Expatriate Taxes

UK Tax. Corporation Tax. Interest and Penalties on late payments. Instalment Arrangements.

Today, HMRC announced an increase in its interest rates, due to another increase in the Bank of England base rate, from 4.25% to 4.5%.  The new rates will take effect from Monday, 22nd May 2023, for quarterly tax instalment payments.  The aim of the late payment rate is to encourage prompt tax payment by UK Taxpayers and to ensure the system is fair for those individuals who pay their liabilities within deadline.

The new rates will take effect from Wednesday, 31st May 2023, for non-quarterly instalments payments.

Today, HMRC has announced increases to interest charged on both the late payment of tax as well as on tax repayments/refunds.

The two new increased rates of interest are:

• Late Payment Interest which is set at base rate plus 2.5%.  This will increase from 6.75% to 7% on 31st May 2023.
• Repayment Interest which is set at base rate minus 1% with a lower limit of 0.5% (known as the ‘minimum floor’).  This will increase to from 3.25% to 3.5% from 31st May 2023.

IN SUMMARY:

The interest rate on unpaid instalments of Corporation Tax liabilities will increase to 5.5% from 22nd May 2023.

The interest rate for the late payment of other taxes will increase to 7% from 31st May 2023.

The interest rate paid by HMRC on the overpayment of tax will increase to 3.5% on 31st May 2023.

For further information, please click: HMRC late payment interest rates to be revised after Bank of England increases base rate – GOV.UK (www.gov.uk)

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Irish VAT Rates. Return of Trading Details. Tax and Accounting Services. Irish and EU VAT. Reverse Charge Mechanism

As you’re aware, the standard VAT rate was temporarily reduced, as one of the COVID measures, from 23% to 21% for the six month period between 1st September 2020 and 28th February 2021.  The standard rate of Irish VAT is due to return to the 23% rate with effect from 1st March 2021.  This is particularly important to remember for invoicing and when completing your Return of Trading Details.

Please be aware that the VAT rate reduction from 13.5% to 9% for certain goods and services, mainly within the tourism and hospitality sectors, will continue to apply until 31st December 2021.  Please follow link for more details:   https://www.revenue.ie/en/vat/vat-rates/what-are-vat-rates/second-reduced-rate-of-value-added-tax-vat.aspx

To prepare for the VAT rate change, there are a number of practical issues that taxpayers should consider as follows:

1. Update your Systems

2. Amend your Pricing structure if necessary.

3. Review and/or Revise your Contracts

4. Amend your Sales Invoices

5. Don’t forget the Reverse Charge Mechanism especially for invoices dated pre 28th February but in circumstances where they’re received after 1st March 2021.

6. Credit notes – If you initially raised an invoice charging 21% VAT but the customer requests a credit note after the VAT rate has changed i.e. after 1st March 2021, please be aware that you may be required to apply the 21% rate after the VAT rate has returned to 23%.

7. If your business pays VAT to Revenue on a monthly direct debit basis, you should check to see if you’re required to increase this amount after 1st March 2021.

8. Consider how to account for payments on account which are received in advance of the rate change.

9. Annual Return of Trading Details – Please be aware that the Annual Return of Trading Details deadline date has been extended from 23rd January to 10th March 2021 to take account of the rate change in 2020.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

International VAT. EU VAT Experts. Liaison with VAT and Revenue Authorities Europe

Has your business incurred VAT costs in another EU member State between 1st January and 31st December 2018 ?

If the answer is “yes” then you should begin preparing your ‘EVR’ refund claim.

As you’re aware, if you are an Irish VAT registered business who has incurred VAT in another E.U. state, you can’t reclaim this VAT in your Irish VAT 3 Form.  Instead, you must submit an online claim through the Electronic VAT Refund (EVR) service.

This EVR claim is made via the tax authorities’ portal in the trader’s own country.  In other words, an Irish VAT registered business must submit its application to the Irish Revenue Authorities via ROS.

It is the responsibility of the Irish Revenue Authorities to then forward the EVR claim to the E.U. state in question to process the refund.

The EVR application must include the following:

• The Supplier’s details
• The Country
• Import information
• The VAT details
• Details regarding the type of supply made
• In some member states invoices may need to be included with the claim.

