After six months of debate and following modifications of the government’s tax reform proposals, on November 27th, 2014, the Spanish Parliament passed draft laws amending the legislation governing personal income tax for residents and non-residents, corporate income tax and value added tax. The modified legislation will come into force on January 1st, 2015.
Under the new regime of personal income tax for residents and non-residents, the sale of properties or the change of residence in 2015 will have tax consequences which may be taken into consideration.
Therefore, in relation to capital gains obtained through the sale of properties in 2015, the update coefficients will not be applied to the acquisition value, which means that the amount of capital gains, and as a consequence, the amount of tax due, will be higher in most cases.
Until December 31st 2014, taxpayers in Spain can apply specific coefficients (the so-called “coeficientes de abatimiento”) in relation to properties sold during this year which were acquired before December 31st 1994, so that a part of the capital gain will be exempt from income tax. However, with effect from January 1st, 2015, Spanish law will establish a limit on the application of this coefficient insofar as it may be applied if the transfer value of the property is less than 400,000 euros. This measure will have a considerable impact on the tax burden of taxpayers in Spain.
Change of residence during the year 2015 will also have tax consequences if the taxpayer (who must have been a taxpayer in Spain, at least, during the last 10 years) owns shares/has participation of a market value higher than 4,000,000 euros or if the taxpayer holds more than 25% of the shares in an entity having a market value higher than 1,000,000 euros.
This measure, called “Exit Tax”, means that due to the change of residence, the Spanish Tax Authorities will consider that a capital gain has been obtained, so the taxpayer must include this in the Income Tax Declaration and pay the corresponding taxes. If the change of residence arises from a secondment due to professional reasons and the taxpayer has been moved to a State which has a Double Taxation Agreement with Spain, payment of the income tax corresponding to the capital gain may be deferred.
Under the new regime of corporate income tax, a matter of relevance is the tax exemption of dividends and income resulting from the transfer of shares, in cases where the taxpayer has a participation in the non-resident entity with an acquisition value exceeding 20 million euros. The application of this tax exemption also requires that the non-resident entity has paid in the State of source a similar tax at a minimum tax rate of 10%.
Likewise, in order to promote international fiscal transparency, the Spanish tax reform obliges the taxpayer to declare all income obtained by a non-resident entity if this entity does not fulfill the requirement of organization with personal and material resources. The aim of this measure is to attract those passive incomes to Spain so that they can be taxed in Spanish territory.