the Cor- Corporate Income Tax Act, will have porate Income Tax Act is amended to to be taken into account. provide, with certain exceptions, that for the purposes of calculating the minimum In addition, with effect for taxable perio- number of shareholders of these under- ds beginning on or after 1 January 2021, takings, only those shareholders who hold Act 11/2009, which regulates Publicly- shares equal to or greater than 2,500 Traded Real Estate Investment Com- euros will be taken into account or, in the panies (SOCIMIs), is amended so that case of open-ended investment compa- these undertakings will be taxed at a nies in compartments - for the purposes special rate of 15 per cent on the amou- of determining the minimum number nt of profits obtained in the year that is of shareholders in each compartment - not distributed, insofar as it derives from only those shareholders who hold shares income that has not been taxed at the equal to or greater than 12,500 euros general corporate income tax rate or from will be taken into account. In addition, income qualifying for the reinvestment compliance with the rules for determin- period (regulated in Article 6(1)(b) of the ing the number of shareholders may be aforementioned Act 11/2009), and this checked by the tax authorities. However, rate will be treated as a corporate income an interesting transitory arrangement tax liability. In this way, it seems that the is envisaged for SICAVs that resolve to Act wishes to provide a greater incentive

July 2021 3 for the distribution of dividends, which, or compliance check procedure has been ini- it should be recalled, is currently set at tiated which includes the verification of such 80% of the profits obtained. earnings as part of its purpose, without the deduction being applicable in any case in 4. Non-Resident Income Tax respect of the part of the positive net earnings deriving from income not included or In the context of the Non-Resident Income Tax, expenses unduly written off in the taxpayer's amendments are introduced to promote the self-assessment and which are regularised in freedoms of establishment and movement, any of the aforementioned procedures. On in accordance with EU law, and to adapt the this point, it should be remembered that the system of representation of non-residents recent Supreme Court ruling of 17 December to bring it into line with EU law. 2020 (rec. no. 4786/2019), with the previous wording of the aforementioned provision, un- In addition to the above, it is also possible for derstood that the deduction could be applied the tax authorities to require non-residents to earnings discovered by the tax authorities to appoint a representative simply because and not previously declared by the taxpayer. they have real property in Spain. In addition, in respect of this tax, the only 5. Personal Income Tax amendment made by upper House to the text of the Bill submitted by the lower House In the area of the Personal Income Tax, should be mentioned. This change concerns the following changes are noteworthy: succession (inheritance) agreements. It should be recalled that the text approved by the lower The treatment of investments in exchange-trad- House provided that those acquiring assets ed funds (ETFs) is standardised, irrespective through succession contracts or agreements in of the national or foreign market on which which the transfer took place before the death they are traded. In this regard, ETFs mar- of the transferor would be subrogated to the keted in Spain that are traded on foreign value and date of acquisition that the asset stock exchanges are extended the exclusion had at the time the agreement or contract from the deferral scheme for reinvestment be- was entered into - an aspect that, among tween shares or units in collective investment many other operations, negatively affects the schemes, an exclusion that currently only ap- transfers of family businesses that had been plies in relation to Spanish or foreign schemes carried out in this way in those regions whose traded on the Spanish stock exchange. In both civil law regulates this type of agreement. By cases, they will be exempt from withholding. virtue of the amendment made by the upper House, the effects of this regulation have On the other hand, during the passage of the been limited, so that this subrogation in the Bill through the lower House, an amendment value and date of acquisition of the asset was introduced to clarify the wording of the will occur when the asset is transferred before deduction for the rental of residential real five years have elapsed since the conclusion estate provided for in Article 23(2) of Act of the succession agreement or the death of 35/2006, so that it will only be applicable the transferor if this is earlier, This amendment to the positive net earnings calculated by is introduced with a transitory arrangement the taxpayer in a self-assessment submitted that avoids the retroactive effect of this provi- before a data verification, limited verification sion, as it will only apply to transfers of assets

