The Corporate Tax Planning Law Review: Spain

Introduction

Tax planning in Spain is subject to several legal constraints. First, transactions must be real; otherwise, they could be declared as simulated and the tax adjustment will entail the corresponding penalty.2 Second, transactions that are regarded by taxpayers as a specific legal affair but show characteristics that are specific to a different business will normally be reclassified by the Spanish administration.3

In addition, even when the declared transactions are real and their legal categorisation is appropriate, the administration may vary the taxation of such transactions if it considers that (1) the transactions are notoriously contrived and (2) their sole purpose is to obtain a tax reduction.

Moreover, the anti-avoidance clauses provided for in Spanish law may be considered for specific transactions (e.g., corporate restructuring)4 or otherwise in general (fraus legis clause).5 The application of these (general and specific) anti-avoidance clauses does not generally – unless a similar transaction has been declared by the administration to be unlawful6 – lead to the application of tax penalties.

Furthermore, in order to understand the tax planning options available under the Spanish tax system, it is necessary to know the legal forms of companies that can exist in the country, as well as the taxation scheme applicable to each of them and to certain operations that they can carry out.

Local developments

i Entity selection and business operations

In order to design a proper tax planning scheme, it is necessary to be aware of the legal forms available to conduct an economic activity in Spain, as well as the tax implications of adopting one or other form of entrepreneurship.

First, it is essential to differentiate between starting an economic activity as a private individual (entrepreneur or professional) and doing so through various types of entities. The difference between an entrepreneur and a professional under Spanish law is that although entrepreneurs are generally involved in the production and marketing of goods and services, professionals are private individuals (1) whose activity requires a specific academic training – generally university education – and usually access to a certain professional association, often conditional on successful completion of a state examination, and (2) whose economic activity consists of the provision of highly qualified services.

If you start an activity as an individual entrepreneur or professional, you are liable for it with all your personal assets, present and future, unless you limit your liability as a 'limited liability entrepreneur'.7

When a decision is made to start an economic activity through an entity, it is necessary to think about the most suitable legal form for the venture. The following sections broadly review the different entity forms that are available for entrepreneurship and some of their ensuing requirements.

Entity forms

A distinction should be made, on the one hand, between entities that have legal personality and those that do not and, among the former, between entities that have a commercial purpose and those that do not.

Thus, first of all, in relation to the commercial companies that may be incorporated under Spanish law, a distinction must be made among (1) capital companies (public limited companies and limited liability companies),8 (2) partnerships (general partnerships9 or economic interest groupings (EIGs), which may be Spanish or European),10 and (3) mixed companies (limited partnerships, which may be simple11 or joint-stock companies).12 Companies whose corporate purpose is the joint pursuit of a professional activity must be incorporated as professional partnerships.13

Capital companies have a minimum share capital threshold, limit the risk to the capital contributed and, although they may be formed by a single shareholder, usually have two or more. However, Spanish law provides for different types of capital companies, which may be specific to the function they perform and are therefore regulated with special features under Spanish law (real estate investment companies,14 mutual companies,15 etc.).

Personalist companies, on the other hand, are characterised by the fact that partners not only contribute capital but essentially work, playing an active role in the management of the company. For this reason, Spanish law does not limit the liability of partners.

Limited partnerships have, as is indicated above, a hybrid nature straddling the two types of partnerships referred to above because there are two types of partners: (1) general partners (who contribute work and do not limit their liability) and (2) limited partners (who contribute capital but not work and have their liability limited to the amount contributed or committed to be contributed).

There are also certain forms of collaboration involving several companies, including, in addition to the aforementioned EIGs, temporary joint ventures, which, unlike the former, do not have legal personality.16

On the other hand, there are other entity forms that, although they have their own legal personality, lack a commercial purpose because they are not intended to be engaged in the production and marketing of goods and services, either because they are companies incorporated under civil and not commercial law or because of their non-profit nature (social economy). This is the case for civil companies,17 foundations,18 associations,19 cooperative companies,20 trade unions, professional associations,21 etc. Although it is not usual for such entities to carry out an economic activity, some of them might do so, which is why the tax system differentiates between the income resulting from their non-commercial corporate purpose and that related to a specific economic activity.22

Furthermore, there are also entities with no legal personality (e.g., estates of deceased persons, common joint ownerships,23 investment24 or pension funds25) that do not have a personality distinct from that of their members (co-owners, contributors or participants) but have their own tax ID for control purposes before the tax authorities and might be subject to special taxation regimes. The aforementioned entities may carry out economic activities.

