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Let’s talk about a "secret law", today. A law that serves to encourage development, research and innovation in companies. It defines the defensive weapons that companies do have from 20th of February 2019 for protection of trade secrets. What is a trade secret? As a first step, we define a BUSINESS SECRET according to article 1 of Law 1/2019 of 20th February 2019 on Business Secrets, as undisclosed information that can be used in a productive, industrial or commercial activity, and that can be transmitted to third parties. The law imposes a series of requirements for these business secrets to be considered, as such. Thus, they may be subject to specific measures to prevent their dissemination through the implementation by the company of measures to prevent the unauthorised disclosure of such information. Specific case of a business secret If a company has a production contract with a commercial supplier of a product and/or service (paos.) in which secret information interferes with the studies and developments of the company holding the information, and the supplier company decides to produce the same paos. with another company and starts to market it, then the company holding the information will suffer serious economic damage. In this way, our clients have been able to enter into all kinds of cooperation contracts with third parties involving the supply of sensitive, more protected information, such as contracts for the manufacture of preparations for the food industry. A great example comes to mind with the "Coca-Cola" formula. But it is not the only secret recipe that is protected. Clients of Carrillo Asesores have decided to opt for such a preventive measure. In all these cases, the companies have a protection of those intangible assets that cost so many years and effort to generate. They would not have it, if the necessary preventions had not been taken in the contracts by means of the clauses incorporated by Carrillo Asesores. This is where the protection of Trade Secrets (TS) comes into action. What actions are available to a company for the protection of a trade secret? There are several actions available to the company, among others: The management of a LICENSE for the use of such information. The application of legal PROTECTIVE MEASURES to defend its interests. The SEIZURE of the material manufactured in violation of the T.S. The CESSATION of the act via the courts. That is why Carrillo Asesores with its Legal Department recommends the ADOPTION OF PREVENTIVE MEASURES to safeguard the business secrets of large companies that need to protect their secrets that give success to their products. Do you want to know how to add the BUSINESS SECRETS CLAUSE in your manufacturing, distribution, marketing or research contract with your partners? Our Legal Department will be delighted to assess you, but you will have to keep the secret...

The incorporation of a holding company structure does not only achieve an organizational solution at the lowest fiscal cost, but it is also a very convenient feature for the entrepreneur. Here we talk about a real case. Real case for the incorporation of a holding structure The project may be splitted into three phases: study of needs, proposal of a solution, in this specific case it is the holding structure, and follow-up. Needs A businessman who owns several companies of linear structure seeks for our advise by exposing queries related to subsidies and exemption on Equity Tax and Inheritance Tax. The generational relay and inheritance of business towards his children makes him feel concerned. Moreover he wants to restrict responsibility to himself, besides being able to finance other companies, or to create new ones using the benefits or the economic capacity of another company that he owns. The entrepreneur is obviously looking for an organizational solution at the lowest possible tax cost that allows: Profit from tax breaks and exemptions. Generational replacement. Limit the responsibility of the entrepreneur. Financing and business growth. Solution After a thorough analysis of his business structure, his personal and family situation, but also considering the applicable tax and commercial legislation, we propose the creation of a holding structure, allowing the entrepreneur to concentrate all his shares in a single commercial "Holding", whereas this holding company is in turn the one that holds the shares of the linked or active companies. In this way, the owner achieves an organizational structure offering the following synergies: Cost savings for all his companies. Consolidation of direction, management and administration within one single company. Merge of shares on purpose of inheritance. Achievement of rebates on inheritance tax and equity tax for all companies. Separation of risk from his personal assets. Resolution of problems related to inheritance and generational change. In addition to the earlier mentioned topics, there is also a possibility for the Holding Company to open new corporations: using the profits gained by the other companies whilst distribution of dividends, which are tax-free when executed by the Holding, is a decisive advantage. And most importantly, the research carried out by our professionals allowed the entire reorganization to be implemented at a fiscal cost of 0 €. Follow-up Nowadays, we do execute a continuous monitoring and advising of the entity, in the aim of making sure that an accurate performance of the new organizational Holding structure is guaranteed. At Carrillo Asesores we support the client during the whole process of incorporation and management of the . Contact us freely for any additional information.