The EVR application must be filed on or before 30th September 2019 in relation to VAT incurred between 1st January and 31st December 2018.

The refund payment will be made by electronic funds transfer (EFT) to the bank details provided in the claim.

A maximum of five applications can be made via the EVR  in a calendar year.  The refund period can’t be greater than one calendar year (i.e. 1st January to 31st December) and it can’t be less than three calendar months except in circumstances where the application is in relation to the last quarter of the year.

It is not possible to amend a claim to increase a VAT refund.

Please be aware that EVR reclaims are governed by the VAT recovery rules of the E.U. member state to which the claim relates.  In other words, if you are an Irish VAT registered business making an EVR reclaim in, say, France then you must comply with the French VAT rules and not the Irish rules.

If, however,  you are registered or have an obligation to register for VAT in a particular EU member state then, any reclaim of VAT incurred there must be made directly to the tax authorities of that particular E.U. jurisdiction.

For further information, please click on to the link:

https://www.revenue.ie/en/vat/reclaiming-vat/irish-vat-registered-traders-reclaiming-vat-from-european-union-eu-member-states.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

UK Taxes. UK Capital Gains Tax (CGT). Full Cross Border and Expat Tax Services. UK CGT Reliefs

Current UK Legislation

Principal Private Residence Relief (PPR) is a capital gains tax relief on the disposal of an individual’s only or main residence.  Under current U.K. legislation, an individual can claim relief for any period where the relevant property is deemed to be the individual’s “Principal Private Residence” (PPR).  The individual can claim Principal Private Residence relief for the final eighteen months of ownership providing the property had been that individual’s principal or main residence at any point during his or her ownership.  In other words, the final eighteen months always qualify for Principal Private Residence Relief even if the dwelling was no longer the individual’s only or main residence.  Lettings relief currently provides relief of up to £40,000 to individuals who let out a property which is or has been their main or principal residence.

Budget 2018 Amendments

The government proposes to make the following two changes with effect from April 2020:

1)      The Lettings Relief will be reformed so that it only applies where the owner of the property is in “shared-occupancy” with a tenant.  The relief can reduce the capital gain, per person, by up to £40,000, giving a potential tax saving of up to £11,200 (£40,000 x 28%) and

2)      The final period of exemption, which applies if a property has been an individual’s PPR at any point during their period of ownership, will be reduced from eighteen months to nine months.   There are no proposed amendments to the thirty six months that are available to disabled persons or those residing in a care home.

The government will consult on the proposed changes before legislating.

For further information, please click:  https://www.gov.uk/government/publications/private-residence-relief-budget-2018-brief

As Cross Border Tax Advisors, we provide a full and comprehensive UK tax advisory and compliance service including liaising with HMRC on your behalf.  For further information, please contact us through queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

VAT on Cryptocurrency. German Tax Advice. Tax Advice for crypto-assets and Bitcoin.

On 27^th February 2018, the Germany‘s Federal Ministry of Finance (MOF) issued guidance clarifying the VAT treatment of bitcoins and other “virtual currencies”   by confirming that the German Tax Authorities will not impose VAT on cryptocurrency which is used as a form of payment.

It determined that although transactions to exchange a traditional currency for a virtual currency and vice versa were deemed to be a “taxable supply” these transaction are considered to be VAT exempt.

The guidance confirms that Germany will not impose a VAT charge in circumstances where the virtual currency is a substitute for a traditional currency and is used merely as a form of payment.

This guidance is in line with the ruling of the Court of Justice of the European Union (CJEU)— Hedqvist (C-264/14, 22^nd October 2015).

For further information, please click the following links:

https://taxation-customs.ec.europa.eu/taxation/vat/vat-directive/vat-exemptions/exemptions-without-right-deduct_en

https://curia.europa.eu/juris/liste.jsf?num=C-264/14

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Cross Border Taxes, International Tax Consultants, GST, VAT, Goods and Services Tax, Ex-pat Taxes, Chartered Tax Advisors

As Chartered Tax Advisors in Ireland, you might be surprised to learn how many of our multi-jurisdictional clients have contacted us regarding the new GST rules in Malaysia.  According to Malaysia’s Ministry of Finance, the supply of goods and services made in Malaysia will now be subject to the zero rated Goods and Services Tax (GST) effective from 1^st June 2018.  The “Goods and Service Tax (Rate of Tax) (Amendment) Order 2018” amends the rate of tax on the supply of goods or services as well as on the importation of goods from 6% to 0%.

