Law 11/2021 of 9 July on measures to prevent and combat tax fraud, transposing Directive (EU) 2016/1164, modifying various tax rules and gambling regulation

I. GENERAL PROVISIONS
HEAD OF STATE
11473 Law 11/2021, of 9 July, on measures to prevent and combat tax fraud, transposing Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, amending various tax rules and in matters of gambling regulation.

FELIPE VI
KING OF SPAIN

To all who see and understand this.
Know: That the General Courts have approved and I come to sanction the following law:

PREAMBLE
I

This Law contains modifications in various norms, primarily in tax matters, with a dual purpose. On the one hand, to proceed with the incorporation of European Union Law into the internal legal order in the field of tax avoidance practices. On the other hand, to introduce changes in the regulation aimed at establishing parameters of tax justice and facilitating actions tending to prevent and combat fraud by strengthening tax control.

In a context where the globalization of the economy, new business models, and the emergence of disruptive technological advances are posing significant challenges, the prevention and combat of tax fraud require an integral strategy that, in addition to an appropriate legal framework, includes a Tax Administration equipped with the necessary means to optimize its results. This will require that the legal modifications contained herein be accompanied by certain organizational and operational measures that, by adapting the State Tax Administration, that is, the Tax Agency, the General Directorate of Taxes, and the Economic-Administrative Courts, to the economic context, place it at the level of the most advanced countries.

In particular, efforts must be concentrated on the control of taxpayers with large assets, as well as their corporate and family environments, in order to favor the correct fulfillment of their tax obligations through the creation of a central coordination unit for such control actions.

II

This Law consists of nineteen articles, six additional provisions, two transitional provisions, and seven final provisions.

In accordance with what is provided in Law 39/2015, of 1 October, on the Common Administrative Procedure of Public Administrations, the elaboration of this Law has been carried out in accordance with the principles of necessity, effectiveness, proportionality, legal certainty, transparency, and efficiency.

Thus, the principle of necessity and effectiveness is fulfilled, as the approval of a Law is necessary, given that the changes introduced in various norms of the Official State Bulletin, having legal rank, require their incorporation through a norm of equal rank.

The principle of proportionality is also fulfilled, as the exclusive mode of addressing the strictly required objectives mentioned above has been observed.

Regarding the principle of legal certainty, the coherence of the text with the rest of the national legal order, as well as with that of the European Union, has been guaranteed. In fact, a significant part of it responds to the need to transpose certain Community norms into Spanish Law.

The principle of transparency, without prejudice to its official publication in the Official State Bulletin, has been guaranteed through the publication of the Draft Bill, as well as its Regulatory Impact Analysis Report, on the electronic headquarters of the Ministry of Finance, so that these texts could be known in the public hearing and information procedure by all citizens.

Finally, in relation to the principle of efficiency, it has been sought that the norm generates the least administrative burdens for citizens, as well as the lowest indirect costs, fostering the rational use of public resources; indeed, some of the measures incorporated even involve a reduction of such burdens. In this sense, the information and documentation requirements imposed on taxpayers are strictly indispensable to guarantee the control of their activity by the Tax Administration.

III

Council Directive (EU) 2016/1164 of 12 July, laying down rules against tax avoidance practices that directly affect the functioning of the internal market, known as the Anti-Tax Avoidance Directive or, by its English acronym, ATAD, falls within the multilateral measures that have been taken in the years following the recent economic crisis in the field of Corporate Income Tax.

In 2013, within the Organization for Economic Co-operation and Development (OECD), work began with the aim of approving an Action Plan to avoid base erosion and profit shifting (BEPS Plan), which resulted in the approval of fifteen reports referring to an equal number of "actions" designed to address these problems and formulate concrete recommendations for member countries of the organization.

From the outset, the European Council positively valued this initiative, and the European Commission in its Communication of 17 June 2015 established an Action Plan for a fair and effective corporate taxation system in the European Union.

The final reports on the fifteen action points of the OECD were made public on 5 October 2015 and were also welcomed with satisfaction by the European Council, which underlined the need to find common solutions at the European Union level coordinated with the BEPS Plan.

In this context, the aforementioned Directive 2016/1164 was approved, which incorporates several of the matters dealt with in the OECD reports.

As stated in the recitals of the Directive, it is necessary to guarantee the payment of tax where profits and value are generated, strengthen the average level of protection against abusive tax planning, and establish rules against base erosion in the internal market and profit shifting outside it.

This Directive addresses different areas. Specifically, the establishment of a general anti-abuse rule, a new regime of international tax transparency, the treatment of so-called hybrid mismatches, the limitation of interest deductibility, and the regulation of so-called exit taxation.

However, not all these aspects must be subject to immediate transposition, as different deadlines are regulated for the same; moreover, in the case of the general anti-abuse rule, it will not be necessary to modify our legislation to the extent that it is already included in Law 58/2003, of 17 December, General Tax Law, through the figures of conflict in the application of tax rules and simulation.

