This section is linked with the Spanish Company Tax and Mercantile Calendar.
This section is aimed to our Spanish company clients.
All circulars appear one after another as they are issued.
Circular of January 1st 2007.
We hereby inform you of some changes in the tax treatment of companies owners of houses for enjoyment of the shareholders or for rental to third persons.
As you may be aware the Government abrogating the legal treatment of patrimonial companies. From January 1st 2007, patrimonial companies no longer exist and all companies now have the same tax regime.
The first important modification is the tax rate. Before the rate for yearly profits was 40% and the rate for capital gains accrued over one year was 15%. Now there is only one rate of 25% for yearly profits up to 120.000 euros and a 30% rate for the profits exceeding the afore amount.
A second important modification is the cancellation of the system of presumed income of houses. Before, the law presumed that the ownership of houses produced income and this presumption could not be in rebuttal. From January 1st 2007 there is no such presumption.
A third important modification which came into effect from January 1st 2007 is that the economical relationship between the company and the director/s or shareholder/s must be ruled from the basis of market price. If the company does not comply with this rule the Tax Department can fine the company and its director. This market value relationship means for instance that if the shareholder or director uses the house they must pay a market value for the enjoyment of the property. Furthermore, it is necessary that the company keeps the proof of the calculation of the economical value of the relationship. Unfortunately the Government has not yet approved the bylaw developing the Corporation Tax act where we hope we will find details of the documents your company must keep to prove the amount of the market value. Anyhow, we think that an estimation of an independent rental company agency is sufficient to know the market value of the property for rental purposes.
The documents provided by such agencies should be kept in the company to be provided to the Tax Department in the case that they ask for proof of the market value.
The same is applicable to the money introduced into the company by the directors or shareholders by means of a loan. The company within the time of the agreed loan contract will have to pay to the lender market or legal interest.
Lastly, on a recent law following some European directives it has been approved that from the 1st of January 2008 some companies will have to provide to the Company House further to the current accounts (which you sign each year) a cash flow registry of the company and statement of alteration of the owned assets. Anyhow, most of the new regulation on accounting is not applicable to your company.
Upon approval we will obtain the market value of your property for rental purposes, weekly or monthly, whichever you prefer.
For any queries please do not hesitate to contact us.