Please be aware that the zero rating will not apply to the supply of goods and services listed under the Goods and Services Tax (Exempt Supply) Order 2014.  However, these goods and services will remain exempt from GST.

All persons registered for GST (Goods & Services Tax) must comply with the new legislation in relation to zero rating. At the same time, they will continue to be governed by the current regulations with regard to invoicing, filing and claiming input tax credits.

GST registered persons must continue to ensure that the pricing of goods and services provided adheres to the Price control and Anti-Profiteering Act 2011.

In summary, Malaysia’s Ministry of Finance announced that from 1st June 2018, the supply of goods and services made in Malaysia, in addition to the importation of goods and services liable to the 6% rate of Goods and Services Tax will now be subject to GST at 0%.  It’s important that you don’t confuse the supply of goods and services which are GST exempt with those liable to 0% rate.  Therefore, for complete clarity, the zero rate does not apply to the supply of goods and services listed under the Goods and Services Tax (Exempt Supply) Order 2014.  This continues to be exempt from the Goods and Services Tax.

For further information, please click: https://mysst.customs.gov.my/assets/document/SST%20Act/Sales%20Tax%20Act%202018_b.pdf

We are a boutique tax firm specializing in international and expatriate tax compliance for people moving to or from Ireland. We provide tailored advice for your unique set of circumstances.  With over thirty years experience simplifying complicated international matters, we have a proven track record of success.  If you’re an individual (including a remote worker or expat) we have the requisite expertise in personal tax residency, double taxation relief and tax compliance for people moving between jurisdictions. We help individuals manage risks associated with tax residency, split-year treatment, cross border relief and foreign earnings deductions.  If you are a business owner, we can support your business in relation to international social security, shadow payroll and policies to minimise double taxation.  To make an appointment with a Chartered Tax Advisor, please contact queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

International Tax Advisors, VAT Experts, Cross Border Tax Consultants, Expatriate Tax Accountants

On Budget Day, 21^st February 2018, the South African Minister for Finance released updated draft regulations in relation to VAT levied on electronic services provided by foreign businesses.  The aim is to extend the definition of “electronic services” to include “any service supplied by means of an electronic agent, electronic communication or the internet…”

If enacted, the amended draft regulations could result in a significant overhaul of the VAT treatment electronic services.

In 2014 Section 89 of the Value Added Tax Act 1991 was amended.  From 1^st June 2014 on-wards the definition of “enterprise” was to include in the supply of electronic services provided by foreign suppliers to recipients within South Africa. As a result, non-resident suppliers of these services were required to register for VAT where their supplies exceeded the threshold amount of R50 000 in a twelve month period.

The amendments proposed in this Budget, which should take effect from 1^st October 2018, include the following:

• Repealing the current Regulation – This would allow for the deletion of the specific types of services currently outlined as “electronic services” and

• Revising the definition of “electronic services” to effectively include any type of service supplied electronically with the exception of telecommunication services and educational services provided by a person who is regulated by an educational authority in a foreign jurisdiction.

This new definition will bring into the South African VAT regime; foreign suppliers whose services were previously outside its scope, including online advertising, broadcasting, cloud computing, access to databases and information systems, etc.

The VAT Act does not, however, distinguish between Business to Business (B2B) supplies and supplies made directly to South African consumers (B2C). This will have a significant impact on the tax compliance burden for foreign suppliers who supply services electronically into South Africa as well as for the South African Revenue Service.

Amendments have been proposed for intermediaries and platforms to be allowed to register as vendors.  This will enable them to account for the VAT arising on sales made through such platforms providing the platform or intermediary facilitates the supply and assumes responsibility for the issuing of invoices and collection of the associated payments.

The National Treasury has allowed until 22^nd March to provide comments.  Following which, if the proposed amendments are enacted they will become effective from 1^st October 2018.

For further information, please click: https://www.sars.gov.za/businesses-and-employers/my-business-and-tax/newsletters/vat-connect-issue-8-march-2018/#:~:text=In%20the%20Minister%20of%20Finance’s,VAT%20rate%20to%20charge%20etc.

