Corporate Operations and Notarial Acts: Tax Implications

Corporate Operations

Taxable Events: Corporate Transactions Subject to Tax

Corporate transactions are considered subject to tax in the following cases:

• The creation, increase, and decrease of capital, merger, division, and dissolution of companies.
• The sums paid by the partners to replenish losses.
• The move to Spain of the place of effective management or the registered office of a company, when they were not previously in EU countries or were not subject to a similar tax.
• The undertaking by entities of operations in Spanish territory through branches or permanent establishments.

For the purposes of Impuesto sobre Transmisiones Patrimoniales (ITP), the following are also considered as companies:

• Non-corporate legal persons, profit-making.
• Contracts in participation.
• The joint ownership of ships.
• The community of goods which carries on business.
• Constituted community property mortis causa when undivided and continuing under the operation of the business for a period exceeding three years.

Assumptions of No Tax Liability

The following are not subject to tax:

• a) The capital increase from reserves consisting of a share premium of shares, although they are taxed under Actos Jurídicos Documentados (AJD).
• b) The amendment of the company by total or partial change of corporate purpose.
• c) The extension of companies, even if taxed by AJD.
• d) The transformation of companies.

Taxpayer

The following are liable to pay the tax:

1. In the formation, capital raising, merger, division, and headquarters relocation of members' shares to replenish losses, the company itself.
2. In the dissolution and reduction of social capital, partners, joint owners, community members, or participants, for goods or rights received.

Taxable Income

• a) In the increase in capital formation and corporate social responsibility to limit their partners, the taxable amount corresponds to the nominal amount to be extended.
• b) In all other companies and in members' shares to replenish social losses, the taxable amount is the net value of the contribution (assets and rights contributed, minus deductible expenses and debts of the company resulting from the injection).
• c) In shipments of the place of effective management or head office, the tax base will coincide with the net worth of the company when adopting the agreement (real assets less current liabilities).
• d) The tax base, in decreasing capital and dissolution of companies, will coincide with the actual value of the property and rights given to members, without deduction of expenses and debts.
• e) In cases of split and merger of companies, the taxable amount is set according to the capital of the new entity created or increased capital of the acquiring entity.

Documents of Attorney

Taxable Events

The following general notarial acts are subject to tax:

• a) Writings: Documents that contain legal contracts or relationships that engender obligations.
• b) Minutes: Documents that are extended and authorized by notaries ex parte and in which facts and circumstances that are witnessed are recorded, and which are not contracts.
• c) Testimonials: Accurate statement, signed and given by the solicitor, which refers to a fact or document that the notary himself was involved in or not.

If the documents contain more than one instrument or contract, they must be taxed for each of them.

Single copies will not be taxable, but the second and successive copies issued to the same grantor will be.

The first copy is the copy of the original instrument, which is in the notary's protocol, and which is entitled for the first time to the parties thereto, being in turn which usually occurs in the corresponding register once the tax has been paid.

Those scripts that involve a subrogation or mortgage modification are exempt from taxation.