This new form, which had been pending implementation and application since 2017, must be filed for the first time between October 1 and November 30, 2019, and all companies domiciled in Catalonia holding non-productive assets must pay the corresponding amount of tax for fiscal years 2017, 2018 and 2019.
The taxable event of this new tax is the holding by the taxpayer of the following assets, on the date the tax accrues, provided that they are not productive and are located in Catalonia:
b.Motor vehicles with 200 HP or more.
e.Art and antiques with a value exceeding that set by the Spanish Historical Heritage Act.
In general terms, the above-mentioned assets will be considered non-productive assets in the following circumstances:
- Assets freely transferred to owners, partners or persons who are related to them and which are intended for own use or private benefit except if considered as compensation in kind;
- Assets transferred for consideration to owners, partners or persons who are related to them unless the market price is paid for them and these people work effectively in the company and receive remuneration for this higher than the transfer price;
- If they are not subject to any economic or public service activity. For these purposes, non-productive assets are not considered those with a purchase price not exceeding the amount of retained earnings obtained by the entity, provided that they derive from the performance of economic activities, up to a limit of the earnings obtained both in the same year of the purchase and in the last ten years. Similarly, dividends from securities that grant at least 5% of voting rights are assimilated and are held for the purpose of directing and managing participation, provided that, for tax purposes, the corresponding organization of human and material resources is available, and the invested company's main activity is not the management of movable or immovable assets, in accordance with wealth tax rules. At least 90% of the income obtained by the invested company must come from the performance economic activities.
In relation to the taxpayer, and according to the literal wording of the Law, it could be understood that the taxpayers of the tax would be those legal persons and entities that, lacking any legal personality, constitute a separate economic unit or asset that is subject to taxation with non-productive assets located in Catalonia, regardless of residence (that is, even residents in other autonomous communities and including non-resident entities).
However, Tax Consultation no. 241 E/17 of 25 October 2017, issued by the Departament de la Vicepresidència i d'Economia i Hisenda highlighted that only legal persons and entities resident in Catalonia were subject to this tax.
Along the same lines, the Constitutional Court's Judgment 28/2019, of February 28, 2019 ruled on the appeal on constitutional grounds filed by the President of the Government against article 3.1, paragraphs a) and b) in addition to article 6 of this tax law. It is noteworthy that, in this appeal, the representatives of the Government and Parliament of Catalonia argued that "although the wording of the law could have been more specific in terms of connection points, it must be assumed that it is a personal tax, so it will only fall on taxpayers with a tax domicile in Catalonia, which is the territorial scope of the law."
Similarly, in relation to motor vehicles, the Constitutional Court adds that the tax "has no extraterritorial effects because its tax base includes all non-productive vehicles of entities domiciled in Catalonia, regardless of their location at any moment of time since, for tax purposes, such vehicles are considered as being located in the territory of that autonomous community," since motor vehicles are located at their owner's domicile, regardless of where they are at any moment of time physically.
That is to say, the taxpayers must pay this tax on all their non-productive assets and, in the specific case of vehicles, this is independent of whether they are permanently located in Catalonia or temporarily elsewhere. The same criterion could apply to ships, aircraft, art, antiques and jewelry. In other words, if they are non-productive and held by the taxpayer they will fall within this law's scope of application, regardless of their location, as they are deemed to be located at their owner's domicile, that is, in Catalonia.
With regard to the taxable base, this will be the sum of the value of the non-productive assets, with there being specific valuation rules depending on the type of asset that, if these are not applicable, is to be valued at market value:
a.Rights on real estate: cadastral value of the real estate
b.Motor vehicles, leisure craft, aircraft: at their market value or, if applicable, by the vehicle valuation tables used.
c.Works of art, antiques and jewelry: at market value.
d.Assets of which use can be assigned as a result of a financial leasing transaction: value calculated by the rules applicable to leases in the property transfer and stamp duty tax.
Accrual and filing period: the tax accrues on January 1 of each year, except for 2017, which accrues on June 30, 2017. The deadline for filing and payment of Form 540 is during the month of June (1-30) following the accrual date. However, for fiscal years 2017, 2018 and 2019, the deadline for filing will be between October 1 and November 30, 2019.
Lastly, no minimum amount is exempt and a progressive tax identical to the one set out in the Catalan Wealth Tax applies, that is, a minimum rate of 0.21% up to a maximum of 2.75 for tax bases exceeding EUR 10,695,995.06.
The content of this alert is intended for information purpose only. All decisions or acts based on the above should be subject to appropriate professional advice.