Capitalisation requirements

Public limited companies have a minimum share capital of €60,000, whereas for limited liability companies this threshold is substantially lower (€3,000). For all other types of companies (general partnerships, limited partnerships (single or joint stock), cooperatives and EIGs, etc.), no minimum capitalisation is required. However, a different minimum capital requirement applies for certain entity types, such as investment companies (€2.4 million) or real estate companies (€9 million), banks and financial institutions (€18 million), etc.

Moreover, there are no particular requirements as to the structure of corporate financing sources, nor may any impact arise from a tax point of view, stemming from the different structures of accounting liabilities (payable (debts) and non-payable (share capital, reserves and retained earnings)), beyond the rule limiting the deductibility of interest on intra-group loans,26 the deductibility rules for hybrid (cross-border) mismatches27 or, in general, on more than 30 per cent of the operating profit for the year (accounting profit for a given tax year adjusted by certain increases and reductions provided for in the regulations).28

ii Spanish tax system affecting entities and business operations

Domestic income tax

Under the Spanish tax system, companies are taxed on the income earned (accounting profit from the financial year with some extra accounting adjustments) on three different tax rates, depending on certain characteristics of the taxpayers and, in particular, on (1) their nature (corporate or not) and (2) their tax residence.

Thus, if a taxpayer has legal personality and a commercial purpose or, in certain cases, even no legal personality (e.g., investment funds and pension funds) but residence in Spain, it will be taxed on its earnings for corporate income tax (IS) purposes at the general rate of 25 per cent.29 However, 'civil companies with no commercial purpose' (terminology that has been interpreted by the tax authorities as meaning those civil companies that, although conducting an economic activity involving the production, exchange or provision of services, are engaged in agricultural, livestock, forestry, mining or professional activities) will not be taxed under this tax.

On the other hand, if a taxpayer directly carries out their business or professional activity as an individual and resides in Spain, they will be taxed on their income under personal income tax (IRPF) at a tax rate generally ranging from 19 per cent to around 45 per cent, which will vary depending on the autonomous community in which the taxpayer is resident.30 Income attributed to partners, co-owners, heirs, or participants of entities with legal personality (civil companies with no commercial purpose) or without legal personality (such as communities of property or estates of deceased persons) will also be taxed for the part of such entities attributed to them in accordance with the attribution income provided for in the regulations.

When the economic activity is carried out through an EIG or a joint venture and the partners or participants are resident in Spanish territory, profits and losses (as well as any tax benefits) will be allocated according to the participation of the partners or participants.31

Finally, if a taxpayer does not reside in Spain, regardless of whether they are a natural person, have a corporate legal personality or carry out their economic activity through an unincorporated entity, they will be taxed on the income deemed to have been earned in Spain under the non-resident income tax (IRNR) (at a general rate of 24 per cent or 25 per cent, depending on whether the taxpayer has a permanent establishment in the country).32 Accordingly, it is very important to clarify when, under Spanish law, a taxpayer is deemed to be resident in Spain.

Thus, a natural person is considered to reside in Spain for tax purposes when they stay in the country for more than 183 days during the calendar year (not counting sporadic or temporary absences from the country) or have 'the core or base of his or her activities or economic interests, directly or indirectly' in Spain.33

In the case of a legal entity, it shall be deemed to be resident for tax purposes in Spain when any of the following requirements are met: (1) it is incorporated under Spanish law; (2) it has its registered office in Spanish territory; or (3) it has its effective place of management in Spanish territory.34

Notwithstanding the above, it should be noted that certain special regimes exist in relation to specific cases or territories.

