The legal concept of trust does not exist in Spanish law and is therefore not recognized by the Spanish tax authorities or Spanish courts. Therefore, the tax treatment of trusts may vary from case to case and the Spanish tax authorities generally consider that the economic reality of the trust should be analyzed and not its legal nature. The trust must always take the form of a legal person recognized by Spanish law.
Since Spanish tax legislation does not specifically regulate the taxation of trusts, the tax treatment of the legal relationships involved in trusts must be determined in an abstract manner based on the general guiding principles of the Spanish tax system. This task is further complicated by the fact that scientific and administrative doctrine on the subject is scarce and is not based on clearly defined criteria. In practice, this means that the economic relations between the members of a trust must be considered as held directly between them and the tax implications of this must be analyzed accordingly.
Management of commercial transmission entities
According to Spanish legislation, there are several types of companies, it is important to distinguish between commercial companies, which are IRC taxpayers, and legal entities, which are indirect commercial companies. As a general rule, business entities with separate legal personality are treated as IRC taxpayers and business entities without separate legal personality are treated as transient business entities. Spanish legislation establishes a specific tax regime known as the “income allocation regime” for income generated by business entities without their own legal personality. As of 2003, in accordance with Spanish law, commercial companies incorporated outside of Spain that have the same or similar legal nature as a Spanish commercial company taxed under the income sharing regime are also subject to this regime.
Mainly, there are two types of situations in which non-residents can pay taxes in Spain in the field of companies: (i) non-residents who are partners in a Spanish company; or (ii) foreign legal persons that, fulfilling certain conditions, can be considered a company for Spanish tax purposes and the foreign company or its members can be taxed in Spain if they have any type of interest in Spain.
According to the Spanish NRIT law, the legal characteristics of a foreign company are the main factor in determining whether it is a transient business entity for Spanish tax purposes. However, the decisions of the Spanish tax authorities adopt the simpler view that a foreign company is an indirect business entity when it is not subject to tax in its country of residence.
Furthermore, as mentioned above, the Spanish NRIT law distinguishes between non-resident business entities with a presence in Spain and non-resident business entities without such a presence.
If the Spanish/non-resident entity carries out a business activity in Spain, its non-resident members operate in Spain through a PE. This means that income generated by the entity is directly taxable at the entity level. The mechanisms used to tax these entities are similar to those used to tax non-resident taxpayers with PE in Spain, although other rules also apply.
If the Spanish/non-resident entity does not carry out a business activity, its non-resident members are taxed under Spanish NRIT legislation and therefore there is no entity-level taxation. Instead, under Spanish tax law, revenue is allocated to the members of the entity as if the entity did not exist. While members residing in Spain would include their share of the income on their direct tax return (IRS or CIT), non-resident members would pay taxes by NRIT.
Work and residence authorizations for Spain
International transferees from EU countries do not need to obtain a work and residence permit. If the transferee intends to stay in Spain for more than three months, he or she must register with the Central Registry of Foreigners ("Registro Central de Extranjeros") with the local authorities to obtain a foreigner identity number in Spain.
Please note that after Brexit, citizens of the United Kingdom (UK) are no longer considered EU citizens. Only UK citizens registered as resident in Spain before 2021 are beneficiaries of the withdrawal agreement and can retain their status.
On the other hand, international assignees from outside the European Union who wish to carry out lucrative technical or professional activities in Spain, whether employed or self-employed, must obtain a work and residence permit before starting their work activity.
As a general rule, if the assignee is an employee and due to the characteristics of his job, the assignee must comply with the provisions of the National Employment Situation, applications for work authorization and residence in Spain are made in three steps:
- The employer publishes the job offer in the national employment system and needs to prove that there is no suitable candidate for the position in the Spanish labor market. This process takes about a month.
- The employer requests the residence and work permit in Spain. If all the required documents are completed with the application, the immigration office will issue a letter approving the work and residence permit, which can take three to six months.
- The international transferee must apply for an entry visa at the Spanish consulate in their country of origin within 30 days of receiving the letter from the Spanish immigration office, which can take up to a month. Once in Spain, the transferee must apply for their residence card within the first 30 days.
