The Congress of Deputies approves the Anti-Fraud Law

This Tuesday, Congress approved the new law to combat tax fraud, after the bill began its passage through Parliament last October. It will now move to the Senate to complete the legislative process. The text that has emerged from the lower house includes several of the proposed amendments, among them one allowing the Spanish Tax Agency (AEAT) to carry out unannounced inspections, an issue that had been called into question by the courts.

The text may still be amended, but the most relevant features of the current wording of the Law are as follows:

Tax amnesties are prohibited

This is because they are considered to discriminate against taxpayers who comply with their tax obligations. Tax amnesties make it possible to regularize undeclared assets on more favorable terms than if they had been taxed in the usual, normal way.

The list of debtors to the tax authorities is expanded

The list is expanded by lowering the debt threshold that triggers a debtor’s inclusion from €1,000,000 to just €600,000. In addition, the legal text provides that the list must include not only principal debtors but also those who are declared jointly and severally liable for the debt as a result of their acts or omissions.

The maximum limit on cash payments is reduced for certain transactions between businesses

One of the best-known changes in the law is that it will lower the cash payment limit for transactions between businesses from €2,500 to €1,000, although the limit remains at €2,500 for payments made by private individuals. The measure, which seeks to put an end to tax fraud in transactions that are difficult to trace, also reduces the cap on cash payments between private individuals with their tax domicile outside Spain from €15,000 to €10,000.

The prohibition on the use and possession of software used to conceal sales is specifically regulated

Specifically, the law prohibits the production, possession, or use of accounting management software systems and applications capable of manipulating and falsifying companies’ accounts in order to conceal part of their turnover from the tax authorities and thereby reduce their tax bill. Each year, the use of these programs causes losses of public revenue that would exceed several billion euros.

The law requires electronic systems used in accounting or business management to meet requirements that guarantee the integrity, preservation, traceability, and unalterability of transaction records.

An obligation is established to review the jurisdictions on the list of tax havens

Another measure included in the legislative text is the review of the jurisdictions on the list of tax havens. The evolution from the concept of a tax haven to that of a non-cooperative jurisdiction in the international forums of the OECD and the Council of the European Union makes it necessary to apply more demanding and internationally coordinated regulations.

An obligation to report cryptocurrencies is established

Given their proliferation and popularity among investors and savers, greater control over cryptocurrencies has become necessary. Accordingly, an obligation is introduced to report the holding of, and transactions in, virtual currencies, whether located in Spain or abroad, where Spanish taxpayers are concerned.

Therefore, information will be required on the balances and holders of these currencies, as well as on all types of transactions carried out with them. It will be mandatory to report the possession of cryptocurrencies abroad on Form 720 (return on assets and rights held abroad).

The law also transposes the European Anti-Tax Avoidance Directive, known as ATAD, which incorporates several of the matters addressed in the OECD reports under the Action Plan on Base Erosion and Profit Shifting (BEPS Action Plan).

Specifically, in this area, the aspects of the directive concerning controlled foreign company rules (Transparencia Fiscal Internacional, TFI) and exit taxation, or the ‘exit tax’, are incorporated into Spanish legislation. This strengthens taxation in Spain of income that had been located in low-tax territories, and ensures that companies relocating to another country do not escape taxation on tax bases that must legally remain taxable in Spain.

A new tax rate is established for SOCIMIs (Spanish REITs) and SICAVs

For real estate investment companies (SOCIMIs), a tax rate of 15 percent is established.

In addition, with regard to open-ended investment companies (sociedades de inversión de capital variable, SICAVs), oversight is reinforced through a minimum investment requirement of €2,500, or €12,500 in the case of a company with sub-funds, for shareholders, of whom there must be at least one hundred.

Strengthening of the judicial safeguards for AEAT inspections at the taxpayer’s home

The Law also clarifies and strengthens the judicial safeguards for inspections by the Tax Agency at a taxpayer’s home. Specifically, it provides that, where such inspections are necessary, the tax authorities must obtain either the consent of the taxpayer (obligado tributario) or judicial authorization. Under the law, the application for judicial authorization to enter a home must be justified and must set out the purpose, necessity, and proportionality of the entry.