Thus, on the one hand, the objective circumstances of certain companies will mean that they will be taxed at reduced rates: (1) taxpayers in respect of their first two financial years; (2) non-profit entities; (3) most cooperative societies (20 per cent in general); (4) most stock and real estate investment companies and funds (1 per cent); and (5) pension funds (zero per cent). In turn, (1) credit institutions and (2) entities engaged in the exploration, research, and exploitation of hydrocarbon deposits and underground storage facilities35 will be taxed at an increased IS rate (30 per cent).

Tax benefits also exist for certain income (e.g., income from patents (patent box))36 or for certain expenses (e.g., expenditure on research, development and innovation or on film productions, audiovisual series, and live shows in the performing arts and music industry)37 or for certain entities (e.g., venture capital companies and funds, mining entities or small companies, among others).

Specific regimes are also envisaged, such as tonnage-based taxation of shipping companies.38

However, the General State Budget Act for 2022 has approved a minimum tax rate of 15 per cent for IS, which limits the application of certain tax benefits.39

On the other hand, there are special regimes that apply in two types of territories: (1) the foral territories (Basque Country and Navarre), which, for historical reasons, have different regulations, in some aspects, from the general regulations for the rest of the territories;40 and (2) the ultraperipheral territories (African cities of Ceuta, Melilla and the Canary Islands), which enjoy certain tax benefits compared with the rest of the peninsular and adjacent territories (Balearic Islands) and are not subject to VAT (Ceuta, Melilla and the Canary Islands) or customs taxes (Ceuta and Melilla) but are subject to special local taxes.41

International taxation

Income earned in international environments will be taxed under IRPF or IS (for resident taxpayers, depending on whether they are subject to either of the above taxes) or IRNR (for non-resident taxpayers).

Both IRPF and IS include provisions for the avoidance of international double taxation, be it legal (taxing the same income in two different jurisdictions) or economic (referring to dividends and profit distributions). In any case, the taxation of income paid in international environments will be modulated by the double taxation agreements (DTAs) signed by Spain (around 100), with regard to both the determination of tax residence (to avoid cases of double residence) and to transfer pricing, the definition of permanent establishment, the reduction of source taxation percentages set in the IRNR for passive income (dividends, interest and royalties) or measures to alleviate international double taxation, exchange of information and dispute resolution procedures, or assistance in tax collection, among other issues.

In general, it should be noted that Spanish domestic legislation includes, in relation to income received from abroad and as a tool to mitigate double taxation effects, both the measures provided for in the ordinary taxation system to correct legal42 or economic43 double taxation and the exemption system (for dividends received from a foreign source by companies residing in Spain and for income earned by permanent establishments of companies residing in Spain but located abroad).44 As the exemption system is generally more favourable than the tax credit system, most companies use it instead. The application of the exemption system requires certain requisits to be met, such as: (1) taxation at source by a corporate tax of an identical or analogous nature to the Spanish tax and a nominal rate of at least 10 per cent; and, in the case of dividends received from a foreign source (2) holding a share of at least 5 per cent in the subsidiary company distributing profits; (3) maintaining this shareholding level for one year; and (4) not being a mere holding company or a stock or real estate management firm with no own arrangement of means of production or human resources intended to take part in the production or distribution of goods or services.

It should also be noted that Spain has approved a tax regime for entities holding foreign securities (holding companies), which allows for the exemption of income on its passage through the country and makes it possible to create conduit companies for international tax planning purposes.45 For their part, EIGs or joint ventures will be taxed, in the part corresponding to non-resident shareholders, as companies subject to IS, and their distributed profits will be taxed under the non-residents income tax with the modulation provided for in the DTAs.

It should also be noted that there is a special 3 per cent tax rate on real estate properties owned by entities domiciled in tax havens.46 The reason for this tax is to prevent individuals who own high-value real estate properties in Spain (and who should therefore pay Spanish wealth tax) from contributing such real estate to a company to circumvent this tax (since companies are not subject to wealth tax).

