1. CASH PAYMENT LIMITATION
According to the LPLF, transactions in which any of the parties acts
as an entrepreneur or professional may not be paid in cash if the value
of the transaction is equal to or exceeds EUR 2,500, or its equivalent
value denominated in a foreign currency. However, a higher limit of EUR
15,000, or its equivalent value denominated in a foreign currency,
applies when the payer is an individual evidencing not to be a tax
resident of Spain and who does not act as an entrepreneur or
professional. The LPLF also lays down that the amount subject to these
limits must include any transactions or payments in which the supply of
goods or the provision of services may have been divided. Payments and
deposits in credit entities are excluded from this limitation.
The drafting of this rule raises a number of questions, among them:
(i) the term “transaction” (operaciones) is not defined or explained,
and it is not clear whether it refers to payments per se, or to the
supply of goods or the provision of services (as defined under the Value
Added Tax -“VAT”- Law), or to any other kind of transaction resulting in
a payment (e.g., a donation, a cash contribution, etc.); and (ii) it is
also uncertain whether it is possible to make a payment in cash for less
than EUR 2,500 in transactions where the total consideration exceeds
LPLF defines “cash” as any payment instrument referred to in article
34.2 of Law 10/2010 of 28 April on the prevention of money laundering
and the financing of terrorism, which includes: (i) national and foreign
banknotes and coins; (ii) bank checks to the bearer in any currency; and
(iii) any other payment instrument (including those which are electronic)
in bearer form.
The failure to comply with this limitation is considered a serious
administrative offence, punished by means of a fine equivalent to 25% of
the amount paid in cash. Both the paying party and the receiving party
will be held jointly and severally liable for this infringement.
However, those who pay or receive any amount in breach of this
limitation will be exempt from liability if they denounce the other
party within three months as from the payment date.
The statute for limitations period for this infringement is five
years as from the moment it is committed, and the statute for
limitations period for the relevant penalties is also five years as from
the moment they are imposed by the relevant administrative body.
The parties in any transaction are obliged to keep receipts and
documentation evidencing that they have complied with this limitation
for at least five years.
Unlike other measures under the LPLF (which are applicable as of 31
October 2012), this regulation enters into force and is applicable to
any cash payment made as of 19 November 2012.
2. DISCLOSING OF ASSETS LOCATED ABROAD
The LPLF establishes the obligation to disclose “information”
regarding certain assets located abroad. This obligation applies to
“taxable persons” and, in any case, to “real owners” of assets, as
defined by article 4.2 of Law 10/2010 on the prevention of money
laundering and the financing of terrorism. In particular, the disclosure
obligation refers to the following assets:
(i) Foreign accounts in banks or
(ii) Any assets, securities or rights
representing the share capital or equity of any entity, or the
assignment of funds to third parties, which are deposited or located
abroad, as well as any policyholder position in life or disability
insurances, and any life or temporary annuities deriving from the
payment of a lump-sum amount or from the transfer of any movable or
immovable property, and contracted with entities located abroad.
(iii) Real estate and rights over real
estate located abroad.
The minimum penalty for not complying with this disclosure obligation
is EUR 10,000, to be calculated as EUR 5,000 for each datum or set of
information referred to each account or asset that is omitted,
incomplete, inexact or false. The minimum penalty for late disclosing is
EUR 1,500 (to be calculated as EUR 100 for each each datum or set of
In addition, those assets or rights which have not been disclosed (i)
will be deemed as a “non-justified capital gain” for Personal Income Tax
(“PIT”) purposes or (ii) will be considered acquired from undeclared
income for Corporate Income Tax (“CIT”) purposes; unless the taxpayer
proves that the ownership of the relevant asset or right derives from
declared income, or that it was obtained in a tax period in which the
taxpayer was not subject to these taxes.
The relevant capital gain or undeclared income will be charged into
taxation in the more distant tax year which is not out of the statute of
limitations, and it is irrelevant whether or not the taxpayer can
evidence that he owned the relevant asset or right in a previous tax
In addition, where according to the above a “non-justified capital
gain” or an undeclared income is to be brought into charge for the
purposes of PIT or CIT, an additional penalty will be imposed, which
will amount to 150% of the resulting PIT or CIT liability (without
taking into account the offsetting or application of any carried forward
losses, deduction or pending tax credit).
3. NEW INDIRECT TAXATION RULES ON THE TRANSFER OF SHARES IN REAL
The LPLF modifies article 108 of Law 24/1988 of 28 of July on the
securities market ("SML"), setting out significant changes to
indirect taxation applicable to secondary market transfers of shares in
companies which assets mainly consist in real estate located in Spain.
Before this modification of article 108 taking place, these
transactions were subject to transfer tax (Transmisiones Patrimoniales
Onerosas - "TT") when certain objective conditions were met,
disregarding whether they were tax driven or not.
