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1. introduction
Law 16/2012 of 27 December (“Law 16/2012”) has
introduced a number of tax measures aimed at consolidating the Spanish
public finances and fostering the economic activity. Among them, we
would highlight the following:
- Step up of balance sheet book values up to 129%.
- Temporary limit to the tax deductible depreciation of assets owned
by large sized companies.
- Improvement of the special tax regime applicable to real estate
leasing companies.
- Amendment of the special tax regime applicable to Spanish REITs (“SOCIMIs”).
- Amendment of the “tax lease” regime.
- Limit to the 40% tax rebate applicable on severance payments for
Personal Income Tax (“PIT”) purposes and restriction
to deductibility of these payments for Corporate Income Tax (“CIT”)
purposes.
- Elimination of the PIT tax credit for the acquisition of
real estate to be used as residence.
- New tax on lottery prizes and bet winnings.
- New method for determining the deemed taxable income for employees
who are provided with a dwelling by their employers.
- Amendment of taxation applicable on short-term capital gains.
A summary of these measures is provided below with a special focus on
the most significant and potentially relevant aspects in practice
[1].
2.STEP UP OF BALANCE SHEET BOOK VALUES
Companies and individuals who carry out business activities will be
exceptionally allowed to step-up the book value of certain assets, under
certain requirements.
a. Taxpayers that may elect for
this step-up: CIT payers, PIT payers who carry out business
activities (and keep their accounts according to the Commercial Code or
are obliged to keep records of their business activities) and Non-Resident
Income Tax (“NRIT”) payers with a permanent
establishment in Spain.
b. Assets eligible for step-up:
those assets which are shown in the first balance sheet closed
after 28 December 2012 [2] provided that they are not (or
they must be) completely depreciated for tax purposes at that time and
which are included in the list below:
(i) Tangible fixed assets and real estate
investments, either located in Spain or abroad
[3] (including
those which are held through financial leasing, upon subsequent
condition that the relevant call option is actually exercised).
(ii) Administrative concessions registered
as intangible assets by concessionaire companies which are subject to
the special accounting criteria set forth in the accounting regulations
applicable to concessionaire companies (EHA/3362/2010).
c. Scope:
If the taxpayer
elects for this exceptional step-up of book values, it will affect any
and all assets which are eligible according to the above, except as
regards real estate assets, which may be stepped-up individually, i.e.,
on a case by case decision for each asset.
d. Procedure:
- The procedure for the step-up basically consists in applying
certain coefficients to (i) the purchase price or production cost of
the relevant assets, (ii) to any improvements (additional investments)
made to such assets and (iii) to any depreciation of these assets
which has been considered tax deductible.
- The coefficients range from 1 to 2.2946,
depending on the dates when the acquisition, improvement or
depreciation of the relevant asset took place. The maximum coefficient,
which implies a step up in value of approximately 130%, applies to
dates before 1 January 1984.
- For CIT and NRIT payers, the increase in the value of the relevant
assets resulting from the application of the above referred
coefficients must be reduced by multiplying its amount by the
following ratio (only if such ratio is equal or below 0.4): (net
equity / (net equity + total liabilities - credits and cash)).
- A special reserve (called “reserva de revalorización de la Ley
16/2012, de 27 de diciembre”) must be registered for the amount
of the increase in the value of the relevant assets resulting from the
step-up.
- The step up must be carried out before the end of the term for the
corporate approval of the first balance sheet closed after 28 December
2012. In the case of PIT taxpayers, the step up must be carried out
before 30 June 2013.
e. Depreciation of the stepped-up
assets: the net increase in the value resulting from this step-up
extraordinary procedure will be depreciated during the operating life of
the relevant assets as of 1 January 2015.
f. Special tax applicable on the
step up:
- The step up will not be taxed under CIT, PIT or NRIT, but it will
be subject to a special 5% tax. The relevant tax liability will be
assessed as 5% of the amount registered in the account “reserva de
revalorización de la Ley 16/2012, de 27 de diciembre” .
g. The special account “reserva
de revalorización de la Ley 16/2012, de 27 de diciembre”
- The amount registered in the special reserve may not be disposed (except
in certain exceptional situations) during a three-year period as of
the filing of the special step up tax return, unless the tax
authorities have audited the step-up before such period expires.
- Once the three-year term has elapsed or the Spanish tax
authorities have concluded the relevant audit, the amount registered
in this special reserve may be used to offset losses, to increase the
share capital or, once that ten years have elapsed as of the closing
date of the balance sheet previous to the step up, to free reserves (which
will only be distributable once the stepped-up assets have been
completely depreciated or transferred). CIT taxpayers receiving the
distribution of this special reserve will benefit from a 50% or 100%
exemption, under the general requirements provided by law for
dividends.
3. Corporate income tax (CIT)
3.1. Temporary measures
3.1.1. Temporary limitation of tax deductible
depreciation for large sized companies.
During tax periods initiated in 2013 and 2014, the tax deductible
amortisation of certain assets by large sized companies
[4] will be partially limited: tax deductibility of amortisation expenses of
tangible and intangible fixed assets and real estate investments will be
capped to 70% of that which is registred and that would have been deductible otherwise
[5].