There are also international tax transparency rules (controlled foreign company (CFC) rules) under which income obtained by non-resident entities is allocated to residents in Spain when (1) they have an interest of 50 per cent or more in their capital, equity, results or voting rights; (2) more than 15 per cent of the income obtained by such entities is merely 'passive' or does not constitute the arrangement of resources for the performance of an economic activity (leases, dividends, capital gains, credit, financial or insurance transactions, industrial and intellectual property licences, etc.); and (3) a tax has been paid abroad on income that is identical or analogous to IS and less than 75 per cent of what would have been payable in Spain if it had been earned in Spain.47

In view of the above, it should be noted that in Spain there is (1) an extensive network of DTAs with information exchange clauses and (2) exemption rules in relation to foreign income (dividends and income from permanent establishments). Such regulatory instruments allow (1) the avoidance of overtaxation of income obtained in international environments and (2) greater tax control of compliance with tax obligations in relation to international transactions.

iii Common ownership: group structures and intercompany transactions

Ownership structure of related parties

The Spanish tax system allows groups of companies to be taxed jointly for the income obtained by the member entities and after making the appropriate adjustments in relation to the transactions conducted between members of the same tax group.48 This makes it possible to offset losses of some member companies against the profits of others, thus reducing joint taxation.

A tax group consists of resident entities in which a parent company holds, directly or indirectly, throughout the tax period, at least 75 per cent of the share capital as well as a majority of the voting rights of one or more other entities that are considered to be subsidiaries (this percentage is reduced to 70 per cent of the share capital in the case of entities whose shares are admitted to trading on a regulated market).

Domestic intercompany transactions

Under Spanish law, transactions between related parties must be taxed at market value.49 This value will be calculated using the following methods:

  1. comparable free price;
  2. cost plus;
  3. resale price;
  4. distribution of the result among related parties according to market criteria (apportionment);
  5. net operating margin; or
  6. other broadly accepted valuation methods and techniques that respect the arm's-length principle.

The aforementioned list does not imply a prioritisation but rather the most appropriate method for the valuation of the specific related-party transaction should be applied.

Related parties are subjects such as:

  1. an entity and its partners or participants;
  2. an entity and its directors or managers, except in respect of remuneration for the performance of their roles;
  3. an entity and the spouses or persons linked by family relationships of the partners or participants, directors or managers;
  4. two entities belonging to a group;
  5. an entity and the directors or managers of another entity, when both entities belong to a group;
  6. an entity and another entity in which the former holds indirectly at least 25 per cent of the share capital or equity;
  7. two entities in which the same partners, participants or their spouses, or persons linked by a family relationship, directly or indirectly hold at least 25 per cent of the share capital or equity; and
  8. an entity resident in Spanish territory and its permanent establishments abroad.

To comply with the regulations on related-party transactions set out in Spanish law, certain documentation obligations are imposed in relation to such transactions,50 referring to (1) country-by-country reporting, (2) information specific to the undertaking's group of companies and (3) information specific to the company. Failure to comply with these documentation obligations is considered as an infringement on its own and would carry penalties of €1,000 for each piece of information and €10,000 per set of omitted or false information, capped to a maximum percentage equal to the lesser of the following: (1) 10 per cent of the taxable transactions or (2) 1 per cent of the company's turnover.

Similarly, the impairment of securities representing holdings in the capital or equity of entities with which certain types of relationship51 exist is not deductible.

International intercompany transactions

International transactions with related parties are calculated on the basis of the domestic rules referred to above or, where DTAs exist, as provided for in those international treaties.

In essence, the applicable regulation will be the provisions – in each DTA signed by Spain – that are equivalent to Articles 9 (associated companies) and 25 (mutual agreement procedure) of the OECD Model Tax Convention on Income and on Capital (the OECD Model), as interpreted by the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. There is the possibility of using an arbitration system (depending on the convention and by multilateral convention modification) to implement the measures provided in the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Multilateral Instrument) (MLI). For the EU area, Convention 90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (the Transfer Pricing Arbitration Convention) is also applicable.

iv Third-party transactions

Sales of shares or assets for cash

Sales of holdings or assets intended to obtain liquidity will generally be taxed on the basis of the capital gains or losses realised and will be charged to tax at the time the corresponding changes in equity take place.

