Our tax department can assist you with taxes payable according to the special international fiscal transparency scheme, a complex regulatory regulation with many peculiarities that make it a speciality of its own within tax law.
This tax scheme, known as the international tax transparency regime, aims to apply personal income tax -in the case of individuals- or corporate income tax -in the case of entities- to income from capital obtained in companies resident in low tax territories -also known as tax havens-, when taxpayers resident in Spain transfer their wealth to this type of company for tax reasons, regardless of any other motivation, offshore territories or tax havens-, when taxpayers resident in Spain move their capital to this type of company for mainly tax reasons, regardless of any other motivation, to integrate the income obtained in these companies instead of the taxpayer.
The non-resident company is liable to tax rather than the taxpayer integrating income into their tax base. It is the non-resident company that is taxed for the revenue obtained. The taxpayer is only taxed when it either receives the dividends from the non-resident shell company or transfers its holding in the company. What is achieved is a difference in the payment of taxes, and that is what the international tax transparency scheme sets out to prevent.
The international tax transparency scheme aims to charge tax to taxpayers living in Spain – just as other countries do – on income earned by non-resident companies from the capital invested by non-resident companies because of the relocation of that capital. This income, which is called passive income, because they do not come from economic activities, is therefore taxed in the taxable base of the taxpayer holding the equity shares in the non-resident shell company rather than in the taxable base of that company.
In most countries, taxpayers are taxed on their worldwide income, that is, on their entire income regardless of where the funds are earned and where the payer of the income resides.
However, the target of the international tax transparency scheme is the shell companies registered abroad and not those engaged in productive activities. However, the latter may also be affected when they do not repatriate their benefits or acquire assets in a percentage classified as “significant.” With this, the international tax transparency regime intends that the benefits from productive activities carried out by companies abroad be repatriated to the persons with the holdings.
The international tax transparency scheme focuses on three basic areas: (i) holdings in the non-resident shell company; (ii) the level of taxation of the non-resident company in the territory where it is resident; and (iii) the type of income earned by the shell company.
In general, as regards the allocation of income, it should be stressed that taxpayers must be taxed on all the revenue obtained by the entity not resident in Spanish territory when the entity does not have the corresponding organisation of material and personal means for its realisation, even if the operations are recurring.
Taxpayers residing in Spain who are required to apply the international tax transparency regime in their respective Personal Income Tax or Company Tax self-assessments, as appropriate, must provide information concerning the non-resident company or companies, which are: (i) name or business name and place of registered office; (ii) list of directors and their registered office; (iii) balance sheet, profit and loss account and report; (iv) amount of positive income subject to taxation on the taxable basis; and (v) proof the taxes paid on positive income to be charged on the taxable basis, for deduction in the full resident taxpayer’s quota.