This limit will not apply to those cases specifically approved by (or
notified to) the Spanish tax authorities through a special procedure.
The amortisation expenses that are not deducted from the 2013 and
2014 CIT taxable income as a consequence of this cap, will be deductible
on a linear basis in a ten-year period as of 2015.
3.1.2. Extension of the term during which very
small sized companies may benefit from a special reduced CIT rate
During 2013, very small sized companies (i.e., those which turnover
is lower than EUR 5 Million and which have an average number of
employees lower than 25) will continue benefitting from the special 20%
and 25% CIT rates for creating or maintaining its level of employment,
under certain requirements.
3.1.3. Extension of the term during which CIT
taxpayers may generate a tax credit for expenses incurred in training
employees for the use of new technologies
During 2013, CIT taxpayers will continue benefitting from a tax
credit for expenses incurred in training employees for the use of new
communication and information technologies, under certain requirements.
3.2. Permanent measures
3.2.1. Special regime for housing rental
companies
For tax periods initiated on or after 1 January 2013, the
requirements for this regime to apply have been modified: (i) the
minimum number of dwellings for sale is reduced from 10 to 8; (ii) the
minimum lease period is reduced from 7 to 3 years and (iii) the maximum
built area requirement is eliminated.
3.2.2. New tax lease regime
With effects as of 1 January 2013, CIT taxpayers will be entitled to
benefit from a special accelerated depreciation regime for certain
qualifying assets acquired through a financial lease before these assets
are ready to use. Thus, the CIT taxpayers acting as lessees will be
entitled to elect for this regime through a formal notification to the
Spanish tax authorities, so that they can register tax deductible
expenses for the relevant assets as of the moment they start to be built,
if the following requirements are met:
- The relevant asset must be a fixed tangible asset acquired through
a financial leasing which rental payments are significantly paid
before the construction finalises.
- The construction must take at least 12 months.
- The asset must have a particular design and technical features
that cannot be mass-produced.
3.2.3. Elimination of the obligation to make
advanced payments on account of CIT for certain entities
CIT tax payers subject to a tax rate of 1% or 0% will be released
from its obligation to ake advanced payments on account of CIT. This
measure will mainly affect to investment and pension funds.
3.2.4. Limitation of CIT-deductible severance
payments
As of 1 January 2013, expenses registered for severance payments paid
by CIT taxpayers to dismissed employees exceeding (i) EUR 1 million or (ii)
the amount which qualifies to be PIT-exempt income of the employee (according
to the PIT regulations), if higher, will not be deductible for CIT
purposes.
4. PERSONAL INCOME TAX (PIT)
4.1. Elimination of the tax credit for the
acquisition of real estate to be used as residence.
The tax credit for the acquisition of real estate to be used as
residence has been eliminated for acquisitions formalized as of 1
January 2013.
4.2. Amendment of the tax regime applicable to
earnings from gambling and lotteries
4.2.1. New tax on lottery prizes and bet
winnings
Prizes from lotteries that (i) are organised by the Spanish State,
the autonomous regions, the National Organization of Spanish blind
people (ONCE), the Spanish Red Cross and similar European entities and (ii)
take place after 1 January 2013; will cease to be exempt from taxation
if they exceed EUR 2,500, and will be subject to a special 20% tax.
4.2.2. Offsetting of gambling gains and losses
With effects as of 1 January 2012, PIT payers will be allowed to
offset gains and losses from gambling (excluding those derived from
lotteries referred above).
4.3. Amendment of taxation applicable to short-term
gains
As of 1 January 2013, those capital gains which correspond to assets
held for less than one year, will not be taxed as “savings income”, but
as “ordinary income”, meaning that they will not benefit from the
reduced rates applicable to savings income (maximum 27%) but to the
general rates applicable to ordinary income (up to 56%) [6].
4.4. New method for calculating the deemed
taxable income for employees who are provided with a dwelling by their
employers
Also with effects as of 1 January 2013, the method for assessing the
in-kind labour income consisting in the provision of a dwelling to
employees has been amended.
4.5. Limit on the reduction applicable to
severance payments which are not exempt from PIT
Severance payments which are not exempt from PIT (as a consequence of
exceeding the compulsory amounts set out by the labour regulations,
which are PIT exempt as a general rule) may normally benefit from a 40%
reduction (which cannot exceed EUR 120,000), if the dismissed employee has been working for more than two
years for the paying employer, among other conditions.
With effects as of 1 January 2013, this 40% reduction will not apply
where the relevant severance payment exceeds EUR 1 million and will only
partially apply when the relevant severance payment exceeds EUR 700,000
(the reductible amount will be calculated according to this formula: EUR
300,000 - (compensation amount - EUR 700,000)).
5. WEALTH TAX
Wealth Tax will continue being levied in most Spanish regions during
2013.
6. non-residentS income tax (NRIT)
As of 1 January 2013:
- NRIT payers without a permanent
establishment in Spain will be subject to the new tax on lottery
prizes described in section 4.2.1 above.
- The special tax on real estate owned by
non-resident entities will only apply to those entities which are
resident in a tax haven jurisdiction.
