Bill proposes a 35% tax on cross-border tax avoidance

Automatic summary, not yet reviewed

1. The bill would create a new tax, the Tax on the Detraction of Income through Abuse of Law, to tax profits that multinationals shift abroad through cross-border tax engineering.
2. Before the tax can be charged, the transaction must first be declared a conflict in the application of the tax rule, which requires a favorable report from an advisory committee made up of the Tax Agency and the Directorate General for Taxes.
3. The bill would amend the General Tax Law to add a section 4 to Article 15, making that declaration of conflict the taxable event for the new tax.
4. The tax would not apply to those who prove the income was already taxed in Spain (personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings., corporate tax or non-resident income tax) or taxed elsewhere at an effective rate of at least 25%, unless the other jurisdiction is a tax haven or does not exchange information with Spain.
5. The tax base would be the income withheld from the Spanish Treasury, with a 35% rate for companies and entities and the top personal income tax rate for individuals. The Tax Agency would issue the assessment and the taxpayer would pay within the general voluntary payment period.
6. The tax would accrue when the report declaring the conflict is served on the taxpayer, and late-payment interest would run from the day after the filing deadline for the tax return of the tax that originally would have taxed the income.

Who it affects

• Large multinationals, especially in the digital sector, that use tax structures to shift profits abroad.: They could pay a 35% tax on income withheld from the Spanish Treasury.
• Individuals who carry out transactions declared in conflict.: They would pay the top personal income tax rate on the withheld income.
• Companies and entities related to the party carrying out the transaction.: They would be jointly liable for paying the tax.
• Taxpayers who prove effective taxation in Spain or in another jurisdiction at an effective rate of 25% or higher.: They would not be subject to the tax.

Words worth knowing

Conflicto en la aplicación de la norma tributaria (conflict in the application of the tax rule)

An official finding that a transaction was done only to avoid paying taxes, going against the purpose of the law.

Abuso de derecho (abuse of law)

Using legal forms in a fraudulent way, following the letter of the law to get a result it was meant to prevent.

Hecho imponible (taxable event)

The situation that, under the law, triggers the duty to pay a tax.

Devengo (accrual)

The moment the obligation to pay the tax arises.

Treaty shopping

Choosing a country or treaty only to pay less tax, taking advantage of double taxation treaties.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries