The Spanish Tax Agency (AEAT) has published a report, warning against the risks of Asset Management Companies. Improper use can lead to additional income tax, corporation tax, VAT and wealth tax.
The warning comes after several politicians were recently discredited because of the way they use Asset Management Ltd’s. The Tax Agency emphasizes that it is not the aim to prevent the use of these types of Ltd’s, but does point out that they must be used correctly.
What does the Tax Agency in Spain pay special attention to?
In particular, warnings are issued about:
- The invoicing of services by Asset Management Companies while these services are not actually provided by or via these companies.
- Invoicing services while the Ltd does not have the substance and structure in terms of personnel and resources to be able to provide those services.
- The non-market valuation of services, usually with the aim of generating income through an Asset Management Company in order to pay only the lower corporate income tax rate instead of the higher income tax rates.
- Acquiring assets in the name of the Asset Management Company that are intended for private use.
Private use and VAT
Also, a warning is given about the intervention of companies in the process of invoicing or channeling the income tax of natural persons as a result of the development of a professional activity, as well as the risks associated with owning assets through corporate structures.
Proper use is allowed without restrictions
To “reassure” (?), the Tax Agency states in the report that it is not the aim “to prevent a taxpayer from developing an activity through an Ltd, because every entrepreneur is free to choose how to practice his profession.”
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