However, given that some sales might be made for purely tax reasons (e.g., (1) for sales between companies in the same corporate group, where any losses will be allocated when the assets are transferred to third parties outside the corporate group or when the acquiring entity ceases to be part of the corporate group;52 and (2) for sales followed by an agreed subsequent acquisition (repurchase agreement)), where the accounting rules determine that there has been no transfer of the asset, no gain or loss should be accounted for until the actual and final transfer of the asset in question has taken place.53

Tax-free or tax-deferred transactions

The exemptions on business income provided for with IS essentially relate to the elimination of domestic and international double taxation in respect of dividends or capital gains that have been obtained, as well as income earned abroad through a permanent establishment.54

In addition, there are deferred revenues – attributable to other subsequent tax periods – when (1) differences exist between the accounting records and the tax rules laid down in the IS;55 and (2) corporate restructuring operations (mergers, spin-offs, contributions of assets or exchanges of securities) have taken place, in which case any gains on the transfer of assets in the context of these corporate restructurings will be deferred to a later time so as not to impair such corporate transactions for purely tax reasons, provided that there is an 'economically valid reason' (in the sense that there is a business reason justifying the transactions beyond the reduction of tax payments) that allows such a deferral.56

Likewise, when entities subject to IS change residence to other countries, an exit tax will be levied on the assets owned by an entity resident in Spanish territory that transfers its residence abroad, unless these assets are assigned to a permanent establishment located in Spanish territory.57 In these cases, however, when EU Member States or Member States of the European Economic Area have concluded an agreement with Spain or the EU on mutual assistance in the recovery of tax debts, the taxpayer may opt to pay the resulting tax debt in equal fifths of the year.

International considerations

When assets are sold in international environments, the DTAs signed with Spain will be applicable, which, in accordance with Article 13 of the OECD Model, as a general rule, state that (1) capital gains from the sale of real estate, business assets, or ships or aircraft may be taxed in the state of the source; (2) capital gains from the sale of shares, partnership interests or similar assets more than 50 per cent of which are real estate may be taxed in the state of the source; and (3) other capital gains may be taxed only in the state of residence of the owner of the assets transferred. However, in cases of sales under repurchase agreements, the application of general anti-avoidance rules, both domestic and in DTAs, might result in such transactions being disregarded for tax purposes.

Information on reportable cross-border arrangements referring potential tax avoidance

Spain has transposed between 2020 and 2021 Directive 2018/822 of 25 May on mandatory reporting of cross-border arrangements potentially qualifying as tax avoidance hallmarks.58 Thus, as of 2021, tax advisers who have designed or intervened in the implementation of cross-border tax schemes potentially qualifying as tax avoidance hallmarks under the Directive are required to notify the Spanish tax authorities under threat of penalty. There is, however, the possibility of being exempted from this duty if the tax advisers are lawyers who invoke professional secrecy, even though they may be relieved of such secrecy by the taxpayer. This is intended to strengthen the control of tax avoidance at the very outset of activities potentially qualifying as tax avoidance hallmarks.

v Indirect taxes

Indirect taxes levied on business operations in Spain basically include (1) value added tax (VAT),59 (2) excise duties (ED) levied on various specific consumptions60 and (3) customs duties.61

Most of them are regulated by EU legislation, either directly (the Common Customs Tariff) or indirectly (VAT and ED directives).

In addition, there are, with a lesser impact (1) taxes on second-hand transfers and certain documentation of legal acts62 and (2) taxes on certain digital63 services and certain financial64 transactions.