For all your cross border, expatriate and International tax queries, please contact us, to make an appointment with a qualified Chartered Tax Advisor, at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Spanish Tax Advice. Personal and Income Tax. Spanish Tax Compliance. International and Cross Border Tax Services for residents, non-residents, employees, individuals, etc.

The Spanish system has two types of Personal Income Tax: (i) PIT for Spanish resident individuals and (ii) NRIT for individuals who are not resident in Spain.  Spanish resident individuals are generally liable to PIT on their worldwide income wherever it arises  Non-resident individuals are chargeable to NRIT on their Spanish source income only.

RESIDENCE

An individual is liable to Spanish tax based on his or her residence.

An individual is deemed to be Spanish resident if he or she spends more than 183 days in the tax year (i.e. the calendar year) in Spain or if the individual’s main centre of business or professional activities or economic interests is located in Spain.

It is important to bear in mind that temporary absences from Spain are ignored when calculating the number of days for the purposes of establishing residency except where tax residence in another jurisdiction can be proven.

Where the individual does not satisfy the above 183 day rule, he or she will not be considered Spanish tax resident for the calendar year in question and as a result, Spanish source income including capital gains will be liable to NRIT.

In situations where an individual may be deemed to be tax resident in two jurisdictions in the same tax year, it is essential that the individual consult the relevant Double Taxation Agreement to establish what relief or exemption from Spanish Tax may be available.

Generally speaking, the credit for Spanish tax withheld on foreign source income and capital gains tax will be the lower of:

a)      Actual foreign tax withheld on the foreign source income which is equivalent to the Spanish PIT or NRIT

b)      Average effective PIT rate applied to the foreign source income taxed in the other jurisdiction.

 COMPLIANCE

Individuals must file a Tax Return and pay the relevant taxes within six months of the end of the calendar year i.e. 30^th June following the year end, being 31^st December.

Married couples may elect to file their tax returns either jointly or separately.

There are strict filing deadlines for non-resident individuals.  Please be aware that there are no deadline extensions available.

There are a number of penalties to consider including:

a)      Penalties for the underpayment of taxes range from 50% to 150% of the unpaid tax liability.

b)      Penalties for the late payment of taxes range from 5% to 20% where such payments are made on a voluntary basis and not as part of an audit or investigation.

c)      Statutory Interest on late payments will also apply.

WORK PERMITS / VISAS

Individuals entering Spain from outside the E.U., as either employees or self employed individuals, must obtain a work and residence permit prior to commencing their self employed or employment activity in Spain.

The Work and Residence permits are issued for a twelve month period.

It is possible to renew this permit two months in advance of its expiry date and always advisable to do so before the permit has expired.

For individuals entering Spain from E.U. member states, there is no requirement to possess a Work and Residence Permit.

For E.U., EEA or Swiss individuals who wish to remain in Spain beyond a three month period, they are required to register with the Spanish Authorities and obtain the Central Registry for Foreigners Certificate.

TAXES

For general taxable income received by Spanish resident individuals, progressive tax rates ranging from 19% to 48% are applied. These rates depend on the Autonomous Community in which the individual is deemed to be tax resident.  As a result, tax liabilities can vary from one autonomous region to another.

Dividends, Interest, Capital Gains and Savings Interest are taxed at the following rates:

• 19% for the first € 6,000 of taxable income.
• 21% for the following €6,000 up to €50,000 of taxable income.
• 23% for income exceeding €50,000.

Non resident individuals are taxed at a flat rate of 24% on Spanish source income.  This rate is reduced to 19% for individuals who are tax resident in an EU member state or an EEA country with which there is an effective exchange of tax information treaty in place.

Income Tax is levied on the gross Spanish source income but there are no deductions or tax credits available for offset with the exception of certain expenses for E.U. tax resident individuals.

Investment income (i.e. Interest and dividends) arising for non resident individuals are liable to 19% tax although this figure may be reduced depending on the Double Taxation Treaties in place.  It is important to bear in mind that Interest for EU residents in tax exempt.

From 2016 onwards Capital gains will be taxed at 19% if arising from the transfer of assets.

