Tax law - Appunti

2. SUBJECT, NON SUBJECT AND EXEMPTION

- SUPUESTO DE SUJECIÓN (subject to tax): When a situation fits the taxable

event and it occurs.

- SUPUESTO DE NO SUJECIÓN (non subject to tax): The opposite, when a

situation does not fit the definition of the taxable event (Hecho Imponible).

es tassa sui fast food → hamburger (TE) / apple (NON SUB)

- SUPUESTO DE EXENCIÓN (Exemption): the taxable event occurs, but the

Law, specifically, exempts the person from fulfilling its tax obligation.

es pizza not considered fast food

3. ELEMENTO TEMPORAL

- Devengo (accrual): The moment in which the taxable event (hecho imponible)

occurs and when the tax liability arises.

- Periodo impositivo (tax period): Interval of time considered in the execution of

taxable event in certain taxes.

- Exigibilidad (enforceability): when the taxable person has to pay, it may not

necessarily coincide with the moment the chargeable event (devengo)

- This concepts are relevant to understand the difference between instant and

periodic taxes

QUANTIFICATIONS OF TAX LIABILITY

PANORAMIC VIEW OF SPANISH TAX SYSTEM AND MAIN TAXES

Impuesto sobre el Patrimonio – Wealth Tax (Ley 19/1991)

- It is a State, direct & periodic tax. It taxes annually the patrimony of natural persons

(goods and rights, less debts and burdens)

- Although it was suppressed in 2008, the financial crisis forced the government to put

it in force again.

- There are important exemptions for the main residence and business

- There is a fix reduction (minimum exemption) of 700.000 euros.

Impuesto sobre la Renta de no Residentes (Real Decreto Legislativo 5/2004) – IRNR – Non-

Resident Income Tax

- IRNR is a State, direct & periodic tax. Its taxes annually the income obtained in Spain

by Non-residents (natural & legal persons):

- When the taxpayer is resident in a Member State (or EEE) the tax rate is 19%, in any

other case it is 24%.

- For non-resident companies the tax rate is the same as CIT.

Impuesto sobre las Primas de Seguros (Ley 13/1996) – Insurance Tax

- IPS is a State, indirect, instant tax. Its taxes the insurance premium and it is charged

on the insured person.

- The tax rate is 6%.

- Many important insurances are exempt (life, health care, compulsory social

insurance)

Impuesto sobre Sucesiones y Donaciones (Ley 29/1987) – Inheritance & Gift Tax

- ISD (IHT) is a direct, state (fully assigned to Regions), instant and subjective tax. It

taxes the increase in wealth of natural persons from inheritance, donations or life

insurance.

- There are important reductions for business elements and main residence.

- Depending on the relationship with the donor or the deceased there are reductions

and multipliers.

- The huge differences among Regions (with power to change many elements of the

tax) have caused a feeling of unfair treatment in many regions and personal transfers

to avoid the taxation.

Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (Transfer of

Property and Official Documents)

- It is an indirect, State (fully assigned to Regions) and instant tax which is actually

divided in three different tax modalities:

a) Transmisiones Patrimoniales Onerosas.- Transfer of Property Tax .

Transfers of goods and rights when the seller is not an entrepreneur or professional.

E.g. 4-6% for vehicles; 6-10% for buildings.

b) Operaciones societarias – Company operations.

It used to tax different companies' operations (incorporation of companies, capital

increase and decrease & dissolution). At the moment only dissolution and capital

decreased are taxed (1%).

c) Actos Jurídicos Documentados.- Official documents

It taxes some notarial deeds: public deeds such as immovable property (1,2%)

(purchases, mortgages), commercial documents (bill of exchange) or administrative

ones (nobility titles transfers)

Local Taxes

- IBI – Real State Tax. Direct, real, periodic that taxes annually the value of immovable

property as a percentage (0,3-1,1%) of Valor catastral (official value)

- IAE – Business Tax – Direct, real, periodic that taxes the mere exercise of business

activities in Spain (professionals and business with less than 1 million of volumen are

exempt).

- IVTM – Motor Tax – Direct, real, periodic that taxes annually the property of motor

vehicles. Public transport or disabled vehicles are exempt.

- ICIO – Construction Tax – Indirect, real, instant that taxes the execution of any

construction, installation or work in the municipality (4-5% of the value)

- IIVTNU – Urban Land Tax – Direct, real, instant, taxes the increase in value of urban

land at the moment of a transmission (purchase, inheritance, donation). Sometimes

objective parameters used to calculate tax liability have proved ineffective.