International developments and local responses

i OECD-G20 BEPS initiative

In relation to the base erosion and profit shifting (BEPS) initiative, the incorporations in Spanish law have been due to (1) the MLI, which in Spain entered into force on 1 January 2022 and amended 88 DTAs with third countries, and (2) the directives approved by the EU to implement some measures of the BEPS project, such as hybrid mismatches (BEPS Action 2),65 CFC rules (Action 3), limitation on the deductibility of interest (BEPS Action 4) and prevention of tax treaty abuse (BEPS Action 6),66 the mandatory disclosure rules (BEPS Action 12),67 country-by-country reporting (BEPS Action 13)68 and the mutual agreement procedure (BEPS Action 14).69 The aforementioned directives have been transposed into Spanish law in recent years.

ii EU proposals on taxation of the digital economy

At the EU level, a directive was proposed on a harmonised tax on revenues from the provision of certain digital services.70 However, given the lack of unanimity within the EU and, subsequently, the international agreement reached in the Inclusive Framework on BEPS of the OECD (i.e., Pillar One, which envisages a unified nexus for the allocation of income to virtual permanent establishments of companies in the digital economy and would entail the elimination of taxes created on certain digital services), the EU has not finally developed the aforementioned directive, although certain countries (such as Spain) have done so, following the structure of the referred directive.

Moreover, in the field of indirect taxation, the EU has approved legislation to regulate VAT transactions conducted by electronic means, which aims to exempt – as in practically all VAT legislation – final consumers from formal tax obligations with their respective tax administrations, imposing the management burden on the providers of these services, even when they are delivered from outside the EU. The legislation has been duly transposed into Spanish law.

iii International tax treaties

Notable typical or model provisions

Generally speaking, the DTAs signed by Spain follow the rules of the OECD Model. The only generalised divergences in respect of this Model relate to (1) the definition of 'permanent establishment' in relation to construction, installation or assembly projects because in some DTAs the time span required for an establishment to be considered permanent (and therefore taxable in the source country for such income) is reduced from the 12 months provided for in the OECD Model to nine or six months; and (2) the taxation at source of royalties, given that although the OECD Model understands that such income is taxed exclusively in the state of residence of the person who earns it, in the DTAs signed by Spain, a percentage taxation at source is generally established, which varies according to each bilateral treaty.

Moreover, the method for eliminating double taxation in the vast majority of treaties signed by Spain is the tax credit method and not the exemption method.

In addition, it should be noted that not all bilateral treaties include the elimination of the double economic taxation weighing on dividends. However, Spanish domestic legislation does provide for (1) a very relevant exemption regime for dividends (which would be applied in substitution of the tax credit method established in the DTAs signed by Spain)71 and (2) a tax credit for double taxation of dividends (alternative to the exemption method) to avoid the economic overtaxation on such income when the aforementioned exemption method does not apply and the bilateral treaty does not provide for the elimination of international double economic taxation on dividends.72

Recent changes to and outlook for treaty network

In addition to the latest DTAs signed by Spain (in force since 2020: Cape Verde, Azerbaijan; and since 2021: Belarus), or totally or partially renegotiated (in force since 2019: United States; since 2020: Romania and India; or since 2021: China and Japan) or still in the process of ratification (Ukraine), on 1 January 2022 the MLI entered into force, in which 88 of the 94 DTAs in force in Spain may be amended and 49 DTAs are imminently to be amended. In relation to this MLI, Spain (like Germany) opted for the reservation provided for in Article 35.7, which delays the entry into force of the amendments to the DTAs depending on the date of the notifications made with the other signatory states regarding the ratifications of the MLI.

Recent cases

i Perceived abuses

Perceived abuses by the Spanish Tax Administration Agency have focused on several areas.

On the one hand, with regard to the creation of companies by individuals who carry out highly remunerated professional activities (artists, athletes, lawyers and doctors, etc.) with the aim of having these companies deliver the professional service and thus be taxed on the profits at the IS tax rate (25 per cent in general) and not at the personal income tax rate (with a marginal rate of around 45 per cent, which varies depending on the different Spanish autonomous communities), the tax authorities have understood (1) that a simulated business exists (when the company does not have sufficient means to provide the service), in which case a penalty is applicable; and (2) that, being a high value-added personal service, even when the operation is carried out through a company, the company's invoicing must be attributed to its sole shareholder, varying in this respect the valuation of related-party transactions between shareholder and company, and in many cases penalties are also established.