4 July 2021 made after the entry into force of this Act thereof, with the aim that life savings in- that have been acquired lucratively through surance policies are effectively taxed by death by virtue of succession agreements this tax, even if the policyholder does not or contracts with present effects. have the right of surrender. Thus, although as a general rule, life insurance policies Finally, in relation to life insurance contracts will be computed at their surrender value in which the policyholder assumes the invest- at the time of accrual of the tax, when the ment risk, Article 14(2)(h) of Act 35/2006 is policyholder does not have the right to ex- amended, since the requirements demanded ercise the right of full surrender on that day, in its version still in force for the special rule the insurance policy will be computed at the of temporary imputation not to be appli- value of the mathematical provision on that cable in this type of insurance refer to in- date in the policyholder's tax base. These rules surance legislation that has already been will also apply in cases where temporary or amended. Instead, the requirements set out life annuities are received from a life insur- in Article 89 of Royal Decree 1060/2015, ance policy, with the value thus calculated of 20 November, on the unified regulation, being included in the recipient's tax base. supervision and solvency of insurance and reinsurance companies will apply. Likewise, the aforementioned legal provision establishes that non-resident taxpay- 6. Cryptocurrencies ers will be entitled to the application of the legislation of each region where most In relation to cryptocurrencies, those who of their assets are located. It should be re- provide services on behalf of third parties to called that previously this possibility was safeguard private cryptographic keys that only envisaged with respect to taxpayers enable the holding and use of such curren- resident in other European Union or European cies, including providers of exchange services Economic Area States. for the aforementioned currencies if they also provide the holding service, will be obliged 8. Transfer Tax to provide information on the balances held by holders of virtual currencies, and on the In the field of the transfer tax, and in relation transactions carried out with them (acqui- to purchases from private individuals of gold sition, transfer, exchange, collections and and jewellery items by traders in this business payments), the latter obligation extending sector, it is clarified that the case of non-taxa- to those who make initial offers of new vir- tion provided for in Article 7(5) of the Transfer tual currencies. On the other hand, virtual Tax (Recast) Act requires the transferor to be currencies will be included in the declara- an employer or self-employed professional tion of property and property rights abroad in the conduct of his business activity, a con- (Form 720). dition that will not be met if the transferor is not, without the condition of the acquirer 7. Wealth Tax being relevant for these purposes.

Likewise, also in insurance matters, and with In other matters, for the purposes of the trans- effect from the entry into force of this Act, the fer tax and the inheritance and gift tax, the Wealth Tax Act 19/1991 of 6 June is amend- amendment affecting the calculation of the ed, changing the valuation rule in Article 17 tax base for these taxes is noteworthy, which

July 2021 5 will now be determined by the "reference one hand, to clarify that obtaining authori- value of the Cadastre", understood as the sation for the owners of tax warehouses to most probable value of the property on the operate as such requires that actual storage market. Consistent with the above, this same operations, in respect of products subject to rule is added to Wealth Tax for real proper- manufacturing excise duties, are carried out ties whose value has been determined by in said establishment and, on the other hand, the tax authority in a procedure. to classify new cases of infringements.

9. Value Added Tax In addition, during the passage of the Bill through the lower House, control rules on raw With regard to the planned changes to tobacco - not included among the tobacco the value added tax, the following aspects products subject to taxation in Spain - were should be highlighted: included together with sanctioning rules, applicable to hired operators and transport- Article 87(3) of the Value Added Tax Act ers of this product. The aim is to combat, (LI VA) is amended to update the case of vi- in particular, an illegal market from which carious liability for payment of the tax cur- clear fiscal and non-fiscal disadvantages rently defined forcustoms agents, which will derive. now apply to natural or legal persons acting for and on behalf of the importer. On the 11. Tax on Business Activities other hand, in order to delimit the scope of joint and several or vicarious liability arising With regard to business tax, among other as- from customs assessments, the term "customs pects, the regulatory references for the consid- premises" in Article 87(4) LIVA has been re- eration of a group of companies are updated placed, thus clarifying that this liability ex- and it is clarified that the rule for calculating tends to customs declaration and customs the net amount of turnover must be applied declaration data verification procedures. independently of the obligation of accounting These amendments are also incorporated consolidation. into the Canary Islands Tax. 12. Taxation Act In relation to groups of undertakings, it is specified that the controlling undertaking With regard to the many amendments af- will be the party in breach of the obliga- fecting the general Taxation Act (LGT), the tions deriving from the payment of the tax following aspects should be highlighted: debt, the request for a set-off or the refund resulting from the aggregate tax return-set- — An express prohibition is introduced to tlement corresponding to the group of establish any extraordinary tax regu- undertakings. larisation mechanism that involves a reduction in the amount of the tax debt. 10. Excise duties — The compatibility, where applicable, In the field ofexcise duties on manufacturing, of late payment interest in the case of amendments are basically introduced, on the

6 July 2021 an unjustified refund with late payment ability, traceability and unalterability surcharges is expressly acknowledged. of records.

