Solicitor Valencia

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SIMPLIFICATION OF DOCUMENTATION FOR BINDING BUSINESSES

The Spanish Government has approved Royal Decree number 6/2010 which will come into effect from the 14th of April 2010.

This rule simplifies the documentation required for binding business between companies and its directors, shareholders, family, etc.

The new regime will be valid for the tax years after the 19th of February 2009. Therefore, the new law is applicable to the 2009 tax year (to be taxed in 2010).

According to the new law there is no legal duty for keeping the documents proving market price for companies with returns lower than 8.000.000 € provided that the total binding business of the company with all binding persons/companies is not higher than 100.000 € according to the parameters of the market value.

Nevertheless, there is a duty to keep documents proving the market value of linked business when the business is carried out with binding people/companies with residence in an offshore territory (according to the list of the Spanish Tax Department) except:

A) When their residence is in a State within the European Union and

B) The company proves that such business has valid economical grounds and the people/company linked in the business are people/companies that ordinarily carry out business.

Notwithstanding, although the company may not have a duty to carry out the special protocols there is a duty to enter the business accounts in accordance with the market value. Non fulfilment of this duty will entail a fine which under some circumstances could be very high.

This Governmental decision proves that the Spanish Government is totally beleaguered by the serious economical crisis beating Spain and is clueless as to which measures should be approved to get out or improve the economical framework. The protocols of binding businesses were brought about 2 years ago and have caused unnecessary expenses and worries to thousands of companies and have been an enormous waste of time for companies and advisors.