How can the new Spanish tax Exit Tax on shares influence the new Andorran fiscal residents coming from Spain?
First of all, we must clarify that Law 26/2014 introduced substantial modifications to the Spanish income tax (IRPF), which includes the Exit tax. This, taxes the latent gains of certain shares owned by the taxpayer that migrates.
Specifically article 95 bis of the IRPF Law tells us that the change of residence of a natural person from Spain abroad may, if certain conditions occur, levy on some property gains. The article 95 bis is at list, taxing the variation of the value of certain goods and not the obtaining of rent. So, what really has been done by the legislator is to regulate this taxation within the personal income tax, when it implies a brand-new tax rate as it is of a different nature than personal income tax.
Who is a contributor?
As it has been said, the contributor who is a taxpayer of the Spanish income tax (IRPF) is contributing to the new tax, and as a consequence of migrating and changing his residence, he loses the IRPF contributor condition. However, this contributor must have been a taxpayer for ten of the last fifteen tax periods prior to the last one that must be declared before changing residence. This requirement is due to the fact that article 95 bis is based on a pure conceptual fiction by not establishing a correlation between the stay in the territory of the shareholder and the gain generated latently. Therefore, at least some time of stay in the state (Spain in this case) is needed to give some sense the new tax. Otherwise, the tax must comply with qualitative and quantitative circumstances: In order to be a contributor of this tax, you must hold, on the date of accrual of the last tax period, shares or units that represent a percentage of participation in an entity, superior than 25%. In this case, the value of these shares must exceed € 1,000,000. You will also be contributor if the total value of the shares exceeds € 4,000,000 without participation percentage requirements.
To calculate the tax base, the latent gain must be measured as the positive difference between the market value of the shares and their acquisition value. The market value is determined in accordance with the regulations set forth in Directive 2004/39 / EC.
It is also important to indicate that if the taxpayer acquires the Spanish residence again and consequently the condition of taxpayer, and he hasn’t transmitted the ownership of the shares or participations, he could request the rectification of the self-assessment that he presented. That way he could get the refund of the amounts he paid as tax when he emigrated.
Analyzing the repercussions of this tax, we must first say that we are in front of a fictitious figure that does not fit into the dogma of the personal income tax (IRPF). In fact, it is clear that many of the countries that implemented it, such as France, Canada, Netherlands, Denmark and others, justified its incorporation as a way of avoiding tax evasion. However, if a potential resident in Andorra was a contributor of this tax, we would consider that he would be unfairly paying a disproportionate amount because of the Spanish tax legislation. Although, it is true that the exempt minimum amounts are very high but this does not imply that in this case a tax evasion presumption is not established on the taxpayer.
The Court of Justice of the European Union stated that the transfer of domicile of a natural person outside the territory of a Member State cannot imply a presumption of tax evasion. Thus, the court itself acknowledged that the principle of freedom of establishment is opposed to a Member State imposing a tax regime on capital gains to prevent a tax evasion risk in the case of transferring the tax domicile of a taxpayer, out of this state.
In this way we find that the exit tax levies the assets of the emigrant and not their rent, which makes the figure not only forced in the Personal Income Tax (IRPF), but unnecessary in the majority of cases. At the same time, we understand that it is a measure that restricts the freedom of movement of individuals. Spanish contributors as income taxpayers who are also taxpayers to be included in their definition and characteristics will be harmed by a legal fiction in the form of a tax devolved within the law of another tax with the one it does not have a relation.