New regulations for 2018

Main changes to taxation introduced by Royal Decree 1074/2017, of 29 December, amending the Regulations on Corporation Tax

MAIN NEW TAX FEATURES INTRODUCED BY ROYAL DECREE 1074/2017 OF 29 DECEMBER (OFFICIAL STATE GAZETTE OF 30 DECEMBER) IN THE CORPORATION TAX REGULATIONS, APPROVED BY ROYAL DECREE 634/2015 OF 10 JULY AND THE PERSONAL INCOME TAX REGULATIONS APPROVED BY ROYAL DECREE 439/2007 OF 30 MARCH.

CORPORATION TAX

Modification of the regulation on information and documentation on associated entities and operations

With effect for tax periods commencing from 1 January 2016, section 1 of article 13 of Royal Decree 634/2015 of 10 July is modified, clarifying the subjective scope of the entities required to provide information and documentation regarding associated entities and operations. In this regard, it clarifies the inclusion of permanent establishments in Spanish territory of non-resident group entities obliged to provide documentation as per article 14 of the Regulations. The case set forth in the previous letter a) of section 1 of article 13 regarding reporting obligations is removed.

Furthermore, the following exception is included -there shall be no reporting obligation for subsidiaries or permanent establishments in Spanish territory when the multinational group has designated a group subsidiary resident in a member State of the European Union to present this information, or when the information has been reported in its territory of tax residence by another non-resident entity appointed by the parent company of the group as representative for these reporting purposes. In the case of an appointed entity with tax residence in a territory outside the European Union, the conditions set forth in paragraph 2, section II, annex III of Council Directive 2011/16/EU of 15 February 2011 must be complied with in relation to administrative cooperation in the tax area, which repeals Directive 77/799/CEE.

The following clarification is added: in the event that there are several subsidiaries resident in Spanish territory, one of these shall be appointed by the multinational group to report the information, and shall be solely obliged to do so.

Lastly, it is added that in the event that the non-resident entity were to refuse to provide all or part of the required information corresponding to the group to the entity resident in Spanish territory or the permanent establishment registered there, the latter shall report the information available to them and notify the Tax Agency of this circumstance.

Modification of the regulation of country-by-country information

With effect for tax periods commencing from 1 January 2016, modification is made to letter e) section 2 of article 14 of Royal Decree 634/2015, to include in the information to be reported, in addition to the amount of capital, other non-distributed earnings at the closing date of the tax period.

Title III of Royal Decree 634/2015, "Tax Management" is changed to Title IV

Modification of the regulation of exceptions to the obligation to perform withholdings and payments on account

With effect for tax periods commencing from 1 January 2018 modifications are made to letters u), y) and z) of article 61 of Royal Decree 634/2015, except for the withholding obligation regarding amounts paid on account of pension funds set up as a result of the repayment or mobilisation of investment pension fund participations or investment pension funds, in accordance with the revised text of the Pension Plans and Funds Regulation Act, approved by Royal Legislative Decree 1/2002 of 29 November, and its implementing provisions, as well as income from repayment or transfer of participations or shares in funds and companies regulated by article 79 of the implementing Regulation of Act 35/2003. Finally, an exemption is established from the obligation to perform withholdings of remunerations and compensation for economic rights received by central counterparties on transactions involving securities loans carried out in accordance with section 2 of article 82 of Royal Decree 878/2015 of 2 October, on compensation, settlement and registration of marketable securities represented by book entries, on the legal regime of central securities depositaries and central counterparties and on the transparency requirements of securities issuers admitted for trading on an official secondary market. Similarly, central counterparties are also exempt from the obligation to perform withholdings of remunerations and compensation for economic rights paid as a result of the securities loans referred to in the previous paragraph. These conditions are without prejudice to the requirements of the said earnings to the withholdings applicable in accordance with the corresponding regulatory standards of the personal income tax of the beneficiary of these earnings. These withholdings shall, where applicable, be made by the participating entity brokering the payment thereto, for the purposes of which they will not be understood to be undertaking a simple payment brokerage.

Modification of regulation of taxpayers required to perform withholdings or payments on account

With effect for tax periods commencing from 1 January 2018 a modification is made to section 8 of article 62 of Royal Decree 634/2015, establishing that on operations carried out in Spain by insurance companies registered in another member State of the European Economic Area and operating in Spain under the freedom of service provision regime, the insurance company is required to perform withholdings and payments on account.

Adaptation of Corporation Tax Act 27/2014

With effect for tax periods commencing from 1 January 2018 modifications are made to certain sections of articles 69 of Royal Decree 634/2015 to adapt these to the Corporation Tax Act, specifically establishing with regard to the procedure for offsetting and paying tax credits claimable from the Tax Authorities, that the deferred tax assets corresponding to provisions for impairment of loans and other assets deriving from possible insolvencies of debtors not associated to the taxpayer, not due to pubic law entities and whose deductibility does not call for the application of article 13.1.a) of the Corporation Tax Act, or those deriving from sections 1 and 2 of article 14 of the said Act, corresponding to provisions or contributions to social benefit schemes and, if applicable, early retirement schemes; can be converted into credits claimable from the Tax Authorities, in the terms established in sections 1 and 2 of article 130 of the Corporation Tax Act.