As indicated in the preamble of the LPLF, the purpose is now to come
back to the very first drafting of article 108 of the SML, which was
originally thought as an anti-circumvention measure against setting up
corporate entities for possible transfers of securities solely to hedge
a transfer of real estate assets.
With this in mind, new drafting of article 108 of the SML only
excludes from the general indirect tax exemption applicable to the
transfer of shares those which are intended to avoid the payment of
taxes applicable on the transfer of real estate.
For these purposes, the SML assumes (unless there is evidence to the
contrary) that there is an intention to avoid the payment of the
indirect taxes applicable to the transfer of real estate assets in the
a) When, as a consequence of a secondary
market transfer of shares (i) in a company which assets mainly consist
in real estate located in Spain which is not used in a business activity
(a “Real Estate Company”) or (ii) in a company which has a stake
in a Real Estate Company; the acquirer gains control (or if it already
had control, it increases its stake) in the relevant Real Estate Company.
b) When there is a transfer of shares which
had been previously received in exchange for the contribution of real
estate occurred less than three years before, provided that the relevant
real estate is not used in a business activity.
Other noteworthy features of the amended version of article 108
include the following:
- Taxation on the acquisition of shares in the primary market is
- If the transfer of shares is subject to tax, this will be subject
to VAT or to TT, depending on the tax applicable to the direct
transfer of the real estate assets owned by the company which shares
are being transferred.
4. VALUE ADDED TAX
Regarding VAT, changes primarily concern the reverse charge mechanism
and the applicable rules for cases of insolvency. Several changes have
also been introduced in the General Indirect Tax of the Canary Islands (Impuesto
General Indirecto Canario - “IGIC”), mainly in the same
4.1. The reverse charge mechanism
The Law sets out three new cases where the VAT reverse charge
mechanism must be applied (meaning that the acquirer or recipient will
be considered as VAT taxpayer instead of the transferor or provider).
- When the taxpayer waives the VAT exemption laid down by paragraphs
20 and 22 of article 20(1) of the Spanish VAT Law, which basically
refers to transactions consisting in (i) the delivery of rural land
and other land that is not considered available for building; and (ii)
second and subsequent deliveries of buildings, under the conditions
established under the VAT law.
- In the delivery of real estate assets as a consequence of the
execution of a guarantee over them, including those cases where the
real estate is delivered to the creditor as payment of the relevant
debt, and also where the acquirer assumes the obligation to repay the
- In the execution of works, with or without the provision of
materials, as well as in the assignment of personnel for the execution
of works, as a result of contracts entered into directly between the
developer and the contracting party for the development of land or the
building or refurbishment of buildings. This includes situations where
the recipients of the transaction are the main contracting party or
other sub-contracting parties under the same conditions.
4.2. Special provisions for cases of insolvency
The LPLF establishes several special provisions relating to VAT for
cases of insolvency, which, according to the preamble of the LPLF, aim
to avoid that the declaration of insolvency, whether by the transferor
or the acquirer, undermines the neutrality of the tax. In summary:
- Taking into account the precedents of the Spanish Supreme Court (Tribunal
Supremo), which establish that VAT credits arising from taxable
events prior to the declaration of insolvency (concurso) should
be considered as pre-insolvency credits, the LPLF establishes the
obligation for taxpayers declared insolvent to file two tax returns.
One tax return should be filed for taxable events arising prior to the
declaration of insolvency and the other for those following the
declaration, in the terms provided under the regulation.
- Taxpayers in an insolvency situation may only deduct input VAT
borne before the insolvency declaration in the tax return
corresponding to the tax period when the relevant VAT was borne, with
- A new provision is introduced for the modification of VAT in cases
in which the taxed transaction is deemed void as a consequence of the
exercise of a claw-back insolvency action or other actions challenging
the transaction in the context of an insolvency proceeding.
- In cases of downward modification of VAT due to the declaration of
insolvency of the recipient, the modification will be made in the tax
return corresponding to the period in which the right to deduct the
amounts was exercised, with certain particularities.
5. AMENDMENTS CONCERNING THE LIABILITY REGIME FOR TAX DEBTS OF THIRD
The LPLF amends some of the rules governing the liability for tax
debts of third parties. Among others:
a) The quantitative limit of
the liability of partners, shareholders and co-owners of companies or
any other legal persons wound up and liquidated, for tax debts of
these entities, is increased, so that it is not now determined by just
the amount they have received from the relevant entity liquidation, but
it also includes what they have received from the relevant entity during
the two years preceding the winding-up.
b) In cases in which Spanish law
establishes that liability for tax debts corresponding to other
taxpayers includes penalties, the tax authorities will allow the
liable party to benefit from a 30% reduction in case that the
liable person accepts the penalty and an additional 25% reduction for
prompt payment, with certain exceptions.