Regulatory developments 2021

Main tax changes introduced by Law 11/2021 of 9 July on measures to prevent and combat tax fraud (Official State Gazette, 10-July-2021)

PERSONAL INCOME TAX (IRPF)

Life insurance in which the policyholder assumes the investment risk

In these contracts, the difference between the net asset value of the assets assigned to the policy at the end and at the beginning of the tax period is imputed annually as income from liquid capital.

In recent years, the rules applicable to insurers have changed. Therefore, with effect from 11 July 2021, the references to these rules contained in Article 14 of the Tax Law have been updated.

(Article 14(2)(h) of the LIRPF is reworded by Article 3(1) of the Law on measures to prevent and combat tax fraud).

Reduction of earnings from real estate for renting as a principal residence

With effect from 11 July 2021, it is established that this reduction will only be applicable to positive net income that has been calculated by the taxpayer in a self-assessment submitted before the start of a data verification, limited verification or inspection procedure that includes the verification of such income as part of its purpose.

In addition, it should be clarified that in no case shall the reduction be applicable in respect of the part of the positive net income derived from income not included or expenses unduly deducted in the taxpayer's self-assessment and which are regularised in any of the procedures mentioned in the previous paragraph, even when these circumstances have been declared or accepted by the taxpayer during the processing of the procedure.

(Article 23(2) of the LIRPF is reworded by Article 3(2) of the Law on measures to prevent and combat tax fraud).

Transfers of property for profit arising from contracts or agreements of succession with present effect

With effect from 11 July 2021, it is established that, in for profit acquisitions through death derived from inheritance contracts or agreements with present effects, the beneficiary of it who transfers the acquired assets within five years of the conclusion of the agreement or of the death of the deceased, if earlier, will be subrogated to the position of the latter, with respect to the value and date of acquisition of the assets, when this value is lower than that resulting from the application of the rules of Inheritance and Donations Tax.

This prevents an updating of the values and dates of acquisition of the acquired item which would result in lower taxation than if the asset had been transferred directly to a third party by the original owner (non-deceased testator).

(A new second paragraph is inserted into Article 36 of the LIRPF by paragraph three of Article three of the Law on measures to prevent and combat tax fraud).

International tax transparency system

With effect from 11 July 2021, the new features introduced in this system by Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, known as ATAD, are incorporated. Therefore, this amendment is made in a similar manner to the amendment made to Corporation Tax.

(Article 91 of the LIRPF is reworded by Article 3(4) of the Law on measures to prevent and combat tax fraud).

Exchange-traded funds and investment companies (ETFs)

With effect from 1 January 2022, the treatment of investments in listed investment funds and companies on foreign stock exchanges will be equal to that of listed investment funds and companies on the Spanish stock exchange.

Therefore, the existing deferral regime for capital gains will not be applicable when the amount obtained in the transfer is reinvested in shares or units of another CII.

(New section 3 of letter a) of section 2 of article 94 of the LIRPF introduced by section five of article three of the Law on measures to prevent and combat tax fraud).

However, a transitional regime is established so that the deferral continues to apply to shares or units in foreign listed investment funds and companies acquired before 1 January 2022, except that the reinvestment must be made in a CII other than listed investment funds and companies.

(New thirty-sixth transitional provision of the LIRPF introduced by paragraph seven of article three of the Law on measures to prevent and combat tax fraud).

New reporting obligations concerning virtual currencies

Effective from 11 July 2021:

Persons and entities resident in Spain and permanent establishments in Spanish territory who:

• Provide services to safeguard private cryptographic keys on behalf of third parties, to hold, store and transfer virtual currencies.

They shall be obliged to provide the tax authorities, under the terms established by regulations, with information on:

• All virtual currencies over which that have custody.

Persons and entities resident in Spain and permanent establishments in Spanish territory who:

• Provide exchange services between virtual currencies and legal tender or between different virtual currencies, or otherwise intermediate in the execution of such transactions.

• Provide services to safeguard cryptographic keys on behalf of third parties, to hold, store and transfer virtual currencies.

• Make initial offers of new virtual currencies, in respect of those they deliver in exchange for the contribution of other virtual currencies or legal tender.

They shall be obliged to provide the tax authorities, under the terms established by regulations, with information on:

• Acquisition, transmission, exchange and transfer transactions involving virtual currencies, as well as collections and payments made in these currencies, in which they intervene or mediate, presenting a nominal list of the parties involved with an indication of their address and tax identification number, class and number of virtual currencies, as well as the price and date of the transaction.

(Two new sections 6 and 7 are introduced in the Thirteenth Additional Provision of the LIRPF by section six of article three of the Law on measures to prevent and combat tax fraud).

de medidas de prevención y lucha contra el fraude fiscal, de transposición de la Directiva (UE) 2016/1164, del Consejo, de 12 de julio de 2016, por la que se establecen normas contra las prácticas de elusión fiscal que inciden directamente en el funcionamiento del mercado interior, de modificación de diversas normas tributarias y en materia de regulación del juego.(BOE, 10-julio-2021)