EU CONSTRAINTS ON RECENT AND EXPECTED CHANGES IN SPAIN. María Teresa Soler Roch

Transcription

1 EU CONSTRAINTS ON RECENT AND EXPECTED CHANGES IN SPAIN María Teresa Soler Roch

2 Preliminary remarks (Report on Tax Reform) EU constraints. Key principles: Fiscal consolidation (sound public finance) Main role of income taxation (corporate and individual) Reduction of selective tax incentives

3 AGRESSIVE TAX PLANNING AND CORPORATE TAX Anti-avoidance(subject -to-tax, GAAR, Parent/Subsidiary Directive). Tax incentives

4 Recommendation (2012/772/UE) Subject to tax clause: Where this Convention provides that an item of income shall be taxable only in one of the contracting States, the other contracting State shall be precluded from taxing such item only if this item is subject to tax in the first contracting State

5 DTCs and Spanish provisions Spanish DTCs: No rule of that kind Tax sparing clauses in some DTCs Domestic provisions Exemption/Foreign tax credit General rule: effective payment of the foreign tax (ECJ decision 8 December 2011, C-157/10 BBVA )

6 Recommendation 2012/772/UE: proposal of GAAR An artificial arrangement or an artificial series of arrangements which has been put in place for the essential purpose of avoiding taxation and leads to a tax benefit shall be ignored. National authorities shall treat these arrangements for tax purposes by reference to their economic substance

7 GAARS in Spanish GTA (Ley General Tributaria) Substance over form (article 13) Anti-avoidance (article 15): artificial transactions, tax benefit as main purpose Sham transactions (article 16) Procedural aspects EU GAAR, a better option?

8 Parent/subsidiary proposal 2013 COM (2013) 814 final, amending 2011/96/EU Article 4.1.a): refrain from taxing such profits to the extent that such profits are not deductible by the subsidiary of the parent company

9 Spanish provisions Participation exemption (article 22 CTA) 5% threshold -Business activity Taxation at source -No tax haven Tax Reform Report. Proposal 43: 10% tax at source B.activity not required Future scenario? BEPS Action 2 (hybrids)

10 BRAZIL Hybrids juros brasileños Dividend payment juros SPAIN Deduction juros Court(AN 27 February2014):exemption applies. The classification as dividend under art. 10 DTC cannot be disregarded TA: no exemption on dividend (art. 21 CTA)

11 Parent/Subsidiaryproposal2013 Commission(2013) 814 final Article 1.2 This Directive shall not preclude the application of domestic or agreementbased provisions required for the prevention of tax evasion New article 1 a Member States shall withdraw the benefit of this directive in the case of an artificial arrangement.. (GAAR Recommendation 2012)

12 Parent/Subsidiary Spanishprovisions Specific provision(article 14.1.h) NRTA) Look-through approach (no exemption at sourceifmorethan50%noneuresidents) Court decision: Audiencia Nacional 25 November 2010 Exception: valid economic purpose, effective business activity Compatible with PSD GAAR proposal?

13 Tax incentives Legitimate tax policy option vs. Potential risks of unlawful State Aids and harmful tax competition Tax Reform Report. Proposal 45: No tax incentives (tax credit such as: R&D&I or environment investments, new jobs or reinvestment of extraordinary profits) What about the patent box regime?

14 Profit shifting STATE A Company X STATE B Company X/Y R&D activity R&D result Input incentive P. B. regime

15 INDIVIDUAL TAXATION Inheritance Tax (non residents) and Pensions (temporary residents)

16 Inheritance tax on non residents: EU constraints Commission proposals (tackling tax obstacles, relief of double taxation) ECJ doctrine (cases Barbier, Geurts- Votgen, Jäger, Eckelkamp, Arens-Sikken, Block, Mattner, Halley, Ivon Welte) Discrimination in comparable situations Restriction on free movement of capital

17 EXAMPLE Deceased resident in the region of Valencia (Spain) all assets in Spain Heirs (on equal footing) residents in Valencia, Madrid and Brussels. Tax allowance (tax base): (R in Valencia and Madrid), (R in Brussels) 75% tax debt reduction: only R in Valencia

18 Inheritance tax and non residents: Spanish provisions Problem raised by regional legislation ECJ pending decision : Commision vs. Spain (C-127/2012) High Supreme Court (4209/2011 Const. Court on IHT provisions Valencia) Report on the Tax Reform. Proposal 57: same exemption in all Spanish territory

19 Pensions (temporary residents) The exclusive rule in article 18 OECD MC Alternative proposals in the Commentary Recent exceptions (DTC Germany-Spain) Tax Reform Report. Proposal 32: Foreign retired residents: pensions taxed at the lowest Income Tax rate Tax competition and profit shifting?

20 STATE AIDS Pending issues (Implementation of recovery procedure)

21 Recovery of unlawful aids: EU provisions Procedural regulation (659/1999, 794/2004). Article 14.3: Recovery shall be effected without delay and in accordance with the procedures underthenationallawofthememberstate concerned, provided that they allow the inmediate and effective execution of the Commission s decision

22 ECJ decision 13 May 2014 (C-184/11 Commission vs. Spain) (Grand Chamber): Spain has failed to fulfil its obligations under art TFUE Spain has been the subject of a number of judgements of the kind(failure in inmediate an effective recovery) Delayforrecovery(morethan5years) Penalty: lump sum (not reduced because of regional infringement)

23 Recovery of unlawful aids Spanish provisions Main issues Legal certainty and legitimate expectations (risk of retrospectivity) Statute of limitation (possible solutions) Procedure (Member States autonomy) In the case of tax benefits: lack of ad hoc provisions Next modification of the GTA?