It dates back as far as November 26th, 2019 when the EU Directive 2019/1937 of 23rd of October 2019 on the protection of whistleblowers, commonly known as the "Whistleblower Directive", was published in the Official Journal of the European Union – say the “OJEU” – the latter to be transposed into national law in December 2021. Protection of whistleblowers who report about infringements The aim of the Norm is to ensure the protection of employees and self-employed persons, domestic employees and public sector employees, as well as former employees and persons who have not yet started to provide services, but who are aware of irregularities and other interested parties, such as shareholders, members of board of directors, volunteers and apprentices and persons working for contractors, subcontractors or suppliers, when they report irregularities or breaches related to topics such as: Public procurement. Prevention of assets laundering. Financial services, products and markets. Product safety. Transportation safety. Environmental protection. Radiation protection and nuclear safety. Safety of food. Public health. Consumer protection. Protection of personal data and privacy. Competition. Security of networks and information systems Financial interests of the Union (expenditure, revenue and fundraising) and corporate taxation. The Directive clearly rises a change that doesn’t just mirror on legislation, but also on culture. The so far reviled attitude, that of the whistleblower, is now positively valued. In fact, the implementation of the Directive has turned the claimant or "whistleblower", no longer to be the target of reprisals or sanctions; rather than this; these figures will become actors to be protected. Their intervention will no longer be the object of persecution and reprisals, but their activities will have to be facilitated as a means of control and guarantee of compliance by companies. Targets of the Whistleblower Directive The Directive basically aims for: Discovery and prevent infringements. Strengthening enforcement by establishing effective, confidential and secure whistleblowing channels and ensuring effective protection of whistleblowers against reprisals. Preventing whistleblowers from incurring any liability, whether civil, criminal, administrative or employment-related. Unless criteria are changed in the implementation of the law at national level, the Directive establishes that the regulations apply on those companies with more than 50 employees or with an annual turnover of more than 10 million euros. Public bodies and authorities, as well as districts with more than 10,000 inhabitants, will also be affected. In general terms, the companies and bodies subject to the law will be required to: Define internal or external whistleblowing channels, the so-called Ethical Channels. Establish protocols to substantiate, ensure the management and follow-up of all complaints received, so that they can be consulted and easily processed by Compliance Officers. The application of the Directive is closely related to the implementation of Criminal Compliance Systems in companies, the so-called Criminal Compliance already contemplates the application of protocols for receiving complaints and managing them, in a way that guarantees the complainant, and with a view to achieving strict compliance with the legislation, which can avoid possible criminal liability for companies. Therefore, we now just wait for the transposition into national law to disclose the obligations, but for sure we will have to avoid expressions such as "boy, don't be a snitch". If your company has more than 50 employees or an annual turnover of more than €10 million, contact us. Our Consulting Department will be delighted to help you.

On Thursday, April 8th 2021, the Regional Courtroom of Madrid has once again, absolved footballer Xabi Alonso and his advisors. They were accused of tax offence. This acquittal is very significant as he is the only footballer who did not want to make a deal with the Tax Agency. He defended his innocence in a round of similar cases investigated by the Treasury to artists and athletes. So far, the Courts have decided in his favour on two occasions. There will surely be more appeals. The main issue here is the taxation of image rights. The taxation of image rights Those rights held by companies in charge of managing them. According to article 92 of the “IRPF” Income Tax Law, the individual taxpayer (Xabi Alonso in this case, any artist, sportsman or sportswoman who exploits his or her image), will deduct an amount for this concept in their income tax return, specifically "...the value of the consideration paid prior to the contracting of the employment services of the individual or to be paid by the person or entity referred to in paragraph c) of section 1 for the acts mentioned therein. This amount shall be increased by the amount of the payment on account referred to in paragraph 8 and reduced by the value of the consideration obtained by the natural person as a result of the transfer, consent or authorisation referred to in paragraph a) of section 1, provided that this was obtained in a tax period in which the natural person who owns the image is a taxpayer for this tax". Of course, this topic is not absolutely "crystal clear". The taxpayer will have to charge this income if three requirements are met. The first of which is that "the right to exploit their image has been assigned or consented or authorised its use to another person or entity, whether resident or non-resident. For the purposes of the provisions of this paragraph, it shall be irrelevant whether the assignment, consent or authorisation took place when the natural person was not a taxpayer". Minimise taxation Therefore, in principle, the fact that the image rights company is a non-resident would not imply that no income would be charged in the income tax return for the image rights, if the rest of the requirements were met. In any case, and regardless of which side is ultimately right in this case, trying to minimise taxation with the existing legal mechanisms through companies abroad for the taxation of image rights is something that should be reviewed beforehand, but which is perfectly possible (this is also reinforced by the two judgments of this player, so far). First of all, it is important to define how image rights are taxed under Spanish law. Once this is clear, then all possible tax scenarios can be considered and adapted to the particular case of each individual in order to optimise the taxation of this income. Are you an artist or athlete? Just reach out for us! We at Carrillo Asesores will be delighted to help you.