On the other hand, regarding the limitation on interest deductibility, it should be noted that the Directive itself provides for the possibility of extending the transposition deadline until 2024 in the event that the national legislation already contains a regime limiting this matter that is homologable or comparable to that regulated in Article 4 thereof.

Well, the Kingdom of Spain, with regard to the common territory and also to the foral regime of Navarre, chose to communicate to the European Commission its intention to exercise that option, understanding that both Law 27/2014, of 27 November, on Corporate Income Tax, and the Navarre foral norm met that requirement of effect homologable to that of the legislation contained in the Directive, having already manifested the Commission its approval of that option.

On the other hand, the hybrid mismatches regime comprises a double transposition deadline, depending on the specific matter, 31 December 2019 and 31 December 2021, which, combined with its complexity, suggests addressing it at a later stage.

Taking into account the above, the aspects finally incorporated into this Law are those concerning the new regime of international tax transparency and exit taxation.

In summary, international tax transparency implies the attribution to a company resident in Spanish territory of certain income obtained by a predominantly held entity resident abroad when the taxation on that income abroad is notably lower than what would have occurred in Spanish territory, attribution that occurs even if the income has not been effectively distributed.

Spain already regulates this figure both in the Corporate Income Tax regulations and in the Personal Income Tax regulations, but the Directive introduces some novelties that it is necessary to incorporate.

Among these, it is worth highlighting, first, the fact that the attribution of income that occurs within the tax transparency regime affects not only those obtained by entities held by the taxpayer but also those obtained by their permanent establishments abroad.

On the other hand, the Directive contains various types of income susceptible to attribution in this regime that were not included until now in Spanish law, such as those derived from financial leasing operations or insurance, banking, and other financial activities.

Furthermore, it is important to note that what is provided in the Directive is not an obstacle to the existence and application of national provisions "aimed at safeguarding a higher level of protection of national corporate income tax bases." In the case of Spanish law, there are, in fact, elements of the tax transparency regime that represent this higher level of protection. That is, it implies that, potentially, more income than that derived from the strict transposition of the Directive may be subject to attribution, or that the regime may be applicable in a greater number of cases.

In this regard, it has been decided, as a general rule, to maintain in the provision those higher levels of protection. This is the case, for example, of the difference between taxation in foreign territory and what would have resulted in the event that it had been taxed in Spain, which is regulated in the law as a triggering requirement for the obligation of attribution. Or also the inclusion of certain types of income that are not expressly referenced in the Directive as susceptible to attribution and that, however, are in Spanish law, such as income derived from the ownership of real estate or from credit, financial, insurance, or service activities carried out with related persons or entities when they determine fiscally deductible expenses in entities resident in Spanish territory.

As for the so-called exit tax, as stated in the recitals of the Directive, its function is to guarantee that, when a taxpayer transfers their assets or fiscal residence outside the fiscal jurisdiction of the State, that State taxes the economic value of any capital gain created in its territory even if the capital gain in question has not yet been realized at the time of exit.

Our Corporate Income Tax Law already regulates the tax treatment in case of change of residence, but here also it is necessary to make modifications of some importance to transpose the Directive.

Specifically, in the event that the change of residence had occurred to another Member State of the European Union, the deferral of payment of the exit tax was established, at the request of the taxpayer, until the date of transmission to third parties of the affected assets. However, the Directive provides for a right of the taxpayer to fractionate the payment of the exit tax over five years, when the change of residence is made to another Member State or a third country that is a party to the Agreement on the European Economic Area, establishing, likewise, certain complementary rules for the case that such fractionation is requested.

On the other hand, the Non-Resident Income Tax regulations currently regulate the case of the transfer of assets abroad from a permanent establishment located in Spanish territory.

As a consequence of the transposition of the Directive, it is necessary to introduce in said norm, in addition to what was mentioned above regarding fractionation, a new case provided for the generation of an exit tax in the event that there is a transfer, not of an isolated element, but of "the activity" carried out by the permanent establishment.

On the other hand, in the regulations governing the Corporate Income Tax and the Non-Resident Income Tax, it is necessary to introduce the provision of the Directive that when the transfer of assets has been subject to exit taxation in a Member State of the European Union, the value determined by that Member State will be accepted as the fiscal value in Spain, unless it does not reflect market value.

Finally, with regard to Corporate Income Tax and apart from the Directive, additional requirements are established so that variable capital investment companies (SICAVs) can apply the tax rate of 1 percent.

Until now, the number of shareholders required for the application of the 1 percent rate is, as a general rule, 100 shareholders, without requiring each of them a minimum investment. This situation has led to it being common for SICAVs to concentrate very high percentages of their shareholding in one or several persons, while the rest of the shareholding is distributed among shareholders with economically insignificant participations, which distorts the collective character that can be predicated of SICAVs and that justifies the application of the reduced tax rate.

With the purpose of reinforcing said collective character, objective requirements are established that shareholders must meet to be counted for the application of the 1 percent tax rate, in order to guarantee that said shareholders have an economic interest in the company. This economic interest is quantified based on a determined amount of the investment.