On the other hand, the administration has stated in several 'conflict in the application of the tax law' (fraus legis) proceedings that (1) intra-group transactions considered to be artificial and perceived not to have any valid economic motive other than the reduction of the tax burden (both IS and VAT) should be taxed in the way that these transactions would usually be carried out without a tax avoidance purpose; and (2) international payments of passive income (dividends, interest or royalties) to companies residing in the EU but with a final destination outside the EU will not benefit from the exemptions provided for under both EU and Spanish law. When applying the fraus legis procedures to reclassify the above transactions – especially when they affect taxes harmonised at the EU level – the Spanish administration has invoked the case law of the Court of Justice of the European Union (CJEU) (e.g., the Halifax73 and Danish74 cases). In this regard, it should be recalled that the procedures for recharacterisation of transactions via fraus legis procedures do not usually entail tax penalties unless they follow schemes that have already been declared by the Spanish administration to be elusive.

ii Recent successful tax-efficient transactions

Given that the Spanish tax authorities usually follow simulation declaration procedures (which do not require a fraus legis procedure and, moreover, allow tax penalties to be imposed), the greatest victories in the courts before the authorities were achieved in those cases where it was demonstrated that the transactions carried out by the taxpayers were real (because the intermediary companies have sufficient means to carry out their economic activity and the transactions carried out are true, etc.), on the grounds of which both the tax assessments and the penalties issued by the Spanish authorities have been annulled.

Outlook and conclusions

Spanish law proscribes the simulation of transactions and also provides for limits to aggressive tax planning, whether national (general or special anti-avoidance rules laid down in domestic legislation) or international (general or specific anti-avoidance rules laid down in DTAs, especially after the ratification of the OECD Model).

In addition, the CJEU has considered the application of general and specific anti-avoidance rules in relation to the enforcement of harmonised tax law. Moreover, the Spanish administration now has more information at its disposal than ever before to detect tax avoidance transactions, given the reporting obligations for international tax planning structures that are required in Spain and other EU Member States, as well as the seamless exchange of information with other countries. Consequently, operations conducted to reduce corporate taxation must be carefully scrutinised to ensure that they are not considered to involve forms of planning that are legally reprehensible to the Spanish administration.

Footnotes

1 Manuel Lucas Durán is a member of the advisory board of Garrido Abogados.

2 Art. 16 of General Tax Act 58/2003 of 17 December 2003 (Ley General Tributaria (LGT)).

3 Art. 13 LGT.

4 Art. 89.2 of Corporate Income Tax Act 27/2014 of 27 November 2014 (Ley del Impuesto sobre Sociedades (LIS)).

5 Art. 15 LGT.

6 Art. 206 bis LGT.

7 Arts. 7 to 11 of Support for Entrepreneurs and their Internationalization Act 14/2013 of 27 September 2013.

8 Consolidated Drafting of the Capital Companies Act, approved by Royal Legislative Decree 1/2010 of 2 July 2010 (Texto Refundido de la Ley de Sociedades de Capital (TRLSC)).

9 Arts. 125 to 144 of the Commercial Code (Código de Comercio (CCom)).

10 Economic Interest Groupings Act 12/1991 of 29 April 1991 and Regulation (EEC) No. 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG).

11 Arts. 154 to 150 CCom.

12 Although classified as capital companies under the Spanish legal system, the existence of at least one general partner allows them to be classified under a mixed category (TRLSC passim and especially Arts. 252 and 294 of the aforementioned legal text).

13 Professional Companies Act 2/2007 of 15 March 2007.

14 Art. 9 of Collective Investment Undertakings Act 35/2003 of 4 November 2003 (Ley de Instituciones de Inversión Colectiva (LIIC)).

15 Arts. 9 and 10 of the Consolidated Drafting of the Private Insurance Regulation and Monitorisation Act approved by Royal Decree-Law 6/2004 of 29 October 2004 (Texto Refundido de la Ley de ordenación y supervisión de los seguros privados).

16 Arts. 7 to 9 of Act 18/1982 of 26 May 1982 on the tax regime for groupings and temporary joint ventures and regional industrial development companies.