Royalty income is liable to tax at 24%

Pensions are taxed at progressive rates ranging from 8% to 40%.

SOCIAL SECURITY

As a general rule, all employees working in Spain must be registered with the Spanish social security administration. The employer is obliged to make employer and employee contributions depending on the category of each employee and social security contributions are paid on salaries/wages.

The general contribution rate for employees is 6.35%.

The general contribution rate for employers is 29.9% in addition to a variable rate for general risk.

These rates depend on the activities engaged in by the companies as well as the employee’s employment and educational category.

Inbound assignees may continue to make social security contributions in their home countries in line with International Social Security Agreements and E.U. regulations and as a result claim an exemption from paying social security contributions in Spain.

To qualify for the exemption E.U. nationals must obtain the necessary official certification from the relevant Social Security Authorities in their country of origin.

There are three situations in which an exemption from Social Security in Spain may be claimed:

1. In situations where a social security agreement between Spain and the individual’s country of origin exists which provides for such an exemption.

2. Where the individual continues to be employed by an employer resident in the country of origin and as a result he/she continues to contribute to the social security system of his/her home country.

3. Where the individual remains in Spain for between one and five years depending on the conditions of the social security agreement in place between Spain and that individual’s country of origin.

For further information, please click: https://sede.agenciatributaria.gob.es/Sede/en_gb/irpf.html

If you have Spanish Rental Properties or you wish to employ Spanish resident individuals to work remotely, please contact us for a range of cross border personal and business tax services at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Spanish Taxes. International and EU Taxes. VAT, Corporate Taxes, Capital Gains Tax

There are a number of alternatives open to individuals wishing to invest in Spain.  These include setting up a limited company or forming a branch / permanent establishment.  Due to the number of Irish clients with trading companies in Spain, we have prepared a general summary of the taxes arising. This is not a full and comprehensive guide to Spanish taxes.  It does not provide detail on the local operation of taxes.  As a result, we would always advise anyone with Spanish interests to seek the advice and expertise of a local tax professional.

RESIDENCE

Corporate tax is levied on the income of companies and other separate legal entities.  Spanish resident entities are liable to tax on their worldwide income, not just on profits from activities carried on in Spain.

What is a Spanish resident entity?

1. A company which is incorporated in Spain shall be regarded for the purposes of Spanish Corporate Tax as being resident in Spain under Spanish law.

2.  The location of central management and control in Spain may bring the entity into the Spanish Corporate Tax regime.  For example, if the legal headquarters/registered offices of the company are located in Spain, or if it is effectively managed from Spain, then the corporate entity is deemed to be Spanish resident.

3.  In the event of the legal entity being resident in a country where no taxation is levied on its profits or gains (i.e. a tax haven) then that entity is deemed to be Spanish tax resident if the following arise:

a)      The majority of the entity’s main assets are located in Spain.

b)      The entity’s principal business activity is carried out in Spain.

c)      The strategic control is exercised in Spain

It is important to keep in mind that the above point (i.e. number 3) will not apply if the entity exercises its management and control in another country.  This is  provided it does so for bona fide commercial reasons and not for the purposes of managing securities or other assets.

NON-RESIDENCE

Non-resident companies and entities are only liable to Corporate Tax on their Spanish income arising from business operations carried out by a Permanent Establishment within the jurisdiction.  Please consult Article 5 of the Ireland/Spain Double Taxation Agreement for a definition of Permanent Establishment.

Please be aware that a “Fiscal Representative” must be appointed by a non-resident individual or company, to correctly handle all tax affairs, when carrying out commercial activities in Spain.

TAX RATES

Corporate Tax

25% is the general tax rate for residents as well as non-residents carrying out commercial activities in Spain through a “Permanent Establishment.” Other tax rates may apply, however, depending on the type of company and the type of business carried out.

Where foreign companies have permanent establishments in Spain, Non-Resident Income Tax of 25% is chargeable on the income arising to the Permanent Establishment.

A reduced rate of 15% applies to newly incorporated entities set up on or after 1^st January 2015.  This preferential rate applies to the first two years of operation, providing a taxable profit arose in the first tax period.

This start up rate of 15% does not apply in the following situations:

1. Where the trade/business was carried on previously by a related entity.

2.  if the newly created company belongs to a Group of Companies.

