Hybrid asymmetries

With effects for tax periods that begin on January 1, 2020 and that have not ended on March 11, 2022, Law 5/2022, of March 9, which modifies Law 27/2014 , of November 27, on Corporate Tax, and the consolidated text of the Non-Resident Income Tax Law, approved by Royal Legislative Decree 5/2004, of March 5, in relation to hybrid asymmetries, introduced a new article 15 bis in the LIS , with the consequent repeal of article 15 j) of the LIS , with the aim of transposing Council Directive ( EU ) 2016/1164 of 12 July 2016, in the wording given by Council Directive (EU) 2017/952, of May 29, 2017, regarding the hybrid asymmetries that take place between Spain and other Member States and between Spain and third countries or territories .

Article 15 bis indicates in its section 1 , that the expenses corresponding to operations carried out with related persons or entities residing in another country will not be tax deductible or territory that, as a consequence of a different tax classification of the expense or operation, does not generate income, generates exempt income or is subject to a reduction in the tax rate or to any tax deduction or refund other than a deduction to avoid legal double taxation.

In the event that the income is generated in a tax period that begins within twelve months following the conclusion of the tax period in which the expense was accrued to the taxpayer, said expense will be tax deductible in the tax period in which the aforementioned income is integrated into the beneficiary's tax base.

On the other hand, in section 2 of the aforementioned article 15 bis of the LIS, it is established that the expenses corresponding to operations carried out will not be tax deductible with related persons or entities residing in another country or territory that, as a consequence of a different tax classification of the taxpayer in said country or territory, do not generate income, in the part that is not offset by income that generates double inclusion income.

The amount of expenses not deducted by application of the provisions of the previous paragraph may be deducted in tax periods ending within the following three years at the conclusion of the tax period in which such expenses were accrued, to the extent that s is offset by the taxpayer's income that generates double inclusion income.

amount corresponding to operations carried out with related persons or entities residing in another country or territory that, as a consequence of a different tax classification of these, will be included in the tax base ##1## , has been considered a tax deductible expense in that other country or territory , in the part that is not offset with income that generate double inclusion income.

The amount integrated into the tax base by application of the provisions of the previous paragraph may be reduced from the tax base of the tax periods that conclude within the following three years at the conclusion of the tax period in which the income was integrated, to the extent that such expense is offset in the other country or territory with income of the related person or entity that generates double inclusion income.

Likewise, article 15 bis of the LIS in its section 3 states that expenses corresponding to operations carried out with persons or entities will not be tax deductible related companies residing in another country or territory that, as a consequence of a different tax classification from these in said country or territory and in that of their participant or investor, do not generate income.

The provisions of the preceding paragraph shall also apply where a connection relationship exists exclusively between the taxpayer and the aforementioned participant or investor.

section 4 of article 15 bis of the LIS establishes that expenses corresponding to operations carried out with or by related resident persons or entities will not be tax deductible in another country or territory that, as a consequence of their different tax classification, are also tax-deductible expenses in said persons or related entities, in the part that is not offset by income that generates double inclusion income.

The amounts not deducted in accordance with the provisions of the previous paragraph may be deducted in tax periods ending in the three years following the conclusion of the period tax in which such expenses were accrued, to the extent that they are offset by income of the related person or entity that generates double inclusion income.

Expenses corresponding to operations carried out by the taxpayer will not be tax deductible when they are also considered tax deductible in the country or territory of a related person or entity as a result of a different qualification tax of the taxpayer, in the part that is not offset by income that generates double inclusion income.

The amounts not deducted in accordance with the provisions of the previous paragraph may be deducted in tax periods ending in the three years following the conclusion of the period tax in which such expenses were accrued, to the extent that they are offset by the taxpayer's income that generates double inclusion income.

Specifically section 5 of article 15 bis of the LIS, indicates the following expenses that will not be tax deductible:

1. Expenses corresponding to transactions carried out with a permanent establishment of the taxpayer or of a related entity, or with a related entity that has permanent establishments, where as a result of a tax difference in their attribution between the permanent establishment and its head office, or between two or more permanent establishments, they do not generate income.

2. Expenditure corresponding to transactions carried out with a permanent establishment of the taxpayer or of a related person or entity which, because the establishment is not recognised for tax purposes by the country or territory, does not generate income.

3. Estimated expenditure of internal transactions carried out with a permanent establishment of the taxpayer, where such expenditure is recognised in an applicable international double taxation agreement, and where, under the law of the country or territory of the permanent establishment, it does not generate income, in the part that it is not offset by income of the permanent establishment which generates double-inclusion income.

   The amount of expenses not deducted by application of the preceding paragraph may be deducted in the tax periods ending within the following three years, to the extent that they are included in the taxable income of the taxpayer with income of the permanent establishment which generates double-inclusion income.

4. Expenses corresponding to transactions carried out with or by a permanent establishment of the taxpayer which are also tax deductible in that permanent establishment or in an entity related to it, in the part that is not offset by income from said permanent establishment or related entity which generates double-inclusion income.

