Tax Newsletter - September 2018 | Ruling requests

Corporate income tax

Acquisition of an urban property by usucaption generates a taxable revenue

Directorate General for Taxes. Ruling V1854-18 of June 25, 2018

The request concerned the treatment for corporate income tax purposes of the acquisition by usucaption of a property.

After requesting a report from the Spanish Accounting and Audit Institute, it was concluded that the asset must be recognized for accounting purposes at its fair value, and a revenue is credited directly to net equity, on the date the judgment declaring the acquisition of the property is rendered. In other words, these acquisitions are recorded under the method for gifts.

That revenue must be taxed in the year it arises, which will match the year it is recognized for accounting purposes.

Corporate income tax

Holding companies may use the capitalization reserve

Directorate General for Taxes. Ruling V1839-18 of June 22, 2018

The Corporate Income Tax Law places various restrictions for use of the capitalization reserve. None are provided in relation to holding companies, however, so these companies are allowed to claim this benefit if the other legal requirements are satisfied.

Corporate income tax

Limits on offset of net operating losses under current Corporate Income Tax Law apply to transactions before its entry into force

Directorate General for Taxes. Ruling V1677-18 of June 13, 2018

The current Corporate Income Tax Law (in force for fiscal years beginning on or after January 1, 2015) places broader restrictions on the offset of tax losses than were established in the previous law.

The DGT considers that these restrictions, according to the current wording, apply to transactions performed before that law entered into force (for example, to the acquisition in 2014 of shares in a limited liability company, as described in the ruling request), because no transitional arrangements have been provided.

Corporate income tax

A teaching institution is not a line of business

Directorate General for Taxes. Ruling V1581-18 of June 7, 2018 

By performing a partial spin-off a company intends to transfer various private teaching institutions to other companies. The DGT concluded that a teaching institution does not in itself amount to a line of business, so the tax neutrality regime cannot be claimed for that transaction. It recalled that for a line of business to exist there must be an operational organization determining the independent existence of an economic activity, which does not occur in this case in relation to each teaching institution.

Personal income tax

Rule on recurrence in preceding five years does not apply to clearly multiyear salary income

Directorate General for Taxes. Ruling V1645-18 of June 12, 2018

The personal income tax legislation contains a 30% reduction for salary income generated over more than two years, where, in the preceding five tax periods to the tax period in which it falls due, the taxpayer obtained other income generated over more than two years for which the reduction was claimed.

This reduction is also claimable for “clearly multiyear income”, which is characterized as such in the Personal Income Tax Regulations.

The DGT confirmed that, according to a literal interpretation of the legislation, the rule regarding the “preceding five tax periods” is not applicable to clearly multiyear income.

Personal income tax

Special valuation rules for income in kind do not apply to income from economic activities

Directorate General for Taxes. Ruling V1567-18 of June 6, 2018

The Personal Income Tax Law establishes that income in kind must be reported at market value, although it sets out certain specific valuation rules, for example for vehicles, the use of a dwelling owned by the payer or low-interest loans.

As the DGT affirmed, however, these special rules are only laid down legally for salary income. Therefore, the provision of a vehicle for work purposes generally has to be reported at market value, and the specific rules on salary income in kind do not apply.

Personal income tax

Only securities representing investments in equity of companies or entities must be included to calculate the “exit tax”

Directorate General for Taxes. Ruling V1499-18 of June 4, 2018

Taxpayers who cease to reside in Spain must be taxed on unrealized capital gains from shares in companies over and above specific thresholds (exit tax). The law provides valuation rules for these purposes. Specifically, in relation to listed securities, it refers to “securities listed on any of the regulated securities markets defined in Directive 2004/39/C”. Although besides shares in companies, that Directive also refers to other types of securities such as bonds or other forms of securitized debt, for example.

The DGT has clarified that this reference to the Directive does not broaden the scope of the exit tax which only applies where shares are held in companies.

Nonresident income tax

If authorities of another state do not issue a tax residence certificate, other means of proof are allowed

Directorate General for Taxes. Ruling V1530-18 of June 5, 2018

To be able to apply a tax treaty, evidence of tax residence is needed, and a certificate of tax residence issued by the competent authorities is considered the best means.

However, in instances where the tax authorities do not issue tax residence certificates (which occurs in Saudi Arabia, for example, which the DGT says it has confirmed), other means of proof may be considered.

Transfer and stamp tax

Deeds amending the appraisal value of mortgaged properties are not subject to stamp tax

Directorate General for Taxes. Ruling  V1914-18 of June 29, 2018

The DGT has held in a number of rulings that deeds amending the appraisal value of a mortgaged property have valuable content, and therefore had to be taxed in respect of stamp tax. TEAC, however, found otherwise in a decision rendered on October 10, 2017. In view of this decision, the DGT has changed its interpretation to adapt it to TEAC’s findings.