SPAIN Law and Practice Contributed by: Álvaro Paniagua Rico and Borja López Pol, Anaford Abogados
1.7 Transparency and Increased Global Reporting The most recent experience shows that the Spanish tax authorities are adopting a more restrictive attitude towards structures that may lead to reduced taxation by incorporating foreign companies. This matter is closely linked to the concepts of “place of effective management, ”substance” and “business motivation”, which may justify the existence and incorporation of a company or, conversely, may attract the attention of the Spanish tax authorities and consider that they are mere conduit companies that have been incorpo - rated for the sole or main purpose of benefiting, for instance, from domestic exemptions or benefits under double taxation provisions. Spanish tax regulations have transposed the BEPS actions and, in some cases, have even gone beyond the standards set by the OECD. For instance, one of the main anti-abuse measures that may affect private clients is the application of Spanish Controlled Foreign Companies (“CFC”) rules. CFC is a special tax regime that taxes, at the level of the Spanish tax resident shareholder, certain income generated by non-resident entities as if it had been distributed to the shareholders (ie, a pass-through). The objective of CFC is to prevent the deferral of taxes by using shell companies to accumulate income in low-tax jurisdictions until the income is repatriated to the shell company. Therefore, the Spanish taxpayer must add to its PIT’s general tax base the income generated by non- resident entities that is attributable to a shareholder deemed resident in Spain for tax purposes, regardless of its nature (ie, dividends, interest, capital gains, etc). Generally, the attributable income is passive (eg, real estate and movable capital income, etc). Therefore, no attributable income would exist if the entity car - ries out, mainly, business activities (less than 15% of the total income is considered as attributable income). Nevertheless, although the entity does not receive passive income, CFC rules will also apply to the total
income if the non-resident entity lacks adequate human and material resources and proves that the entity’s constitution and business are based on sound business reasons. In terms of reporting obligations and transparency, it is worth mentioning the Common Reporting Standard (CRS) and the Central Register of Beneficial Owner - ship (CRBO). CRS Spain has adopted the CRS and the Spanish Tax Authorities actively use the information obtained through it. Central Register of Beneficial Ownership The CRBO is a single, nationwide register managed by the Spanish Ministry of Justice. The purpose of the CRBO is to collect and provide access to up-to-date information on the beneficial ownership of all Spanish legal entities, as well as trusts, trust-like arrangements and similar legal struc - tures without legal personality operating in Spain. In addition to current data, the register also includes his - torical information on such entities, which is available to the competent authorities. The register is part of a broader framework aimed at protecting the integrity of the financial system and other areas of economic activity by preventing money laundering and terrorist financing. In accordance with European Union and Spanish leg - islation, a beneficial owner is defined as the natural person or persons who ultimately own or control, directly or indirectly, more than 25% of the share capi - tal or voting rights of a legal entity or who otherwise exercise direct or indirect control over such an entity. Where no such natural person can be identified, the person or persons holding the position of director shall be considered the beneficial owner(s). Additionally, in the case of foundations, members of the Board of Trustees shall be deemed beneficial owners and in the case of associations, members of the governing body or management board shall be deemed such.
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