Work and residence permits are issued for a maximum period of one year, and their renewal may be requested up to two months before their expiration and, in some cases, up to three months after their expiration. It is best to apply before the license expires.
Work and residence permits in Spain for highly qualified workers, entrepreneurs and investors
With effect from September 29, 2013, immigration procedures are simplified for certain natural persons for reasons of economic interest in the following cases:
- Equity investors. The investment can be: (i) 500,000 euros in real estate, (ii) 2 million euros in Spanish public debt, or (iii) 1 million euros in shares of Spanish companies or bank deposits in Spanish entities.
- Transferees within the company/Persons on international mission (*).
- Highly qualified professionals (**).
Under this law, residence and work permits can be issued for a maximum period of two years, renewable.
With the publication of Law 28/2022, of December 21, for the promotion of the ecosystem of emerging companies, the possibility arises that non-resident foreigners in Spain, who intend to reside in Spanish territory with the aim of working remotely, request an international residence visa authorization for teleworking. It is valid for a maximum of one year, and the remote worker must request (if he intends to remain in Spain) its transformation into a residence permit for international remote workers, with a maximum validity of 3 years.
(*) In May 2014, the European Union adopted the Intra-Business Transfers Directive, which introduced a set of common rules to make it easier for companies outside the European Union to send key personnel to their branches in the European Union.
Under the new directive, once foreigners obtain an intra-company transfer (ICT) permit to work in an EU member state, they can move within the European Union almost freely, as long as they work for the same company or group of companies. . companies. According to the directive, they will have the same protection as posted workers in the EU and are required to receive the same salary as local workers.
The main advantages for workers transferred within the company and for highly qualified professionals are the exemption from posting the position in the national employment system and the issuance of the letter of approval of the work and residence authorization takes between one and three months.
(**) Law 28/2022, of December 21, for the promotion of the ecosystem of emerging companies modified last December the requirements for companies to be considered "Large companies" for the purpose of being able to request worker licenses highly qualified before the Unit of Large Companies (UGE). The new requirements must be published before March 31, 2023.
exchange control regulations
In accordance with the exchange control rules established in Spain, a non-Spanish resident can open a bank account in euros or in any other currency in Spain. In order to open an account, and in accordance with anti-money laundering regulations, non-residents must present at least their passport and, if possible, a document issued by the Spanish Ministry of the Interior proving their status as non-residents in Spain . You can also request a Foreigner Identification Number (NIE).
Spanish residents who open bank accounts abroad or transfer funds to or from non-resident bank accounts are required to make certain notifications to the Statistics Department of the Bank of Spain, as indicated below.
Residents in Spain who carry out banking operations with non-residents or who have financial assets and liabilities abroad of more than 1 million euros must notify the Bank of Spain's Statistics Department of the details of the bank account where the operation is carried out and its owner. . , among other matters. This notification is not necessary for operations of less than 1 million euros, unless the Bank of Spain requests this information, which must be available within two months from the date of request.
These notifications are regulated in Bank of Spain Circular 4/2012, which establishes the notifications that must be made at different time intervals (monthly, quarterly or annually) when the total amount of the banking operations carried out or the assets and financial liabilities existing abroad in a year is greater than 1 million euros and based on their total value in the year. Likewise, the General Tax Law 58/2003, of December 17, 2003, establishes the obligation to inform the accounts located abroad of resident natural and legal persons, the PE in Spain of non-resident companies and the entities indicated in the Article 35.4 of the General Tax Law Code Law (deceased assets, common assets and other entities without legal personality that constitute an economic unit or taxable asset).
If this obligation is not met within the established period (before March 31 of the year following the year in which the information to be declared was produced), these amounts will be considered unreported income for IRC taxpayers (unjustified capital gains for IRC taxpayers) .IRS) and will be charged to the oldest tax period still open for review. Failure to comply with this obligation constitutes a very serious infraction, and fines of up to 150% of the gross amount of tax owed may be imposed.
Likewise, in accordance with Community and Spanish legislation, all persons entering or leaving Spain with means of payment of a value equal to or greater than 10,000 euros or equivalent value in foreign currency must declare them at the border (Customs Services).