This modification is accompanied by a transitional regime for SICAVs that agree to their dissolution and liquidation, which aims to allow their shareholders to transfer their investment to other collective investment institutions that meet the requirements to maintain the 1 percent tax rate in Corporate Income Tax.

At the same time, requirements that producers must meet to execute foreign productions of feature films in order to apply the deduction regulated in said Law are incorporated into Law 27/2014, of 27 November, on Corporate Income Tax. On the one hand, the certificate issued by the Institute of Cinematography and Audiovisual Arts, or by the corresponding body of the Autonomous Community, accrediting the cultural character of the production is required, in order to comply with what is provided in the Commission Communication on State aid to cinematographic works and other productions of the audiovisual sector, of 15 November 2013; and on the other hand, linked to the achievement of one of the objectives pursued with this deduction and indicated in the preamble of Law 27/2014, cited above, namely its contribution to the economic impact on the Spanish tourism sector, the incorporation in the credits of the work of specific filming locations in Spain and the authorization of the use of the title of the work and graphic and audiovisual press material that expressly includes specific filming locations or any other production process carried out in Spain, for the carrying out of activities and elaboration of promotional materials in Spain and abroad for cultural or tourism purposes, which can be carried out by state, autonomous, or local entities with competencies in matters of culture, tourism, and economy.

Finally, a technical improvement is introduced in the regulation of deregistration from the index of entities of Corporate Income Tax, since, strictly speaking, the concept of "failed" cannot be predicated of credits, but of debtor entities.

IV

Modifications are introduced in the consolidated text of the Non-Resident Income Tax, approved by Royal Legislative Decree 5/2004, of 5 March, which aim to favor the freedoms of establishment and circulation, in accordance with European Union Law.

V

In accordance with new international parameters, the term "tax havens" is adapted to "non-cooperative jurisdictions."

Additionally, the determination of countries and territories that have the status of non-cooperative jurisdictions requires an update taking into account reviews and work developed in the international arena, both within the framework of the European Union and the OECD, whose criteria have allowed identifying a series of non-cooperative jurisdictions, as well as requiring a series of commitments in order to leave that category in the international arena, giving rise to lists of countries that are under constant revision.

Thus, with the aim of combating tax fraud more efficiently, it is necessary to expand the concept of tax haven and for this purpose determine the status of non-cooperative jurisdiction, attending to criteria of tax equity and transparency, identifying those countries and territories characterized by facilitating the existence of extraterritorial companies aimed at attracting profits without real economic activity or by the existence of low or null taxation or by their opacity and lack of transparency, by the non-existence with said country of mutual assistance legislation in matters of tax information exchange applicable, by the absence of effective exchange of tax information with Spain or by the results of evaluations on the effectiveness of information exchanges with said countries and territories. Likewise, in order to provide a more precise response to certain types of fraud, it is convenient to identify those preferential fiscal regimes that are harmful established in certain countries or territories that facilitate tax fraud. In this sense, once these criteria are approved, the person holding the Ministry of Finance will adopt the necessary provisions for the publication of the list of countries and territories, as well as harmful fiscal regimes, considered non-cooperative jurisdictions, which must be updated periodically. In this way, non-compliance with the commitments adopted may result in a return to the list of non-cooperative jurisdictions. This dynamic approach guarantees a firm and updated response against the use of said countries and territories for fraudulent purposes.

VI

In the field of Personal Income Tax, various modifications are introduced.

First, Law 35/2006, of 28 November, on Personal Income Tax and partial amendment of the laws on Corporate Income Tax, Non-Resident Income Tax, and Wealth Tax, is modified so that the acquirer of a good through a succession contract or pact subrogates in the value and date of acquisition that said good had in the testator, provided that it is transmitted before the passage of five years from the celebration of the succession pact or the death of the latter if it were earlier. This modification is introduced together with a transitional regime that will only be applicable to transfers of goods carried out after the entry into force of this Law that had been acquired for consideration by reason of death by virtue of succession contracts or pacts with present effects.

In this way, an update of the values and dates of acquisition of the acquired element that would cause lower taxation than if the good had been transmitted directly to another person or entity by the original holder is prevented.

The wording of the reduction for the lease of real estate intended for housing is clarified, so that it can only be applied on the positive net yield calculated by the taxpayer in their declaration-liquidation or self-assessment, without its application proceeding on the positive net yield calculated during the processing of a verification procedure.

At the same time, with the aim of strengthening tax control over taxable events related to virtual currencies, two new information obligations are established regarding the holding and operation with virtual currencies.

Thus, an obligation to supply information on the balances held by holders of virtual currencies is introduced, on those who provide services on behalf of other persons or entities to safeguard private cryptographic keys that enable the holding and use of such currencies, including providers of exchange services for said currencies if they also provide the aforementioned holding service.

Likewise, for these same persons or entities, the obligation to supply information about operations on virtual currencies (acquisition, transmission, exchange, transfer, receipts, and payments) in which they intervene is established. This same obligation is extended to those who carry out initial offerings of new virtual currencies.

On the other hand, with regard to life insurance where the policyholder assumes the investment risk, the requirements required so that the special rule of temporal attribution does not apply to this type of insurance are adapted,