Principal tax measures recognised in Royal Decree-Law 27/2018 of 28 December, establishing specific tax and land registry measures - Tax Agency

PERSONAL INCOME TAX

Maternity or paternity provisions

As a result of the Supreme Court Judgement of 3 October 2018 the Personal Income Tax Act has been amended to state that the following provisions are expressly exempt, together with state maternity provisions received from Social Security, with effect from 30 December 2018 and for previous non-prescribed financial years, that is, the tax periods 2014, 2015, 2016 and 2017:

  • State maternity or paternity provisions and non-tax paying family members regulated by the General Social Security Act (Chapters VI and VII of Title II and in Chapter I of Title VI of Royal Legislative Decree 8/2015 of 30 October).
  • Maternity or paternity provisions applying to professionals not included in the Social Security special regime for freelance or self-employed workers by mutual pension institutions which act as alternatives to the aforementioned regime.

    In such cases the exempt amount is limited to the amount of the maximum provision recognised by Social Security for the corresponding item. The excess will be taxed as earned income, understood as income generated, in the case of concurrence of provisions from Social Security or mutual pension institution benefits, in the provisions of the latter.

  • For civil servants under a Social Security regime that does not give the right to receive the provisions referred to in the previous paragraph, remuneration received whilst on leave for maternity, adoption or foster care, or paternity (regulated in letters a), b), and c) of Article 49 of the Basic Statute of Civil Servants Act, approved by Royal Legislative Decree 5/2015 of 30 October or the specific relevant legislation) will be exempt.

    In such cases the exempt amount is limited to the amount of the maximum provision recognised by Social Security for the corresponding item. The excess will be taxed as earned income.

(Amending letter h) of Article 7, Personal Income Tax Act)

Flat-rate yields

Quantitative limits determining the scope of the flat-rate method for economic activities included in the scope of the method are extended for the 2019 tax period, with the exception of agriculture, farming, and forestry activities, which have their own quantitative according to turnover.

General excluding parameters:

    • Turnover earned in the previous year exceeding 250,000 euros for the set of economic activities, excluding those relating to agricultural, livestock and forestry activities. All the operations shall be taken into account, irrespective of whether there is a duty to issue an invoice. Operations in which there is a duty to issue an invoice when the recipient is a business owner shall not exceed 125,000 euros.
    • Turnover for the set of agricultural, forestry and livestock activities exceeding 250,000 euros.
    • Volume of purchases in goods and services in the previous year, excluding fixed-asset purchases, exceeding 250,000 euros.

(Amending DT 32 Personal Income Tax Act)

It also establishes for 2019 a new term for relinquishing or revoking the flat-rate method for Personal Income Tax, and the simplified regime, and the special regime for agriculture, livestock, and fishing on Value Added Tax.

This term will be one month from the day after the date of publication in the Official State Gazette, of Royal Decree-Law 20/2017, i.e. until 30 January 2019.

VALUE ADDED TAX

The quantitative limits for the application of the simplified regime and the special regime for agriculture, livestock, and fishing are also extended for the 2019 tax period.

General excluding parameters:

  • Turnover earned in the previous year exceeding 250,000 euros for the set of economic activities, excluding those relating to agricultural, livestock and forestry activities.
  • Combined turnover for agricultural, forestry, and livestock activities exceeding 250,000 euros.
  • Volume of purchases and imports of goods and services in the previous year, excluding fixed-asset purchases, exceeding 250,000 euros.

(Amending DT 13 Value Added Tax Act)

CORPORATION TAX

Incorporation of the effects of Circular 4/2017 of 27 November in Corporation Tax.

For tax periods starting from 1 January 2018, Article 2 of Royal Decree-Law 27/2018 of 28 December (RDLaw 27/2018) amends Article 17.1 Act 27/2014 of 27 November, on Corporation Tax (Spanish Corporation Tax Act) and adds a new thirty-ninth Transitional Provision.

