As a follow up to our article in last months WEB Express and in the light of the additional proposals made by the Tax Authorities, which clearly will be of concern to investors, we set out below the details of these latest modifications.
Should these proposals find their way onto the statute book, they will take effect as from the 1st January 2007.
The tax office does not want to leave any stone unturned in its quest to eradicate all investments channeled through tax haven countries.
The main thrust of the proposed legislation is aimed at forcing such companies to demonstrate beyond reasonable doubt that their underlying activities are truly carried out in their respective offshore centre, and that these are indeed normal business activities.
The tax office will be able to initiate tax investigations of these companies based on the simple presumption that they consider the true or main activities to be carried out in Spain. It will be up to the companies concerned to demonstrate otherwise. Failure to do so will result in the companies in question, having to present accounts in Spain, reflecting all their transactions, wherever they are. These proposals will affect holding companies set up to hold shares in Spanish companies.
Many thousands of foreign investors have channeled their property investments in Spain over the last twenty years, directly or indirectly through offshore companies. The time may have come for these structures to be reviewed in the light of the new proposals.
Spanish Inheritance Tax
Various rumors abound with regards to the possible abolishment of inheritance tax in Spain. However, this is what they are - RUMORS. The tax allowances for direct relatives may be increased but this will still leave very substantial liabilities for the inheritors. Let me remind you again of some of the major reasons why serious consideration and planning should be made to avoid your loved ones being landed with substantial liabilities on your inevitable death.