3.  Where the company is considered, by law, to be an equity company.

For new companies set up prior to 1^st January 2015 they will be taxed at 15% on their tax base up to €300,000 with 20% tax being levied on any excess amounts.  This will apply for the first two tax periods.

Without a Permanent Establishment

When dealing with non-residents operating in Spain without a permanent establishment, but who are resident in another EU or EEA state with which there is an Information Exchange Agreement in place, a distinction should be made between an individual and a corporate entity.

The tax rate applicable in the above situation is 19% and the tax deductible expenses are calculated in line with Personal Income Tax and Corporate Income Tax legislation.

In all other situations, the general rule is that non-residents operating in Spain without a permanent establishment are taxable at a rate of 24%.

Capital Duty

A 1% Capital Duty is payable by the shareholders on the dissolution of a company or on a reduction in its share capital.

Dividends, Interest and Royalties

 Dividends paid to non-residents are liable to a 19% Withholding Tax unless a lower rate applies under a relevant Double Taxation Agreement.

It is also possible for an exemption to apply under the EU Parent Subsidiary Directive.  Distributions paid to E.U. parent companies by Spanish subsidiaries are exempt from withholding tax provided the parent company held, either directly or indirectly, at least a 5% holding in the subsidiary company for a continuous period of twelve months in addition to satisfying other conditions.

Anti-Avoidance legislation exists where the ultimate shareholder in not E.U. resident.

Following an amendment in the Spanish Personal Income Tax Legislation, a share premium distribution paid to a non-resident shareholder may now be treated as a dividend distribution liable to withholding tax under the general rules.

Interest paid to a non-resident including a non-resident individual is liable to 19% withholding tax unless a lower rate applies under the relevant Double Taxation Treaty.

Interest income is exempt from tax if the recipient is a resident of an E.U. member state or an E.U. Permanent Establishment of an E.U. resident company which is not deemed to be a tax haven.

Royalties paid to non-residents including a non-resident individual are liable to withholding tax of 24% or 19% if the recipient is resident in an EU or EEA member state where an Information Exchange Agreement exists.

This rate can be reduced by the provisions of a relevant Tax Treaty.

Royalties paid to associated EU resident companies or permanent establishments are exempt from tax in Spain providing certain conditions are satisfied.

Capital Gains

Under Spanish law capital gains are treated as ordinary business income taxable at the 25% corporate tax rate.

Capital gains on disposals by non-residents without a permanent establishment in Spain are taxed at a reduced rate of 19%.

Where non-residents without a permanent establishment dispose of real estate situated in Spain, a tax of 3% will be withheld from the sales price by the purchaser and paid over to the Spanish Tax Authorities to be offset against the vendor’s tax liability.

Capital Gains from the transfer of shareholdings/ownership interests in Spanish companies and foreign subsidiaries by corporate entities are exempt from tax if the conditions of Participation Exemption are satisfied.

For an E.U. corporate shareholder, ownership of at least 5% must be held directly or indirectly or the shareholding must be valued at over €20 million and it must be held for at least a twelve month period.

In situations where the company is non-resident, a foreign tax which is similar to Spanish Corporate Income Tax of 10% will apply providing the corporate entity is resident in a country with which Spain has concluded a Double Taxation Agreement.

VAT

Spanish VAT or IVA is charged on the supplies of goods and services within the Spanish VAT territory as well as on imports and intra-EU acquisitions of goods and services.

IVA is charged at 21% on the majority of goods and services in Spain.

There is a reduced rate of 10% which applies to certain goods and services such as the purchase of a newly built property, passenger travel, health products and equipment, toll roads, refuse collection and treatment, entrance to cultural buildings and events, some foodstuffs, water supplies, renovation and repair of private dwellings, agricultural supplies, hotel accommodation, restaurant services, etc.

There is a super reduced rate of 4% which applies to the basic necessities other than those classified under the 10% rate and these include human medicine, basic foodstuffs (i.e. bread, milk, cheese, eggs, fruit, vegetables, cereals, potatoes, etc.), books, newspapers and magazines except the electronic equivalents.

Sales Tax is applied in Ceuta and Melilla instead of VAT.

The Canary Island Indirect Tax or IGIC applies in the Canary Island instead of VAT.

