VAT SCHEME FOR AGRICULTURE & FISHERIES

 

This special VAT arrangement is characterized by the absence of output VAT (except in case of import, EU acquisition or reversal of taxable person). Since there is no output VAT, input VAT cannot be deducted. In order to neutralize the impact of output VAT, there is a flat-rate compensation in every operating sale: 12% for agriculture operations and 10,5% for livestock and fisheries operations. This percentage is applied to sale price of products or services, excluding indirect taxes.

REQUIREMENTS

It is applicable to the owners of agricultural, livestock, forestry or fishing farms that had not opted out this scheme, unless they had ceded the farm or were in an integrated livestock regime.

It is not applicable to activities of transformation, processing of manufacturing of natural products, sale of own products mixed with others acquired from third parties (unless they are mere preservatives), sale of products outside the farm, sports and recreational activities, sea fishing, independent livestock and accessory services that are not included in the scheme.

Trade, cooperative and agricultural processing companies can not use this special arrangement. Self-employed whose turnover in this special scheme has exceeded €250,000 in the previous year and self-employed whose turnover in other VAT arrangements had exceeded €250,000 in the previous year cannot apply it either.

WAIVER TO VAT AGRICULTURAL ARRANGEMENT

Taxpayers may waive to this special arrangement by delivering a form 036 or 037 to the Spanish Tax Office. The waiver has a minimum validity of 3 years. A taxpayer who practices a deduction of input VAT is understood to have resigned tacitly to this special arrangement.

FLAT-RATE COMPENSATION

The refund of the flat-rate compensation (12% or 10,5%, as explained above) must be paid by the recipient of goods or services. However, in case of exports, EU operations and operations provided to recipients who are established outside the territory of application oft he tax, it is made by the Public Treasury.

BEGIN OR END OF THE SPECIAL ARRANGEMENT

When an activity changes from general to special VAT scheme, the owner is obliged to pay the compensation corresponding to future deliveries of natural products already existent on the date of change.

When an activity changes from special to general VAT scheme, the owner will have the right to deduct input VAT corresponding to operating goods affected to the activity on the date of change.

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VAT SCHEME FOR INVESTMENT GOLD

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Investment gold are gold bullion/sheets of milesimal fineness 995 [1] and gold coins of milesimal fineness 900, minted after 1800, that have been legal tender in the country of origin, sold at a price that does not exceed 80% of the market value of the gold contained in them. [2]

EXEMPTION OF TRANSACTIONS, WHEN THE OBJECT THEREOF IS INVESTMENT GOLD

In general terms, deliveries, EU acquisitions and imports of investment gold are exempt from VAT, but the taxable person may waive the exemption in some cases. Mediation services in these operations (on behalf of thirty parties) are also exempt. 

The exemption does not apply to EU acquisitions in which the provider of investment gold renounces the exemption. 

In case two possible exemptions were applicable (a gold investment and a EU acquisition one), investment gold one prevails. 

WAIVER OF EXEMPTION

Providers of investment gold may waive the exemption in the following cases:  

1. When they are regularly dedicated to produce investment gold or to transform non-investment gold in investment gold.
2. In deliveries of gold which has been transformed into investment gold. 
3. When the acquirer is a buisnessman or a professional.

The exemption can also be waived in case of mediation on behalf on thirty parties in exempt operations, provided that the acquirer is a businessman or a professional, and  when the provider had waived the exemption. 

The waiver must be done per operation, performed by the service provider and communicated in writing to the acquirer (prior or simultaneously to the acquisition). The acquirer also has to be informed in writing of his henceforth condition of taxpayer. 

DEDUCTIONS

In general terms, supported VAT is not deductible, since investment gold deliveries are exempt from VAT. 

Exceptionally, the following must be taken into account:

1.  Exempt deliveries of gold investment generate the right to deduct supported VAT quotes when done by businessmen or professionals who have produced or transformed that investment gold. 
2. Deliveries of exempt investment gold by businessmen who are not contemplated in a), generates the right to deduct.
3. Supported VAT corresponding to the internal or EU acquisition of that investment gold, when the supplier had waived the exemption.
4. Supported VAT corresponding to acquisition or import of investment gold, when it did not meet the pertinent requirements at the time of its acquisition or import.
5. Supported VAT corresponding to services of change of form, weight or milesimal fineness.

TAXABLE PERSON

In case of waive to the exemption by the provider, the taxable person of investment gold deliveries, is the recipient businessman or professional. 

FORMAL OBLIGATIONS

Businessmen and professionals who carry out operations of investment gold must keep copies of all invoices corresponding to these operations within 5 years (article 140 sexies of VAT Law)

Businessmen and professionals who carry out gold investment operations and other kind of operations must pertinently separate the operations corresponding to each scheme in their VAT books. 

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[1] Provided that the weight accomplishes addendum 9th of VAT Law.