Finally, with regard to operations carried out in the European Union, as of February 1, 2014, the current regulation regarding transfers and direct debits in euros is SEPA (Single Euro Payments Area). There is a new case of retail payments derived from SEPA instruments, which are currently the same for all SEPA countries.
Special tax regime for expatriates
Before the implementation of the recently approved Law for the Promotion of the Spanish Ecosystem for Emerging Companies (“Lei das Startups”; Law 28/2022), only the tTaxpayers who acquire tax residence in Spain by virtue of an employment contract (with the exception of the special employment relationship of professional athletes) or the acquisition of the status of administrator of a company (with certain requirements) may choose to pay by Spanish legislation. of NRIT instead of the Spanish IRS law in the year in which the option is exercised and for the following five years.
With effect from January 1, 2023, the aforementioned "Startups Law" introduced new scenarios, in addition to the three explained above, to choose to pay under the Spanish NRIT law instead of the Spanish SRI law for taxpayers who acquire fiscal residence in Spain, as follows:
- to work remotely from Spain (teleworking scenario). This requirement will be considered fulfilled by workers who have a visa for international remote work;
- carry out an economic activity in Spain that is considered a business activity;
- Being a highly qualified professional who provides services in Spain to newly created companies or who carries out training, research, development and innovation activities in exchange for a remuneration of more than 40% of the total income received by the taxpayer.
In addition, the "Startups Law" eliminated for taxpayers who come to Spain as a result of acquiring the status of administrator of the company, the previous requirement that said taxpayer and the company cannot be related parties, but maintaining said requirement only when the company' are made up of assets not linked to the activity of the company in more than 50%.
Additionally, the Ley das Arranques extended the application of this Special Tax Regime to the spouse and children of the taxpayer under 25 years of age (or of legal age if they are considered legally incapable) when certain requirements are met, namely:
- That they come to Spain together with the main taxpayer or before the end of the first fiscal year of application of the Special Tax Regime;
- become Spanish tax residents;
- Not having been Spanish Tax Residents in Spain in the last 5 fiscal years prior to arrival in Spain and who do not obtain qualifying income as income obtained through a permanent establishment in Spain; Is
- The sum of the tax base of the spouse and children is not less than that of the main taxpayer (the taxpayer of this Special Tax Regime).
Finally, the last modification introduced by the Startup Law to this Special Tax Regime refers to income from benefits in kind obtained by these taxpayers, expanding the tax exemptions provided for in article 42.3 of the SRI Law (applicable to taxpayers regular residents) under the Special Tax Regime. These tax exemptions on certain income from benefits in kind are related to the supply of products at reduced prices in canteens to employees, with contributions to insurers to cover employee illnesses, among others.
In these cases, taxpayers are taxed on their income and capital gains from a Spanish source. Exceptionally, taxpayers will be taxed on the income from their work obtained throughout the world. The applicable tax rate is 24% for the first 600,000 euros of tax base and 47% on any excess, except income from non-resident accounts, at a tax rate of 19% up to the first 6,000 euros of income, at a tax rate of 21% for the next 6,000 to 50,000 euros of income, at a 23% tax rate for the following EUR 50,000 to EUR 200,000, at 27% Tax ratefor the following EUR 200,000 to EUR 300,000, and a tax rate of 28%on any remaining incomebut 300,000 euros.
To qualify for this special tax regime, taxpayers must not have been tax residents in Spain for a period ofcincoyears prior to the year in which they moved to Spain.
The application for taxation under the special expatriation regime must be submitted within a period of six months from the date on which the person started working in Spain (that is, the date of registration with the Spanish Social Security or the date that appears on the documents that allow you to continue applying the social security system of the country of origin).
The taxpayer must not obtain income through a PE in Spain.
If any of the above requirements are not met, taxpayers lose the right to benefit from this special tax regime.
Tax equalization policies
Certain companies apply tax equalization policies to ensure that designated employees do not have any type of advantage or disadvantage in their net income or social security contributions in the host country compared to their home country.
These policies also ensure that the assigned employee's tax burden is similar to what they would pay in their home country. To do this, the company assumes the personal income tax payment of the worker in the host country, and the worker pays the tax that he would have paid in the country of origin based on his personal circumstances.