The Spanish Tax Agency, through its Annual Tax Control Plans, is paying special attention to monitoring the tax risks related to the interposition of companies by private individuals in the process of invoicing personal revenue due to the development of a professional activity. Moreover, it is also keeping track of the risks derived from holding ownership of private assets and wealth for personal use through corporate structures.
In this regard, the Spanish Tax Agency has recently published an informative note that warns taxpayers of the risks of behaviours that are considered illegal and generate a reason for tax regularisation.
For the Spanish Tax Agency “It is not about preventing a taxpayer from carrying out his or her professional activity through a company, which is predicated, a priori, on the right that all businesspersons can freely choose the way in which they wish to do business. But that does not mean that the Tax Agency should automatically accept the legal validity of all types of operations for rendering services by a private individual through a professional company. Nor does the Tax Agency STA necessarily assume that when an operation is carried out through a company that the intervention of this company in carrying out the operation is a real one. Neither does the STA have to recognize the valuation of the transactions when they do not have real market value “.
In particular, the following three scenarios would be grounds for tax regularisation:
- When the company does not have enough human and material means to carry out its professional activity, this would constitute a formal interposition. In this case, a tax regularisation would be applicable according to the figure of simulation based on Article 16 of the General Tax Law.
- When the company has enough human and material means to carry out its activity, the analysis of the correct taxation will be aimed at determining the correct valuation of the transactions between related parties in accordance with article 18.6 of the Corporate Tax Law, that determines objectively if there is an unlawful reduction of the tax burden on any of the related parties.
- When the company holds ownership of wealth assets of the shareholder (housing, means of transport, boats, moorings, etc.) or directly meets expenses that the shareholder should pay (upkeep and repair expenses, meals, travel, domestic staff salaries, etc). In these cases, the tax regularisation may involve contingencies in the Personal Income Tax of the shareholder and Wealth Tax and Value Added Tax of the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.