It will be easier to prove Tax Residency: amendment to the Spanish Non-Residents Income Tax Regulation
22 October 2019
Last 19 October the Spanish Official Gazette published the Royal Decree 595/2019, of 18 October, which amends the Spanish-Non-resident Income Tax (hereinafter, NRIT) Regulation, passed by the Royal Decree 1776/2004, on 30 July. This amendment entered into force on 20 October.
Royal Decree 595/2019 amends the NRIT Regulation regarding the tax certification requirements applied to pension funds, Undertakings for the Collective Investment in Transferable Securities (hereinafter, UCITs) and Alternative Investment Fund Managers (hereinafter, AIFMs). The tax certification requirement is imposed in order to benefit from the withholding tax and taxation exemption established in article 14 (c) of the NRIT Law on interest and other income payments made to EU residents obtained from the transfer of own capital to third parties as well as on capital gains derived from movable property, with certain exceptions, provided that such income is obtained by EU residents without acting through a permanent establishment in Spain, or by a permanent establishment of said residents located in another EU Member State.
This amendment aims to simplify the certification process which is not always feasible due to the particular characteristics of the investors, their lack of legal personality or their tax transparency status, in which cases the Spanish domestic withholding tax exemption has traditionally not been applied.
The new rules would ease the tax certification process in order to entitle certain types of entities (described below) to benefit from the Spanish domestic withholding tax and taxation exemption for EU residents even if such entities cannot obtain a tax residency certificate in their country of residence:
|Vehicle||Non-transparent entities||Transparent entities|
New procedure– statement made by the representative declaring the legal requirements are fulfilled. This declaration has a validity period of one year since its issuance.
Exception– institutions for occupational retirement provision (IORPs) regulated on Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016. In this case, a certification issued by the supervisory authorities in country of residence will be required.
|UCITs(Directive 2009/65/EC & Council 13 July 2009)||
New procedure– certificate issued by the supervisory authorities in the country of origin similar to the UCITs attestation provided in Annex II of Commission Regulation (EU) No 584/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council.
The Spanish domestic withholding exemption shall be applicable to the EU resident members.
Vehicle will need to determine tax residency of members in accordance with Annex I and II of Directive 2011/16/EU and the percentage of participation held on 31 December of former year.
AIFMs(Directive 2011/61/EU & Council 8 June 2011)
New procedure– it can be either (i) a statement made by the representative or the Asset Manager (with a validity period of one year since the issuance); or, (ii) a certificate issued by the supervisory authorities of the country where the AIFM is established.