Taxes points out that the indirect ownership of real estate by non-residents is not taxed in Spain by Patrimony

MADRID, 7 Oct. (EUROPA PRESS) -

The General Directorate of Taxes (DGT) has confirmed that the holding of shares or participations in non-resident entities, which directly or indirectly own real estate investments in Spain, does not generate taxation in Spain for the Wealth Tax (IP).

This has been provided for in the binding resolution number V1947-22, which affects natural persons not resident in Spain who own real estate in this country indirectly, that is, through foreign entities.

The resolution is motivated by a tax query presented by Bové Montero y Asociados on behalf of a natural person tax resident in Germany who owns 100% of the shares in a German entity that, through other non-resident entities, holds the ownership of a property in Mallorca, as reported by the professional services firm.

As explained, the consultant has indirect ownership of a property in Spain. Under this assumption, Tributos states that the consultant is not subject to Wealth Tax since he is not the (direct) owner of assets located in Spain.

The partner of Bové Montero y Asociados Andreu Bové Boyd argues that "the sentence provides legal certainty and will help to resolve numerous files initiated by the tax authorities and to claim refunds from previous years."

In the cases in which the Wealth Tax has been liquidated due to similar situations, the partner of the firm considers that "the possibility of requesting the return of undue income and the corresponding default interest should be analyzed."

As they recall, in the past Taxes had ruled to the contrary, indicating that non-residents indirectly owning real estate in Spain should be taxed in Spain for the Wealth Tax, when, for example, the real estate accounted for more than 50% of the assets of the company (in coherence with resolutions number V0093-16 and V1995-20).

From the professional services firm, Bové Boyd reasons that they understood that this interpretation had no legal support since "although some Agreements to Avoid Double Taxation (CDI) granted the power to Spain to subject the ownership of real estate to taxation through foreign entities, the Spanish internal regulations lacked the corresponding legal provision that would allow Spain to hold the indirect possession of real estate".