— The late payment surcharges in Arti- — The system for the representation of cle 27(2) LGT are amended, essentially non-residents is adapted to EU law, so through the establishment of a system that the non-resident's representative of increasing surcharges of 1% for each does not necessarily have an address full month of delay without late payment in Spanish territory. interest until the twelve-month period of delay has elapsed. From the day following — The possibility of granting interim re- the expiry of the twelve-month period, lief during the processing of suspension in addition to the 15 per cent surcharge, proceedings with guarantees other than late payment interest will start to accrue. those necessary to obtain the automat- This amendment is accompanied by a ic suspension, or with total or partial transitory scheme, in such a way that waiver of them, is incorporated. these new surcharges will also apply to those levied prior to the entry into force, — The amount leading to inclusion in the provided that they have not become final. list of tax debtors, which will also in- This same article establishes an exception clude those jointly and severally liable, to the imposition of surcharges when the is reduced to 600,000 euros. taxpayer regularises, by filing a return or self-assessment for other periods of — The grounds for termination of the man- the same tax item, facts or circumstanc- agement procedure initiated by means es identical to those regularised by the of a declaration are modified with re- tax authority, and certain circumstances gard to those taxes that are settled on apply. imports of goods. Thus, the declaration of expiry will not be applicable in these — Articles 31 and 32 LGT are amended, ex- procedures which, on the other hand, may pressly acknowledging that late payment end when it is subsequently decided to interest will not be accrued on refunds initiate a limited verification or compli- derived from the legislation of each tax ance check procedure on the same subject and undue earnings during certain peri- matter of the procedure. ods - delays not attributable to the tax authority and periods of extension of — The mandatory nature of the non-con- the deadline in the compliance check formity report in the processing of procedure -. non-conformity notices is eliminated, being required only when it is nec- — The prohibition of dual-use software essary to complete the information is established through the obligation contained in the notice. for computer or electronic systems sup- porting accounting or business man- — It is stipulated that the presentation agement processes to comply with of repeated requests for deferment, certain requirements to ensure the in- instalments, set-off, suspension or pay- tegrity, preservation, accessibility, read- ment in kind will not prevent the start

July 2021 7 of the enforcement period when other ment interest is not compatible with the previous requests have been rejected levying of surcharges for late declara- and the relevant payment has not been tions. made. It is also clarified that the open- ing of insolvency proceedings does not — The time period for retention by fi- affect the voluntary payment period. nancial institutions of documentary evidence, statements required to be — In relation to the procedure for demand- made by persons owning or controlling ing liability, the original voluntary period financial accounts and other informa- of payment of the debt shall be under- tion used in compliance with report- stood to be the initial voluntary period ing and due diligence obligations is of payment, regardless of the actions amended. Said period must in no case that the main debtor may have taken be less than five years from the end of or the vicissitudes that the tax debt the time limit within which the financial may have undergone. institution is obliged to report the information. — In the area of penalty reductions - for which a transitory scheme is provided - — During the parliamentary passage of the reduction of penalties arising from the Bill, the lower House, following the settlement proceedings is raised from latest case law of the Supreme Court, 50 to 65 per cent, and the reduction included some modifications of exclu- for early payment cases from 25 to 40 sively procedural scope in the Taxation per cent. Act - Article 113 - and in the Judicial Review Jurisdiction Act, clarifying the — As regards the failure to submit or in- rules on court authorisations to enter completeness, inaccuracy or false infor- a taxpayer's home if this has been re- mation in the submission of information quested by a tax authority in the frame- returns required by customs legislation, work of an action or procedure for the the minimum penalties laid down for application of taxes. such infringements are increased to EUR 600 where such infringements occur — Also during the legislative procedure in connection with the entry summary followed for the approval of the Act, declaration provided for in the Union the lower House introduced a new par- Customs Code. agraph 4 in Article 260 of the Taxation Act, by virtue of which, and following — The maximum period for initiating pen- the legal doctrine of the Court of Jus- alty proceedings on the basis of assess- tice of the European Union, those who ments or rulings issued in certain proce- have received State aid held illegal and dures for the application of taxes is set incompatible with the internal market, at six months. It should be recalled that with a pending recovery order following this period was three months. a previous Commission decision, may not enjoy tax benefits that constitute — It is expressly established, with regard State aid under Community law until to customs declarations, that late pay- such aid has been repaid.

8 July 2021 — In the same stage of the legislative pro- previous limit continues to apply. However, cedure followed for the approval of the for private individuals with their tax domicile Act we are commenting on, para. 4 of outside Spain, the limit for cash payments the sixth additional provision of Act decreases to €10,000. 58/2003 was changed to improve the management of tax registers, amend- 14. Gambling ing the rules for revocation of the tax identification number so that inactive Measures are also introduced to combat entities whose number has been revoked fraud in the area of gambling, amending cannot make entries in any public reg- Act 13/2011 of 27 May. istry or execute deeds before a notary, except for the necessary procedures for 15. COVID limitation period the cancellation of the relevant note on the margin. Since the entry into force of Royal Decree 463/2020 of 14 March, declaring a ‘state of 13. Cash payments alarm’ for the management of the health crisis situation caused by COVID-19, the lim- In addition, the rules for cash payments - itation periods for any actions and rights for which a transitory scheme is provided – provided for in the tax legislation have been are amended, also including changes in its suspended until 30 May 2020. sanctioning procedure. Of particular note is the modification of the general limit for However, the effects of this measure are re- cash payments set out by Act 7/2012, from stricted to those limitation periods which, €2,500 to €1,000, except for payments made without taking into account this suspension, by individuals not acting as employers or end before 1 July 2021. self-employed professionals, for which the

Disclaimer: This paper is provided for general information purposes only and nothing expressed herein should be construed as legal advice or recommendation.

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