Individual resident for tax purposes in Spain
Income obtained both as interests and, due to the transfer, reimbursement or amortisation of the bonds, will be considered income from movable capital obtained owing to the supply of funds to third parties upon the terms of article 25.2 of the Personal Income Tax Act (Law No. 35/2006). This income is taxed at a flat rate of:
- 19 per cent on the first €6,000;
- 21 per cent on the following €44,000; and
- 23 per cent for any amount in excess of €50,000.
In principle, any income derived from the interests of the bonds will be subject to a withholding tax of 19 per cent on account of the personal income tax. However, there is no obligation to withhold tax on the income derived from the transfer or reimbursement of bonds with explicit yield, provided they are represented by book entries and are traded on a Spanish-regulated market, except the part of the price equivalent to the accrued interest on any transfers made within the 30 days immediately prior to the maturity of the coupon when:
- the acquirer is an individual or entity not resident in Spanish territory, or is a taxable person for corporate income tax purposes; and
- this express income is exempt from the obligation to withhold in relation to the acquirer.
Corporations resident for tax purposes in Spain
Income obtained by corporate income tax bondholders, both owing to the payment of interest and due to the transfer, redemption or repayment of the bonds, will be included in the taxable base.
In particular, income obtained owing to the payment of interest or the transfer, redemption or reimbursement of bonds, with implicit or explicit yield, will not be subject to withholding tax.
In spite of the above, to benefit from the withholding tax exception, the information and payment of income procedure foreseen in Royal Decree 1065/2007, which passes the General Regulation over actions and procedures of the tax administration and inspection and development of common rules for the procedures of application of taxes, needs to be fulfilled.
Non-resident acting in Spain through a permanent establishment
Income from the bonds obtained by a permanent establishment in Spain will be taxed in accordance with the rules of the above non-residents’ income tax legislation, subject to the provisions of the conventions for the avoidance of double taxation signed by Spain.
The above-mentioned income will not be subject to withholding tax on account of non-residents’ income tax on the same terms indicated above for corporate income taxpayers.
Non-resident not acting through a permanent establishment
Income from the bonds issued by the securitisation fund obtained by non-residents without a permanent establishment in Spain shall be exempt from non-residents’ income tax, in the same terms as the returns derived from public debt, even in case the above-mentioned income is obtained through a tax haven, to the extent these bonds are traded in an MTF, regulated market or any other organised markets. Royal Decree 1065/2007 requirements should be met.
Withholding procedure from bonds’ interest and information obligations
When issuing bonds traded in an MTF, regulated market or any other organised markets, a special information procedure has to be met. In particular, regarding securitisation funds issuing bonds in a Spanish regulated market or MTF, registered in a compensation and liquidation entity domiciled within the Spanish territory:
- the entities maintaining the securities in its third-party accounts; and
- entities managing securities compensation and liquidation systems established in a foreign country that have signed an agreement with a compensation and liquidation entity domiciled within Spanish territory, shall file before the issuer a statement according to the form annex of Royal Decree 1065/2007, which will include:
- identification of the securities;
- total amount of income derived from the securities;
- amount of income corresponding to personal income tax taxpayers;
- payment date; and
- amount of income to be paid on its gross amount.
The statement has to be submitted the working day prior to the maturity date of the interests and can be submitted electronically.
The lack of submission of the statement referred to in article 44, by any of the obliged entities, at the date foreseen in the first paragraph of article 44.6 would imply, for the issuer or its authorised paying agent, the obligation of paying the interest corresponding to the entity on its net amount resulting, after deducting withholding taxes at the general tax rate, over the total amount of the interest.
Subsequently, if the obliged entity submits the statement established in article 44 prior to the 10th day of the month following to the month when the maturity of the interest derived from the bonds takes place, the issuer or its authorised paying agent will refund the exceeded withholding. If such was not the case, the issuer or its authorised paying agent will not refund the withholding. For individuals and corporations resident for tax purposes in Spain, along with non-residents acting through a permanent establishment, it is just a mere financial effect. However, the non-resident not acting thorough a permanent establishment, who is entitled to apply an exemption, will have to request a refund of the withholding from the tax authorities.
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