Article 2 RDLaw 27/2018 amends the Spanish Corporation Tax Act with the aim of introducing to Corporation Tax the effects of Circular 4/2017 of 27 November, of the Banco de España, to credit institutions, on public and private financial information standards, and financial statement forms.

Accounting for the first application of the changes incorporated in Circular 4/2017 will be carried out (aside from those exceptions expressly recognised in the regulation) retrospectively, recording the impacts in reserves. Charges and deposits to reserve accounts generated when making adjustments for the first application (when deriving from the application of tax regulations) will have a tax effect, i.e. they should be taken into consideration when determining the gross tax base for tax corresponding to the 2018 tax period.

To lessen the fiscal impact of this accounting requirement, a transitory regime has been established to integrate the aforementioned charges and deposits into the gross tax base, as soon as they have tax effects in accordance with that stated in the tax regulation, in such a way that this integration will be made in equal parts across the gross tax base corresponding to each of the three first tax periods starting from 1 January 2018.

In addition, the amendment of the Spanish Corporation Tax Act is due to changes in Circular 4/2017 through which investments in equity instruments must be valued at fair value with changes to results, unless the company chooses (irrevocably and from the outset) to recognise these value changes in another overall result.

In order to adapt the effects of this modification to general rules for valuing tax and guaranteeing their inclusion in the gross tax base at the time they are removed, it goes on to amend the regulatory requirement, albeit with a regulation of general character, without express reference to the Circular.

Due to all the above in the Spanish Corporation Tax Act, the following changes have been introduced:

  • Article 17.1 of the Spanish Corporation Tax Act has been modified with the addition of that indicated in bold: “(…) variations in value arising from the application of the fair value criterion shall not have any tax effects, provided they should not be recorded in the losses and income statement, without prejudice to that stated in Article 15 of this Act, or provided they should not be recorded in a reserve account if that is established by a legal or regulatory standard. (…)”.
  • A new thirty-ninth Transitional Provision Spanish Corporation Tax Act, has been incorporated, relating to the inclusion in the gross tax base of accounting adjustments for the first application of Circular 4/2017 of 27 November, of the Banco de España, to credit institutions, on public and private financial information standards, and financial statement forms:

    “Charges and deposits to reserve accounts, taking into consideration expenses or income, respectively, as soon as they have fiscal effects in accordance with that established in this Act, as a result of the first application of Circular 4/2017 of 27 November, of the Banco de España, to credit institutions, on public and private financial information standards, and financial statement forms, will be included in equal parts across the gross tax base corresponding to each of the first three tax periods starting from 1 January 2018, without this integration applying to that established in Article 130 of this Act.

    The inclusion in equal parts mentioned in the previous paragraph will remain applicable even when the item the pending amount refers to is removed from the balance sheet.

    In the event of the taxpayer's expiry within this period, the pending amount will be included in the gross tax base of the last tax period, unless the same is a consequence of a restructuring operation applying to the tax regime established in Chapter VII of Title VII of this Act.

    The quantities included in the gross tax base and those pending integration must also be mentioned in the report on annual accounts for the tax years corresponding to those tax periods.

Approving the reporting of priority patronage activities

The second Additional Provision of RDLaw 27/2018 indicates that during 2019 those listed in the seventy-first Additional Provision of Act 6/2018 on General State Budgets for the year 2018 will be considered priority patronage activities.

The incorporation of this list of activities via a decree-law is justified on the grounds of the principle of legal certainty, given that any other way of it being applied in the said financial year would not be able to be done until being approved by a legal standard, since the ruling governing it for 2018 could not be regarded as automatically extended, which would have a negative impact on the promotion and development of these activities

NET WEALTH TAX

Modification to Royal Decree-Law 13/2011 of 16 September, extending for 2019 the maintenance of the wealth tax levy for the 2019 financial year.

Madrid, 2 January 2019