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Tax System II > overall theory > Flashcards

overall theory Flashcards

1
Q

what is the nature of corporation income tax?

A

Corporation tax is a direct and personal tax on income obtained by entities.

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2
Q

which rules regulate CIT?

A

CIT law & the Royal decree

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3
Q

what is the scope of application of CIT?

A

The Corporation Tax will be applied throughout the Spanish territory, including the Canary Islands, Ceuta and Melilla.

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4
Q

what is CIT concurrent with?

A

Tax applicable throughout all Spanish territory, but concurrent with:

a) specific legislation of the autonomous regions of the Basque Country and Navarra
b) specific particularities in the Canary Islands, Ceuta and Melilla
c) International treaties for the avoidance of double taxation.
d) European legislation: mergers & acquisitions

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5
Q

what does earning of income comprise?

A

The “earning of income” comprises:

  • The allocation of the taxable bases, expenses or other items of entities
  • The imputation to the tax base of positive income obtained by the nonresident entity under the international tax transparency regime
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6
Q

definition of taxable event?

A

The taxable event is the receipt of income by the taxpayer, irrespective of its source or origin

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7
Q

what are the types of tributes?

A

fees, special contributions, taxes

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8
Q

definition of fees?

A

Tributes whose taxable event may consist of:

a) Private use or special use of the public domain.
(b) the supply of services or performance of activities which relate to, benefit or affect the taxable person in a particular way.

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9
Q

definition of special contributions?

A

Taxes whose taxable event may consist of:
- the obtaining by the taxpayer of a profit or
- an increase in the value of his assets
As a result of:
- the carrying out of public works or
- the establishment or expansion of public services

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10
Q

definition of taxes?

A

Taxes levied without direct benefit of the citizen just with aim to contribute to
public expenses.

The Taxable Event demonstrates the economic capability of taxpayer as a result of:

  • Obtaining an income
  • Possession of a heritage, estate
  • Circulation of goods
  • Acquisition of an asset
  • A rental expenditure
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11
Q

what are the types of taxes?

A

direct taxes and indirect taxes

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12
Q

what are the direct taxes?

A 
direct taxes: 
those levied on income:
- personal income tax
- corporation income tax 
- non-resident income tax

those levied on capital:

  • inheritance and donations tax
  • wealth tax
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13
Q

what are the indirect taxes?

A

indirect taxes:

  • patrimonial transmissions and documented legal acts
  • value added tax
  • international trade: customs, duties
  • specials (alcohol, tobacco, coal)
  • insurance premium tax
  • credit deposit institution tax
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14
Q

who has the power to establish taxes?

A
  1. the state
  2. autonomous communities: can establish taxes but on taxable events different to those established by the State.
  3. local corporations: Local corporations only can establish or develop tributes under the authorisation of the State or an Autonomous Community law.
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15
Q

what are the main laws?

A
  1. The Spanish Constitution
  2. International treaties and conventions
  3. European Union Legal System
  4. Domestic law
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16
Q

what are the principles for the organisation of the tax system?

A
  1. economic capacity,
  2. justice,
  3. generality,
  4. equality,
  5. progressivity,
  6. non-confiscation
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17
Q

what are the principles in the application of the tax system?

A
  1. proportionality
  2. efficiency and limitation of indirect costs arising from
    compliance with formal obligations
  3. respect to the rights and guarantees of taxpayers
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18
Q

what is the principal tax obligation?

A

consists of the payment of tax liability

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19
Q

what is the accrual moment?

A

The moment in which the taxable event understood to be realised and in which the tax obligation arises

20
Q

formula for gross tax payable?

A

(net tax base) X (tax rate)

21
Q

comment on the tax residence:

A

Tax residence: place where taxpayers are located in their relations with the Tax Administration.

  • Individuals: their habitual residence, in general.
  • Legal persons: registered office if the administrative and management centre is there. Otherwise, where these activities are carried out, or subsidiary where their main value of assets is located.
22
Q

the 3 ways the tax base can be determined?

A
  • Direct assessment:
  • Objective assessment:
  • Indirect assessment:
23
Q

reasons for differences between accounting result and tax base?

A
  1. Different objectives.
    - Financial rules, find the accounting result, according prudence principle.
    - In contrast, tax rules try to measure the economic capacity of taxpayer. Some expenses or inputs recognised in accounting are object of an “extra accounting adjustment”.
  2. Different treatment of losses from previous years.
    - In Profit and Loss account applies the separation of exercises (accounting closes yearly).
    - In Tax, in some cases is possible to offset tax loses from previous years.
  3. Different temporary allocation criterion
24
Q

comment on independence of tax years:

A

Income and expenses recorded in a wrong tax period (for example due to an accounting mistake), must be allocated for tax purposes in the right tax period, according to the temporary allocation rules.

25
Q

comment on reversal of expenses:

A
  • Reversal of expenses that have NOT been tax deductible will NOT be integrated into the tax base
  • Reversal of an impairment or correction of value that has been tax deductible, will be charged to tax period in which the reversal occurred
  • When provisions were tax deductible, and later they have not been applied to it purpose, the part of provision non applied must be integrated into the tax base
26
Q

comment on negative transmissions from transmission of fixed assets, real estate, intangible assets or debt when the acquirer and transferor are part of the same group:

A

won’t be integrated in tax base of accrual period
They can be integrated only in tax period when:
- the assets are derecognized by the acquirer
- transferred to third parties
- acquirer and transferor are no longer part of the same group

27
Q

what type of tax is the VAT tax?

A

it is a harmonized tax

28
Q

to what is the VAT applied?

A

a GENERAL TAX ON CONSUMPTION to trade in goods and services. This tax will be proportional to the price of goods and services and the number of transactions that happen on the production and distribution circuit

29
Q

when is VAT payable?