17 Arts. 1665 to 1708 of the Civil Code (CC).

18 Act 50/2002 of 26 December 2002 on Foundations.

19 Organic Act 1/2002 of 22 March 2002, regulating the Right of Association.

20 Act 27/1999 of 16 July 1999 on Cooperatives.

21 Act 2/1974 of 13 February 1974 on Professional Associations.

22 Arts. 109 to 111 LIS.

23 Arts. 392 to 406 CC.

24 Arts. 3 to 8 LIIC.

25 Consolidated Drafting of the Pension Plans and Funds Act approved by Royal Legislative Decree 1/2002 of 29 November 2002.

26 Art. 15h) LIS.

27 Art. 15 bis LIS.

28 Art. 16 LIS.

29 Art. 29 LIS.

30 Arts. 62 and 73 of Personal Income Tax Act 35/2006 of 28 November 2006 (Ley del impuesto sobre la Renta de las Personas Físicas (LIRPF)).

31 Arts. 43 to 47 LIS.

32 Arts. 19 and 25 of the Consolidated Drafting of the Non-Resident Income Tax Act, approved by Royal Legislative Decree 5/2004 of 5 March 2004 (Texto Refundido de la Ley del Impuesto sobre la Renta de no Residentes (TRLIRNR)).

33 Arts. 9 and 10 LIRPF.

34 Art. 8 LIS.

35 Art. 29 LIS.

36 Art. 23 LIS.

37 Arts. 35 to 39 LIS.

38 Arts. 113 to 117 LIS.

39 Art. 30 bis LIS.

40 Act 12/2002 of 23 May 2002 approving the Economic Agreement with the Autonomous Community of the Basque Country and Act 28/1990 of 26 December 1990 approving the Economic Agreement between the State and the Autonomous Community of Navarre.

41 Act 8/1991 of 25 March 1991 approving the tax on production and imports in the cities of Ceuta and Melilla, Act 20/1991 of 7 June 1991 amending the fiscal aspects of the Canary Islands Economic and Fiscal Regime, and Act 19/1994 of 6 July 1994 amending the Canary Islands Economic and Fiscal Regime.

42 Arts. 31 LIS and 80 LIRPF.

43 Art. 32 LIS.

44 Arts. 21 and 22 LIS.

45 Arts. 107 and 108 LIS.

46 Arts. 40 to 45 TRLIRNR.

47 Art. 100 LIS.

48 Arts. 55 to 75 LIS.

49 Art. 18 LIS.

50 Art. 18 LIS.

51 Art. 15k) and l) LIS.

52 Art. 11, Paragraphs 9 and 10, LIS.

53 Valuation Rule 14 of the Spanish General Accounting Plan.

54 Arts. 21 and 22 LIS.

55 Art. 10.3 LIS.

56 Arts. 73 to 89 LIS.

57 Art. 19 LIS.

58 Essentially vid. Act 10/2020 of 29 December 2020 and Royal Decree 243/2021 of 6 April 2021.

59 Value Added Tax Act 37/1992 of 28 December 1992.

60 Essentially Law 38/1992 of 28 December 1992 on Excise Duties.

61 Essentially Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff and Regulation (EU) No. 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code.

62 Consolidated Drafting of the Transfer Tax and Stamp Duty Act, approved by Royal Legislative Decree 1/1993 of 24 September 1993 (Texto Refundido de la Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados).

63 Act 4/2020 of 15 October 2020 on the Tax on Certain Digital Services.

64 Act 5/2020 of 15 October 2020 on the Financial Transaction Tax.

65 Directives (EU) 2016/1164 of 12 July and 2017/952 of 29 May 2017.

66 Directive (EU) 2016/1164 of 12 July 2016.

67 Directive (EU) 2018/822 of 25 May 2018.

68 Directive 2013/34/EU of 26 June 2013.

69 Directive (EU) 2017/1852 of 10 October 2017.

70 COM/2018/0148 final.

71 Art. 21 LIS.

72 Art. 32 LIS.

73 Judgment of the Court of Justice of the European Union (CJEU) of 21 February 2006, Halifax and others (C-255/02).

74 CJEU judgment of 26 February 2019 (Joined Cases C-115/16, C-118/16, C-119/16 and C-299/16).

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