Spain – Modifications to Impatriate Regime and Exit Tax

Spain – Modifications to Impatriate Regime and Exit Tax

Changes were enacted on July 11, 2015, in Spain by means of a Royal Decree that developed the rules concerning the so-called exit tax with respect to the unrealized capital gains on shares when a taxpayer ceases to be resident in Spain. In addition, the rules were modified affecting the calculation of the tax due and the documentation requirements in respect of the Special Tax Regime for impatriates. This newsletter also reports on the latest modifications to the Non Residents Income Tax Regulation.

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As we reported in GMS Flash Alert 2015-094 (July 31, 2015), changes were enacted on July 11, 2015, in Spain by means of a Royal Decree that developed the rules concerning the so-called exit tax with respect to the unrealized capital gains on shares when a taxpayer ceases to be resident in Spain.  In addition, the rules were modified affecting the calculation of the tax due and the documentation requirements in respect of the Special Tax Regime for impatriates.

WHY THIS MATTERS

These changes clarify certain questions and challenges that arose with respect to tax compliance under the rules governing the taxation on capital gains when a change of residence occurs (the “exit tax”) and the Special Tax Regime for Impatriates.  These changes should streamline administrative burdens, foster better compliance, and potentially lower tax burdens.

Employers of international assignees should take note of the important amendments that were introduced to the rules for the calculation of the tax due for individuals taxed under the Special Tax Regime for Impatriates, including a new tax relief to avoid double taxation.  This could advantageously impact their international assignment costs. 

On July 11, 2015, measures in Spain’s Royal Decree 633/20151 were introduced modifying the Personal Income Tax Regulation (PITR) and Non Residents Income Tax Regulation (NRITR).  The amendments follow on the recent changes made to the Personal Income Tax Law (PITL) and Non Residents Income Tax Law (NRITL) with effect from January 2015, which we previously had reported on in Flash International Executive Alert 2014-120, December 18, 2014.

In this newsletter, we discuss the changes to:

  • the capital gains tax rules when ceasing to be Spanish tax resident;
  • the special tax regime for impatriates; and 
  • the nonresident personal income tax regime.

Capital Gains and Losses

Taxation on Capital Gains due to Change of Residence (“Exit Tax”)

The recent modifications to the PITL introduced new taxation on unrealized gains on shares (including collective investment institutions).  As such, when the taxpayer ceases to have resident tax status, taxation on capital gains derived from shares might operate.  This ‘new’ exit tax will only be applied in cases of shares whose value exceed EUR 4,000,000, or EUR 1,000,000, if the taxpayer’s holdings, as a percentage share, exceed 25 percent.  (For prior coverage of changes to this regime, see Flash International Executive Alert 2014-120, December 18, 2014.)      

This income is only subject to taxation when the taxpayer has been considered resident in Spain for tax purposes for at least 10 years during the prior 15 fiscal years.

The PITR establishes the deadline to report those unrealized gains, the requirements to apply for a deferral of the tax due, or for an extension in the cases of a temporary transfer to certain other countries, as well as the requirements regarding the communications and deadline for purposes of reporting the gain (where a transfer to another European Union (EU) country has occurred).

Special Tax Regime for Impatriates

The PITR establishes special rules for the calculation of the tax due and defines the documents that have to be filed to request the Special Tax Regime for impatriates.   (For prior coverage of changes to this regime, see Flash International Executive Alert 2014-120, December 18, 2014.)

  • The PITR clarifies that income related to an activity performed prior to the assignment to Spain by the taxpayer who has been granted the Special Tax Regime, will not be deemed as obtained in Spain.  Moreover, income obtained once the assignment in Spain is over, provided that the taxpayer maintains Spanish tax resident status for said year, and the relevant notification is filed within a month with the tax authorities, that income will not be deemed as obtained in Spain.
  • A tax relief to avoid double taxation has been included in the Special Tax Regime.  It is limited to 30 percent of the tax payable on the total employment income received in the fiscal year.
  • If the taxpayer breaches any of the requirements, he must communicate to his employer the inapplicability of the Special Tax Regime and the employer must consequently apply appropriate withholding taxes according to the PIT Law general rates as at that time.
  • The PITR establishes the supporting documentation that must be filed for the purposes of applying for the Special Tax Regime in each case, depending on whether the transfer to Spain is a consequence of an international assignment, of a new labor relationship with a Spanish employer, or of being appointed as Director of a company.
  • The taxpayer must communicate to the Spanish tax authorities the inapplicability of the Special Tax Regime as soon as his assignment in Spain is over – that is, within a month of the termination of the assignment.

Nonresident Personal Income Tax Modifications

A brief summary of the latest modifications with regards to the NRITR is provided below:

  • As a new offering, the Spanish tax authorities will issue, upon the taxpayer’s request, a draft assessment of a nonresident’s tax returns on his deemed real estate income.
  • The new NRITR further develops the Special Regime where individuals resident in another EU country, could opt to be taxed as “ordinary tax residents” under the Personal Income Tax previsions.
  • The NRITR also defines the requirements for a taxpayer resident in an EU country to apply for the refund of his taxes resulting from the application of the exemption for the transfer and reinvestment in respect of his habitual residence. 

FOOTNOTE

1  Please see, Real Decreto 633/2015, de 10 de julio, por el que se modifican el Reglamento del Impuesto sobre la Renta de las Personas Físicas, aprobado por el Real Decreto 439/2007, de 30 de marzo, y el Reglamento del Impuesto sobre la Renta de no Residentes, aprobado por el Real Decreto 1776/2004, de 30 de julio at: http://www.boe.es/boe/dias/2015/07/11/pdfs/BOE-A-2015-7770.pdf.

CONTACTS

For further information or assistance, please contact your local GMS or People Services practice professional or one of the following professionals with the KPMG International member firm in Spain

 

Gonzalo Alvarez-Yuste Alonso De Peralta

Tel. +34 91 451 32 98

galvarezyuste@kpmg.es

 

Igor Diego Angulo

Tel. +34 91 456 34 00

idiego@kpmg.es

 

Maria Ines Maestre De Robles

Tel. +34 91 456 34 00

mariainesmaestre@kpmg.es

The information contained in this newsletter was submitted by the KPMG International member firm in Spain.

© 2016 KPMG Abogados, S.L., a Spain legal liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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