   The amounts not deducted in accordance with the provisions of the preceding paragraph may be deducted in the tax periods ending in the three years following the end of the tax period in which such expenses were accrued, to the extent that they are offset against income of the related permanent establishment or entity generating double-inclusion income.

section 6 of article 15 bis of the LIS establishes that will not result from application of the provisions of the article 22 of the LIS in the case of income obtained through a permanent establishment that is not fiscally recognized by the country or territory of situation.

In accordance with section 7 of article 15 bis of the LIS, expenses corresponding to a transaction or series of transactions carried out with related persons or entities residing in another country or territory, when they finance, directly or indirectly, deductible expenses carried out within the framework of operations that generate the effects derived from the hybrid asymmetries referred to in the previous sections of this article, except when one of the affected countries or territories have made an adjustment to avoid deducting the expense or subjecting the income to taxation, in the terms set forth in said sections.

In section 8 of article 15 bis of the LIS, it is provided that will be deductible in the full amount of this Tax the amount of the withholding carried out on account of the same in the proportion that corresponds to the income integrated into the tax base obtained in a hybrid transfer made with a related person or entity not resident in Spanish territory.

For these purposes, hybrid transfer is considered any transaction relating to the transfer of a financial instrument when the underlying performance of the transferred financial instrument is considered, for tax purposes, to have been obtained simultaneously by more than one of the parties involved in the operation.

section 9 of article 15 bis of the LIS specifies that the provisions of the previous sections of this article 15 bis will also apply when the operations to which they refer, regardless of whether Whether carried out between related or unrelated persons or entities, they take place within the framework of a structured mechanism.

For these purposes, structured mechanism is considered any agreement, legal transaction, scheme or operation in which the tax advantage derived from the hybrid asymmetries referred to in said sections in the terms indicated therein , is quantified or considered in its conditions or considerations or that has been designed to produce the results of such asymmetries, except that the taxpayer or a person or entity linked to him could not have reasonably known them and did not share the indicated tax advantage.

section 10 of article 15 bis of the LIS establishes that or losses that are tax deductible in another country or territory in another country or territory will not be tax deductible. the taxpayer is also a tax resident, in the part that is offset with income that does not generate double inclusion income.

Where such expense is offset in the other country or territory in a tax period subsequent to the deduction of the expense or loss on the taxpayer, the taxpayer must include the amount corresponding to the aforementioned amount in the tax period in which this occurs.

The provisions of the previous paragraph shall not apply when the other country is a Member State of the European Union with which Spain has signed an agreement to avoid international double taxation by virtue of which the taxpayer is considered a tax resident in Spanish territory.

section 11 of article 15 bis of the LIS introduces the following explanation, indicating that for the purposes of the provisions of this article 15 bis, is considered a income generates double inclusion income when it is subject to taxation in accordance with this Law and the legislation of the other country or territory.

Likewise, section 13 of article 15 bis of the LIS explains that, for the purposes of the application of the provisions of this article 15 bis, the reference to related persons or entities will include:

1. Related persons or entities in accordance with the provisions of article 18 of the LIS.

2. An entity which holds, directly or indirectly, an interest of at least 25 per cent in the voting rights of the taxpayer or is entitled to receive at least 25 per cent of the profits of the taxpayer, or in which the taxpayer holds such an interest or rights.

3. The person or entity in respect of which the taxpayer acts jointly with another person or entity regarding the voting rights or ownership of the capital of the latter, or the person or entity acting jointly with another person or entity regarding voting rights or ownership of the capital of the taxpayer.

   For these purposes, the taxpayer or, in the second case, the person or entity, will be treated as the holder of a participation in relation to all the voting rights or ownership of the capital of the entity or the taxpayer, respectively, that are property of the other person or entity.

4. An entity over whose management the taxpayer has a significant influence or an entity that has a significant influence over the management of the taxpayer. For these purposes, it is considered that there is significant influence when an entity has the power to intervene in the financial and operating policy decisions of another entity, but does not control or exercise joint control over that entity.

Finally, article 15 bis of the LIS in its section 14 states that, the provisions of the previous sections when the hybrid asymmetry is due to the beneficiary being exempt from the Tax, occurs within the framework of an operation or transaction that is based on a financial instrument or contract subject to a special tax regime, or when The difference in the imputed value is due to differences in valuation, including those derived from the application of the related-party transaction regulations.

In relation to the cases in which entities under the income attribution regime can give rise to the hybrid asymmetry regulated in section 12 of article 15 bis of the LIS, see the following specific setting .

Filling in form 200

In application of the provisions of article 15 bis of the LIS, the taxpayer must make the following adjustments in boxes [02469] and [02470] «Hybrid asymmetries (art. 15 bis LIS, except art. 15 bis.12 LIS )» on page 12 of model 200:

• In the tax period in which the non-tax-deductible expenses or losses are recorded, in accordance with the provisions of article 15 bis of the LIS, A positive adjustment must be made to the accounting result in box [02469] .

• In the tax period in which the circumstances indicated in article 15 bis of the LIS occur, and taking into account the time limits established therein, a negative adjustment must be made in box [02470].