A

VAT shall be payable on each transaction

30
Q

in which stage shall VAT appear?

A

The common VAT system shall apply until retail sale stage

31
Q

is VAT a direct or indirect tax?

A

VAT is an indirect tax on consumption and is levied on the following transactions:

a) Supplies of goods and services by entrepreneurs or professionals.
b) Intra-Community acquisitions of goods or services
c) Imports of goods

32
Q

is VAT a neutral tax?

A

VAT is hold by the consumer. VAT taxes all stages of the production process (to facilitate management) but allows the taxpayer to deduct the input VAT

33
Q

Is VAT cummulative?

A

It is not cumulative because it only taxes the value added at each phase

34
Q

what is the territorial scope of VAT

A

VAT in application tax territory (ATT): throughout Spanish territory, including the adjacent islands, excluding:

  • Ceuta and Melilla as territories not included in the Customs Union.
  • The Canary Islands as territories excluded from harmonization
35
Q

What taxes then are applied in Canary Islands and Ceuta and Melilla with respect to VAT?

A

In the Canary Islands, the General Indirect Canary Tax (“IGIC”) will apply and in Ceuta and Melilla the Tax on Production, Services and Import (“IPSI”)

36
Q

what are the taxable events with respect to VAT

A
  1. Internal operations.
  2. Intra-community acquisitions/deliveries if the supplier or client is in another member country of the European Union.
  3. Imports / exports if the entrepreneur or client is outside the European Union (and as well for these purposes, operations with the Canary Islands, Ceuta
    and Melilla are assimilated)
37
Q

what will be understood as carried out in the development of a business or professional activity?

A
  • Deliveries of goods and services made by mercantile companies, when they have the status of entrepreneur or professional.
  • Transmissions or assignments of use, of all of any items that integrate the business or professional assets of taxpayers, including those carried out to end the economic activities
38
Q

To VAT purposes, the “status of entrepreneur or professional” is given to

A

those who
carry out business or professional activities

Among others:
• Commercial companies
• Those who make one or more deliveries of goods or services that involve the exploitation of a tangible or intangible asset, and, in particular, the lessors of goods.
• Those who carry out the urbanization of land or the promotion, construction or rehabilitation of buildings, even occasionally.

39
Q

Economic activity for VAT purpose is

A

the management of material or human factors or one of them, with the purpose to produce or distribute goods or services

40
Q

Are also considered “delivery of goods”, among others:

A
  • Construction or rehabilitation of a buildings, when the entrepreneur who executes the work contributes a part of the materials, if the cost of materials exceeds 40% of the tax base.
  • Supply of standardized software (standard and non personalized or tailormade)
41
Q

These are expressly services:

A
  • The independent exercise of a profession, art or trade
  • The leasing of goods provided that they do not constitute a delivery of goods
  • Assignments of copyrights, trademarks and patents
  • Executions of work that do not constitute a delivery of goods
  • Hospitality services
  • Transportation
  • The supply of computer products with customization for the client (not standard)
  • Loans or credits
42
Q

in the context of VAT which are the non-subject transactions?

A

The law does not follow a clear criterion to qualify non-subject operations: it includes operations that are not carried out within a business or professional context
Among others, the following can be highlighted:
- Transfer of an autonomous economic unit, able to develop an economic activity
- Free deliveries of merchandise samples with no commercial value
- Advertising objects when the total cost of supplies to the same recipient during the calendar year does not exceed 200 euros.
- Services provided by natural persons in a dependency regime derived from labor or administrative relations (that is, employed workers)
- Deliveries of goods and services made directly by Public Administrations without payment (for example, public lighting) or subject to a kind of tax, fee…
- Deliveries of money as payment

43
Q

for intra-community acquisition of goods:

A

Acquirer: must be an entrepreneur or professional.
Purchaser: must inform the seller of his “VAT number” (they can only be obtained by residents of Member States)

44
Q

Territories not included in the Customs Union (Ceuta and Melilla) and those not included in tax harmonization (Canary Islands)

A

have the same treatment as third countries (imports)

45
Q

what are the exemptions to VAT

A

SOCIAL EXEMPTIONS. Medical and health services (hospitalization and healthcare, services of medical professionals, dentists and prosthetists, etc.), educational or social assistance.
FINANCIAL EXEMPTIONS: operations carried out by financial institutions (deposits, loans, payment orders, etc.)
REAL ESTATE EXEMPTIONS. In general, deliveries of rustic land, second or subsequent deliveries of real estate (unless the exemption is renounced if the acquirer is taxpayer with right to deduct) and housing lease. But he deliveries of urban land, the first deliveries of buildings (when delivered by the developer or rehabilitator) are subject and not exempt.
TECHNICAL EXEMPTIONS. Deliveries of goods that have been used by the transferor in carrying out exempt operations are exempt (for which, therefore, he could not deduct VAT at the time as he was considered a final consumer)
OTHERS. Postal services, lottery, etc.
EXPORTS OF GOODS: will be exempted the export of goods dispatched or transported outside the UE by the transferor or by a third party acting in his name and on his behalf.

46
Q

general rule for VAT tax base:

A

VAT tax base: total amount of the consideration of the subject operations, including, among others:
Freight costs, transportation and insurance (we charge VAT).
Discounts on the price (minorize tax base).
Interests or compensations are not included in tax base if they are after delivery

47
Q

what is transfer of assets?

A

In general terms is levied on the transfer of rights and assets located or executable in Spain, between alive parties, when the parties are not operating an economic activity (generally in such case the operation would be taxable by VAT sometimes the acquirer can also give up to exemption).

Tax System II (1 decks)

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