In previous blog posts, we have talked at length about company restructuring operations and how they can benefit from the tax neutrality regime, provided that they comply with the established legal requirements.
This special regime allows certain processes such as mergers to be carried out without generating immediate tax effects. On the international level, these benefits can be framed within the FEAC regime, which applies to cross-border operations within the European Union.
However, in this article, we will discuss the Special Regime, and answer key questions to better understand it.
Who must notify the tax authorities?
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The tax neutrality regime, which applies to corporate restructuring operations, allows these operations to be carried out without tax effects being an impediment. However, not all companies have the same responsibility for reporting to the tax authorities.
It all depends on the structure and the tax residence of the entities themselves, the responsibility lies with different players:
- The acquiring entity is not resident for tax purposes in Spain: The transferring entity must notify the Tax Agency. This is because the acquiring entity is not subject to Spanish tax regulations.
- Both the transferring and acquiring entities are not tax residents in Spain: In this case, the liability falls on the shareholders, but only if they are tax residents in Spain. The partners must indicate whether they have taken the transaction under a tax regime similar to that provided for in the Corporate Income Tax Law. If the partners are not tax residents in Spain, the liability will again fall on the transferring entity.
It is important to understand who is responsible in order to avoid complications and to ensure that communication is done properly and within the established deadlines.
What must the communication to the Tax Administration include?
The documentation required may vary depending on the characteristics of the operation, but in general, the communication must include the following:
- Addressee of the communication: It must be addressed to the AEAT Delegation that corresponds to the tax domicile of the entities involved. In other words, it may be addressed to the Central Office for Large Taxpayers.
- Identification of the parties involved: It must include the full details of the entity carrying out the operation, as well as of the person signing the communication.
- Details of the operation: It is necessary to specify the type of operation. For example, if we are talking about a merger or spin-off. In this case, it is necessary to detail how it is carried out and what tax implications it has.
- Applicable tax regime: The notification must indicate whether the company has opted to apply the special tax neutrality regime, which is regulated in Chapter VII of Title VII of the Corporate Income Tax Act.
- Additional documentation required: Along with the notification, certain essential documents must be attached. These include a copy of the public deed and a copy of the prospectus (for takeover bids).
What is the Central Delegation of Large Taxpayers?
As mentioned above, the Central Delegation for Large Taxpayers (DCGC) is one of the possible addressees of the communication; it is a central body that works throughout Spain.
Likewise, the Delegation is responsible for the management and tax control of taxpayers with greater economic relevance, such as large companies and entities with a high turnover. As long as the latter are assigned to it due to some of the circumstances regulated in the regulations.
Who does the Central Delegation for Large Taxpayers depend on?
The DCGC reports to the State Tax Administration Agency (AEAT), which in turn is under the Spanish Ministry of Finance and Public Function.
Within the Tax Agency, the DCGC is part of the Financial and Tax Inspection Department, which is in charge of supervising and controlling the tax compliance of large taxpayers.
What is the deadline for reporting the special regime?
Having analysed everything that must be included and the bodies to which the notification must be addressed, it is important to know the deadlines. It all depends on the type of operation carried out and whether or not registration in the Mercantile Register is necessary:
1. General deadline:
The communication must be submitted within three months of the registration of the operation in the Companies Register
2. In the case of a change of registered office:
If the operation involves a change of registered office, the deadline for submitting the communication is three months from the date of registration of the new registered office.
3. When registration is not required:
For cases in which the operation does not require registration in the Commercial Register, the period of three months is counted from the signing of the public deed or equivalent document regulating the operation.
4. If the entities are not resident for tax purposes in Spain:
This must be done within the period established for partners resident in Spain. If the partners are not resident in Spain, the general period of three months applies.
What happens if the tax authorities are not notified of the application of the special regime in time?
Failure to notify within the deadline incurs a serious tax offence, which carries a significant financial penalty.
Specifically, a fixed fine of 10,000 euros is imposed for each transaction in respect of which notification has been omitted.
In addition, if the administration manages to detect that certain requirements have not been met, it may even eliminate tax effects, which would lead to the loss of profits.
How to avoid penalties and ensure compliance with tax regulations?
To avoid legal and tax complications, it is highly advisable to have the support of an expert tax advisor who can guide companies through the whole process.
Good advice should include three important points: analysis of the case and circumstances, proper presentation of the communication, and attention to compliance.
Having the right support is crucial to carry out restructuring operations smoothly and to take full advantage of the tax benefits offered by the tax neutrality regime.
That is why LEIALTA offers you the support you are looking for to avoid the inconvenience of a penalty or the elimination of the benefits of the tax neutrality regime.
Our team of tax experts will be happy to study your case and the circumstances of your company in depth.