The ordinary rate of IGIC is 7% but there are a range of other rates: 0%, 3%, 9½%, 13½% and 20%.

CHANGES TO VAT RULES

On 1^st July 2017 a new “Immediate Supply of Information” system took effect in Spain.

This new VAT management system now requires taxpayers to maintain their VAT books and records through the Spanish Tax Authorities website on a near real-time basis.

This new system is mandatory for all taxpayers who file their VAT Returns on a monthly basis including:

• Companies included in the VAT Grouping Special Regime.

• Large organisations whose annual turnover exceeds €6 million.

• Taxpayers registered on the VAT Monthly Refund  Registry (REDEME)

This new system, however, also enables Taxpayers to elect to use the S.I.I.  If they voluntarily choose to use this system then they must declare their intention on Form 036.

For further information, please click: https://sede.agenciatributaria.gob.es/Sede/en_gb/estadisticas/estadisticas-impuesto/declaracion-pais-pais-multinacionales-matriz-espanola/informe-pais-pais-2017.html

To speak with a Chartered Tax Advisor, specialising in Spanish Taxes, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut In American History

Top Line:

The U.S. tax code is overcomplicated and fails to create enough jobs, or provide relief to middle class families.

–          Since 2001, the U.S. tax code has faced nearly 6,000 changes, more than one per day.

–          Taxpayers spend nearly 7 billion hours and over $250 billion annually on compliance costs.

–          The U.S. has the highest statutory tax rate in the developed world, discouraging business investment and job creation.

President Trump is proposing the largest tax cut for individuals and businesses in U.S. history.

–          It will simplify the tax code, incentivize investment and growth and create jobs.

–          It will provide historic tax relief for middle income families and small business owners.

The Need For Comprehensive Tax Reform

An overly complex tax code is confusing and burdensome on American taxpayers.

–          The last major effort to successfully reform the U.S. tax code was over 30 years ago under President Reagan.

–          Today, according to the IRS’ National Taxpayer Advocate, the federal tax code is nearly four million words long.

–          Congress has made more than 5,900 changes to the federal tax code since 2001 alone, averaging more than one change a day.

–          The National Taxpayers Union estimates that Americans spend 6.989 billion hours at a cost of more than $262 billion on compliance and record keeping costs.

–          Instead of a single tax form, the IRS now 199 individual income tax forms and 235 business tax return forms.

–          Approximately 90% of taxpayers need help doing their taxes.

Today, with a corporate tax rate of 35%, U.S. businesses face the highest statutory tax rate in the developed world, and fourth highest effective tax rate, which discourages job creation or investment.

–          The U.S. is out of step with its competitors, having the highest corporate income tax rate among the 35 OECD nations and being the only nation that has increased its rate since 1988.

–          A lower business tax rate will discourage corporate inversions and companies from moving jobs overseas.

–          The high corporate tax rate keeps trillions of business assets overseas rather than being reinvested back home.

–          Even President Obama proposed lowering the business tax rate to 28 per cent to help spur economic activity.

Tax Reform for Economic Growth and American Jobs: The Biggest Individual And Business Tax Cut In American History

Goals For Tax Reform

–          Grow the economy and create millions of jobs

–          Simplify our burdensome tax code

–          Provide tax relief to American families-especially middle-income families

–          Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

–          Tax relief for American families, especially middle-income families:

–        Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%

–        Doubling the standard deduction

–        Providing tax relief for families with child and dependent care expenses

Simplification:

–          Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers

–          Protect the home ownership and charitable gift tax deductions

–          Repeal the Alternative Minimum Tax

–          Repeal the death tax

Repeal the 3.8% Obama care tax that hits small businesses and investment income

. Business Reform

–          15% business tax rate

–          Territorial tax system to level the playing field for American companies

–          One-time tax on trillions of dollars held overseas

–          Eliminate tax breaks for special interests

Process

–          Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input.

–          Working with the House and Senate, the Administration will develop the details of a tax plan that provides massive tax relief, creates jobs, and makes America more competitive – and can pass both chambers.

Information courtesy of WHfactsheet04262017.pdf

For further information, please click: https://trumpwhitehouse.archives.gov/articles/president-trump-proposed-massive-tax-cut-heres-need-know/

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.