- IGS: - Luxury tax - Indirect that tax the use of hunting and fishing reserves

9/10.30 MERCOLEDÌ 19

(In contrapposizione all'imposta personale, quella che colpisce la ricchezza (in

genere il reddito) per sé stessa e non in quanto appartenente a un dato soggetto, e

non tiene quindi conto delle condizioni economiche, sociali e familiari del

contribuente.) da aggiungere al progetto

UNIT 2 - 06/10

PERSONAL INCOME TAX

2. NATURE, OBJECT AND SCOPE OF APPLICATION

NATURE

a. Direct tax

→ Charge the income

b. Personal tax

→ Charge the income earn by natural persons

c. Subjective tax

→ It considers the personal & familiar circumstances of the taxpayer

(through reductions, exemptions or deductions).

d. Progressive tax

→ The tax scale increases its tax rates , from 19% to 47%, as the net tax

base grows.

e. Periodic tax

→ It is an annual tax, which charges the income earned along the year

f. State tax but partially assigned to Regions

→ The tax collection is shared in 50% with regions, big cities do do also get

a share around 2%

→ Regions can modify some elements of PIT (Scale, deductions, individual

& family minimum, etc.)

OBJECT

a. Global income: all kind of income

b. World income of taxpayer resident in Spain

→ No matter where it has been obtained, where is the payer or what is

her/his nationality

c. Available income of taxpayer

→ In order to adapt the tax payable to personal & familiar circumstances

specific income is not taxed:

- Personal minimum (5151 euros basic)

- Familiar minimum (per descendant or ascendants who cohabit and depend

economically of the taxpayer)

SCOPE OF APPLICATION

a. The whole Spanish territory

b. Specialities:

→ Navarra & Basque Country have their own PIT.

→ A few differences in Canary Islands, Ceuta & Melilla.

c. Important limitations from Double Tax Conventions.

→ When the income is obtained abroad / in Spain with an international

element, the DTC may determine where it will be taxed and to what

extent.

3. TAXABLE EVENT

Definition: «obtención de renta por el contribuyente en el período impositivo»

- Income obtain by taxpayer along the tax year

Categories of income:

a) Labour income - Rendimientos del trabajo.

b) Capital income - Rendimientos del capital (INM/MOB)

c) Business Income - Rendimientos de Act económicas

d) Capital gains/losses – G/P patrimoniales.

e) Imputed income - Imputaciones de renta

DISTINCTIONS BETWEEN GENERAL INCOME AND SAVINGS INCOME

- Income is separated in two categories: General & Savings.

- It is relevant to calculate tax base & tax payable

Non-subjection situations

PIT law specifies that income subject to Inheritance & Donation Tax is not subject to PIT:

- Wealth increase from free mortis causa (inheritance) or inter vivos (donations)

transfers is not subject to PIT

EXEMPT INCOME

Since taxable event of PIT is very wide, there are many exemption situations that will not be

included in the taxable base of the taxpayer, e.g.

- Lottery and State gambling (< 40.000 €) – over only 20% flat rate

- Some Social security aid.

- Literature, artistic or scientific relevant prizes.

- Public grants for official studies

- Severance payment up to legal limit

- Accident indemnity

- Alimony as child support (only for children, not other relatives)

SUBJECTIVE ELEMENT: THE TAXPAYER

1. Natural persons with habitual residence in Spanish territory

When do we consider that a natural person has his habitual residence in Spanish territory?

Any of this criteria:

a. Permanence of the taxpayer more than 183 days during the calendar year in Spanish

territory (sporadic absences will be considered period of stay, except when the

taxpayer prove having the fiscal residence in another State)

b. Location in Spain (either directly or indirectly) of the core or base of the activities or

economic interests of the taxpayer.

Important presumption to ease the application (iuris tantum):

A person is resident in Spain when, in accordance with the above criteria, its non-separated

spouse and its underage children are habitual residents in Spain.

2. Natural persons (spaniards) in “fiscal quarantine”

Spaniards that move their residence to a country or territory classified as «tax haven» in

Spain

→ Will continue to be considered taxpayers of PIT for this year and 4 more

3. Natural persons (spaniards) with habitual residence abroad for public office

Spanish nationals (also its spouse and underage children) living abroad because of:

- Members of Spanish diplomatic missions.

- Members of delegations and permanent representations before Int. Org.

- Peace missions

→ Provided that did not have their habitual residence abroad before

TIME ELEMENTS: ACCRUAL AND TAX PERIOD

General rule (art. 12 LIRPF)

- Tax period is the calendar year (1st January – 31st December)

- Accrual is the 31st of December.

Special rules (art. 13 LIRPF)

- Tax period is shorter when the taxpayer deceases

- Accrual is the day of the deceased.

In both situations the tax return and the payment are later (May-June of the following year)

4. TAXABLE BASE

LABOUR INCOME

Definition (art. 17 LIRPF) → Any kind of compensations, well in cash, well in kind,

which

derived, directly or indirectly, from dependent work. e.g.

1. Wages

2. Allowances and travel expenses (over the exemption limit)

3. Special working relations (Senior management, disabled)

4. Unemployment assistance

5. Public & private pensions

6. Non-exempt grants

7. Income for teaching courses, conferences or seminars

8. Compensatory maintenance between the spouses

9. Alimony (relatives different than children)

BUSINESS INCOME

CALCULATION OF BUSINESS INCOME

EXAMPLES

CAPITAL GAINS (LOSSES)

Definition (art. 33.1 LIRPF) → A Capital Gain / Loss exists when two conditions

f