[2] These requirements are accomplished in all coins related by the EUOD before 1st of December each year.

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PENALTIES FOR CASH PAYMENTS IN AMOUNTS GREATER THAN THE ONES ALLOWED BY LAW

 

 

Since the entry into force of Law 7/2012, of 29^th October, entrepreneurs and professionals acting as such are not allowed to pay in cash transactions with an amount equal or greater than 2,500€ (or its equivalent value in foreign currency).

If the payer is a natural person who is a resident abroad and is NOT acting as an entrepreneur or as a professional, the limit shall be 15,000€.

Cash is understood as paper money, coin, bank checks and any physical or electronic means designed to be used as payment to bearer (article 34.2 of Law 10/2010, of 28^th April).

Entities intervening in the payments are obliged to keep the documentation that certifies that such operations have not been paid cash for, at least, 5 years.

In case of break of these rules, the penalty will consist of 25% of the total amount delivered in cash and will be imposed to both the PAYER and the RECEIVER.

 

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TRANSFER PRICING IN RELATED-PARTY TRANSACTIONS

 

 

Transfer pricing are those established between related parties, according to article 16 of Spanish Corporate Tax Law 43/1995, of December 27 (with the wording of Measures of Prevention of Fiscal Fraud Law 36/2006, of November 29).

The aforementioned article establishes that transactions between related parties MUST be valued at their normal market value. This valuation has to be documented in the form established for that purpose by the Spanish Tax Administration.

Current criteria to determine market value are those determined in OECD Pricing Transfer Guidelines for Multinational Enterprises and Tax Administrations. That is to say:

1.       Comparable uncontrolled price – The C.U.P. method compares the price charged for property and services in a controlled transaction to the price charged for property and services in an uncontrolled transaction. However, this system is extremely complex in the practice:

 

a.       Because of the difficulty of finding reliable information on prices and

b.       Due to the impossibility of comparing prices, since prices are extremely sensitive tot he characteristics of each transaction. In practice, this method requires a different valuation for each transaction. C.U.P. method is quite reliable in case of financial transactions, such as those with commodity sales, for instance. Notwithstanding, it is totally inefficient in case of operations involving the incorporation of an intangible asset (e.g.: a Loewe handbag or a Prada dress).

 

2.       Resale price method – The resale price method begins with the price at which a product that has been purchased from an associated enterprise is resold to an independent enterprise. This price (the resale price) is then reduced by an appropriate gross margin on this price (the „resale price margin“), representing the amount of which the reseller would seek to cover its selling and other operating expenses and, in the light oft he functions performed, maek an appropriate profit. This method reduces the need for comparability of the product, but it requires a greater functional comparability of the company, the contractual conditions and the economic circumstances of the transaction.

 

3.       Cost Plus – As in the case of resale price, cost plus method begins with the costs incurred by the supplier of property or services in a controlled transaction for property transferred or services provided to an associated purchaser. An appropriate cost plus mark up is then added to this cost, to make an appropriate profit in light of the functions performed and the market conditions. The typical example is that of a company that provides archtectural services and calculates their prices by applying a profit margin on the hours of work of their employees. This method may also represent drawbacks, since it does not take into account production efficiency.

 

4.       Profit Split – The transactional profit split method seeks to eliminate the effect on profits of special conditions made or imposed in a controlled transaction by determining the division of profits that independent enterprises would have expected to realise from engaging in the transaction or transactions (that is to say: assets, employees, expenses). To do so:

a.       The overall profit is determined, adding up the profits obtained by each party in the operation and

b.    The abovementioned overall profit is distributed among the parties, according to the proportional contribution to the operation of each of those parties. This system is more consistent with what is usually done by independent companies, who usually split results according to their investment on the transaction.

 

5.       Transactional Net Margin Method – The transactional net margin method examines the net profit relative to an appropriate base that a taxpayer realises from a controlled transaction. Thus, it operates in a similar manner to cost plus and resale methods. Like resale and cost plust methods, transaction net margin one is applied only to one of the parties. This can affect the overall reliability. Besides, there are also difficulties in determining an appropriate corresponding adjustment when applying the transactional net margin.

 

The determination of the operation value must be documented in compliance with the requirements of article 18 of RD 1793/2008. That is to say:

·         Documentation which must be accompanied by the taxpayer:

 

o   Identification of the taxpayer and of the related parties.

o   Description of nature, charateristics and price of the operation

o   Analysis of comparability, carried out by the company

o   Justification of the valuation method employed

o   Cost sharing criteria

o   Other relevant information

 

·         Documentation which must be accompanied by the group:

 

o   Organizational, legal and operational structure of the group

o   Identification of the related parties taking part in the operation

o   Description of nature, price and flows of operation

o   Functions and risks assumed by each related party

o   Ownership of brands and intangibles affected

o   Group policy on transfer pricing

o   Cost sharing agreement

o   Valuation agreements

o   Group Report

 

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