7. value added tax (VAT)
As regards VAT, most amendments refer to the requirements for VAT
taxpayers to reduce the VAT basis of transactions when the client
becomes in default or in an insolvency situation. In this regard, for
instance, Law 16/2012 sets out that those VAT payers which act as
suppliers in transactions which consideration is divided in instalments,
will be entitled to reduce the VAT basis corresponding to the unpaid
instalments just after having formally requested their payment through a
Notary or a judicial claim.
8. amendment of the tax regime applicable to spanish
reits
Law 16/2012 has changed certain aspects of the special tax regime
applicable to Spanish Real Estate Investment Trusts (in Spanish,
Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario
or “SOCIMI”). Most relevant amendments are described below
[7].
8.1. Increase of flexibility of requirements to
apply the SOCIMI special regime
The purpose of the reform is to facilitate the application of this
regime by reducing the applicable requirements because, as stated in the
preamble of the law, very few SOCIMI have been incorporated so far. In
this regard:
a. As regards the
trading requirement:
- Trading of the
shares in SOCIMIs is now possible not only in regulated markets, but
also in multilateral trading systems (e.g., the Spanish alternative
investment market known in Spain as MAB); and not only in Member
States of the EU or of the European Economic Space, but also in any
other country, to the extent that they have actual exchange of tax
information with Spain.
- It is now not
necessary that the trading requirement is already fulfilled on the
date when the relevant entity formally elects to be subject to the
SOCIMI special regime, but it is enough if it is fulfilled during all
the tax periods during which the entity is taxed as a SOCIMI.
b. Real estate assets promoted by the
SOCIMIs must be leased for at least three years (previously seven).
c. Subsidiaries may promote real estate
assets (previous forbidden).
d. The requirement to hold at least three
real estate properties which separately do not represent more than 40%
of the company’s total assets on the acquisition date is eliminated.
e. The minimum share capital required is
reduced to EUR 5 million from the previous EUR 15 million.
f. The minimum percentage of income not
deriving from the transfer of real estate, the transfer of certain
shareholdings and dividends from such shareholdings, subject to
compulsory distribution is reduced to 80% from the previous 90%.
g. The 70% limit of external financing is
removed.
8.2. Main amendments to the
SOCIMI taxation
Income deriving from the SOCIMIs ordinary
business will be subject to a special 0% CIT rate.
However, SOCIMIs will have to pay a 19% tax
on the gross amount of dividends distributed to shareholders holding
more than a 5% interest in the relevant SOCIMI where those shareholders
pay less than a 10% tax on such dividends, with certain exceptions
[8].
On the other hand, SOCIMIs are excluded from
the extraordinary rule (set out by Real Decreto-ley 12/2012) by
which during tax years initiated on 2012 and 2013, advanced payments on
account of CIT must not be lower than 12% of the net accounting profit
of the relevant CIT taxpayer, under certain conditions.
8.3. Amendment of the
taxation applicable to shareholders of SOCIMIs
As regards the taxation applicable to the
income (gains or dividends) derived by shareholders from their
participation in SOCIMIs:
- CIT and NRIT payers operating through a
permanent establishment will be taxed on the income they obtain from
their participation in SOCIMIs according to the general CIT or NRIT
rules, except that they will not be allowed to any double taxation
relief on such income.
- Income obtained by PIT payers from their
participation in SOCIMIs will be subject to the PIT rates applicable
to savings income (currently ranging from 21% to 27%) and will not
benefit from the general EUR 1,500 exemption for dividends set out by
the PIT regulations.
- NRIT payers not operating through a permanent establishment will
be taxed on the dividends (provided that the relevant SOCIMI has been
subject to the 19% taxation described above) or gains they obtain from
their participation in SOCIMIs according to the NRIT general rules,
with the only speciality that the dividends will not benefit from the
general EUR 1,500 exemption on dividends and the gains will not
benefit from the exemption on income deriving from the disposal of
securities negotiated in Spain.
[1]
Other measures have been
introduced regarding local taxes, Stamp Duty, special taxes, the Canary
Islands general indirect tax, among others.
[2]Or in the corresponding business activity records
as of 31 December 2012 for PIT payers obliged to keep them.
[3] Assets of permanent establishments in Spain must
be used in connection with economic activities of the corresponding
permanent establishment.
[4] In general, large-sized companies are those which
turnover (computed by adding the net sales of all the companies within a
group) during the twelve months previous to the relevant tax year is
higher than EUR 10 million.
[5] This restriction will also apply to assets
depreciated in accordance with articles 111, 113 or 115 of the Corporate
Income Tax Law (new assets, assets that have been reinvested and assets
under finance lease) provided that the taxpayer does not meet the
requirements established in article 108 of the Corporate Income Tax Law
in the corresponding period.
[6] The progressive PIT rates scales vary depending on
the autonomous region where the PIT payer is resident.
[7] The new SOCIMIs regulations also modify the
SOCIMIs information obligations and the rules governing the inclusion
and exclusion of this regime.
[8] This is s special tax which will be triggered on
the date when the dividends distribution is agreed by the relevant
corporate body and will be payable in a two-month term following that
date.
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