TEAC resolves the tax advisory ruling on collective investment institutions
On November 12th, the Central Administrative Economic Court (TEAC) resolved the judgment on the registration of collective investment in the Register of Large Companies. In its resolution (Rec. 1752/2016), are the main keys of tax advice that TEAC has taken into account for the final decision.
As said Court is a competent body before the General Tax Law 58/2003 (LGT) and the General Regulations for the development of such legislation (Royal Decree 520/2005), it has ruled on two notable aspects:
- The conformity or not with the resolution of the TEAR.
- The XP registration of the Pension Fund in the Census of Large Companies.
Firstly, the TEAR establishes that the Pension Funds must not be part of the Large Companies Registry because their economic inactivity does not allow them to be part of the Census of Entrepreneurs, Professionals and Retainers. The Pension Funds are assets managed by a managing entity that does not perform services subject to VAT. According to art. 5 of the VAT Law (VAT LAW), they cannot be considered an entrepreneur or a professional. Consequently, art. 121 of the VAT LAW establishes that it does not have a sufficient volume of operations and, therefore, cannot be considered a Large Company.
Furthermore, art. 3.5 of Royal Decree 1065/2007, of July 27, states the following "The Registry of large companies will be formed by those taxpayers whose volume of operations exceeds the figure of 6,010,121.04 euros during the immediately preceding calendar year, calculated in accordance with the provisions of article 121 of Law 37/1992, of December 28, of the Value Added Tax, even when they carry out their activity outside the territory of application of this tax. This registry will be part of the Census of Entrepreneurs, Professionals and Retainers."
On the other hand, deregistration from this Registry is automatic, although a census declaration must be presented within a month, before the presentation of the first periodic declaration expires, before the AEAT. Regarding registration, it takes into account the following criteria:
- The VAT settlement period is monthly instead of quarterly.
- Income tax and withholding tax declarations must be submitted monthly instead of quarterly.
- The fractional payments in the IS are compulsorily calculated on the tax base of the current year and not on the full installment of previous periods (LIS article 40.3).
- The management procedures are developed by the Large Business Management Units under the Department of Financial and Tax Inspection instead of the AEAT Administrations or by the Regional Tax Management Units..
- Self-assessments and declarations must submit electronically via the Internet with an electronic certificate (OM HAP / 2194/2013).
- They must electronically submit online all kinds of documentation with tax significance related to procedures managed by the AEAT (OM HAP / 2194/2013).
- They must also receive communications and notifications by this method (article 4 of RD 1363/2010).
Regarding the registration of the XP, Pension Fund in the Large Companies Registry, the TEAC has concluded that the entities in numbers 5 and 6 of art. 28 of the Consolidated Text if they have a remarkable volume of operations despite the provisions of art. 121 VAT Law. Therefore, they will be obliged to make the payment as established in art. 450 / .3 of the Consolidated Text of Corporation Tax (IS). This will be done when the volume of operations exceeds, in the twelve months prior to the start date of the tax period, 6,010,121.04 euros.
Finally, article 121 of the VAT LAW can be applied to the Pension Funds in order to determine the fractional payment of the IS. It will also be possible to determine whether or not they should be included in the Large Companies Registry.
B Law & Tax
International Tax & Legal Advisors.