Tax Bulletin April 2013

Just days before the end of the period for filing the first informational return on assets and rights situated abroad (form 720), answers to FAQs are still being published on the State Tax Agency’s website and the Directorate-General of Taxes is still issuing binding rulings on the subject.

As a general observation, it can be said that for this first return, which is for FY2012, the requirements for preparing it are being relaxed. Thus, for example, despite the strict wording of the law, it has been concluded that in this return taxpayers need not include assets and rights in respect of which they are no longer the owner (or beneficial owner, or authorized person, or representative or person with powers of disposal, as the case may be) as of December 31, 2012, even if they lost that status during FY2012.

For subsequent years, however, the termination of these relationships with the assets and rights must be reported except in cases of total reinvestment. The standard that has been applied is that since the relationship no longer exists, it will not serve as a comparable for the future.

In addition, they have clarified that only the assets and rights that are strictly included in the law have to be reported. Accordingly, it is not necessary to report loans (unless they have been securitized), options, pension plans or real estate if ownership has yet be acquired.

Other issues have been clarified such as that of spouses under the community property system who own assets jointly. In this case, they must report the assets even if only one of them has formal title to them: the formal owner will have to report them as the owner and the other spouse as the beneficial owner.

Some issues have not been resolved such as the obligation of non-owners (authorized persons, representatives or persons with powers of disposal) to report where the owners of the assets are not persons required to report (because they are not resident in Spain or they do not act in Spain through a permanent establishment). Based on the wording of binding ruling V1184-13, it could be interpreted that in these cases there is no obligation for any of those persons to report, in accordance with the spirit of the law, which evidences a “clear connection between the reiterated reporting obligations and the monitoring of the fulfillment of the substantive tax obligations that are binding on the various taxable persons.”

In this bulletin we discuss the most newsworthy rulings.