Our previous post reported about the possibility to reduce tax risk when expanding our business to foreign countries via: representative offices. If we have decided to work in a certain territory, then we should consider the full scope of suitable alternatives. The same thought is applicable in case we are a foreign company that has decided to work in Spain. Following option, in order of less complexity and perhaps tax risk, describes a structure of permanent establishment. What is a permanent establishment? This structure, which is defined on the Tax Agency’s website, has no legal personality. This implies: Less costs of incorporation. No responsibility of its own, as it is then absorbed by the "mother" company. Common sense applies; if there are workplaces, then acting through a permanent establishment will be the case; also in those circumstances, where the main activity of the company is executed in another territory. This will not be the case, if auxiliary activities of a representative office are being performed. This scenario is then monitored by double taxation agreements signed between Spain and other countries. Tax obligations of a permanent establishment Being of no legal personality does not mean exemption from certain obligations. The request for a TAX ID at the relative Tax Authority, the liquidation of the non-resident tax for profits, those corresponding to its workers regarding the Social Security of each country... The benefits obtained by permanent establishments will be taxed in the country of the parent company. "Double taxation" may be eliminated, depending on mechanisms existing between countries (if non-resident taxes have been paid in the country where the permanent establishment operates, those taxes may be deducted from the corporate tax of the "parent" company, with certain limits and requirements). In fact, these limits and requirements are one of the issues that should be analysed before operating with a permanent establishment. Of course, the facility to deduct these amounts is not at "sole discretion", but performances may be optimized. Carrillo Asesores will be delighted to support you in establishing yourself in any country, worldwide by means of studying the specific features of your business. We will also be pleased to assist in case your Company is a part of a foreign entity that wants to establish in Spain.

Moving abroad and becoming a tax resident in that country, means categorizing as an income tax payer. In certain cases, this may be detrimental to the taxpayer, due to the progressive nature of the Personal Income Tax, in relation to rates of Non-Resident Income Tax, the latter being more steady. However, different alternatives for the taxpayer can be evaluated. The Personal Income Tax Law regulates this scenario. In fact, we are referring to the special regime for taxation of non-residents for Income Tax. It is applicable to certain individuals, who would normally be subject to income tax rules. This regime consists of maintaining the condition as taxpayer for income tax. It will do so by paying the Non-Resident Income Tax, under appliance of respective rules. To whom does this special regime of taxation of non-residents apply It affects those taxpayers, who have acquired tax residence in Spain by relocation. It can be applicable during the tax period of change of residence, and during a subsequent period of five years. However, the following conditions must be accomplished: The taxpayer has not been resident in Spain during the previous ten tax periods. The relocation is either due to an employment contract (except for special employment relationships of professional sportsmen and women), or because the taxpayer has become a director of an entity that is not linked, according to the criteria of the Corporate Tax Law. No income classified as achieved through a permanent establishment in Spain. It is important to point out that the option of taking advantage of this special non-resident tax regime also implies that the taxpayer will be subject to Wealth Tax stipulated by Spanish Council obligations. The following terms must be viewed, under the assumption that profile is granted for choosing this special regime. Execution of a detailed analysis and review to conclude whether conditions are of interest for tax purposes. Depending on the type and amount of income, there may be notorious differences between paying income tax according to the rules of income tax, and those of non-resident income tax. At Carrillo Asesores we are delighted to assist you for resolving any doubts. Our Tax Advice Department is at your service, do not hesitate to contact us.

A closer focus on the structure titled as Permanent Establishment shows that, according to Tax Office regulations, the stipulations referred to VAT and to corporative tax applicable, are not the same. Although our previous post describes the feature of a Permanent Establishment and its tax obligations, the Value Added Tax compliance requires a closer review. VAT and corporative tax for permanent establishments Taxation of VAT may apply on Permanent Establishments; however, Corporate Tax is based on criteria of international treaties and agreements. Article 84 of Law 37/1992 on value added tax defines as taxpayers: 'On purpose of this Article, taxable persons are those established in the territory of application of the tax if they have their place of business, their domicile for tax purposes or a permanent establishment involved in supply of goods and services subject to the tax. Such a fixed establishment is supposed to carry out supply of goods or services, arrangement of materials or human factors of production on purpose of carrying out each supply. Formerly, the law defined in its article 69: "Permanent establishment: any fixed place of business where entrepreneurs or professionals carry out business or professional activities". Therefore, a taxpayer for VAT purposes is titled as such, when supply of goods or services is involved. However, when referring to Corporate and Non-Resident Income Tax, then the definition given by the Double Taxation Agreement between Spain and the relative country will apply. This definition, depending on the country, may explicitly exclude certain cases such as Permanent Establishment. For example, asset depots, warehouses or similar. These, according to directives of the VAT law, may be considered as Permanent Establishment for the purposes of this tax. It certainly would imply formal obligations when it comes to pay corporate and non-resident income tax in Spain. Even though they may not include the obligations of a Permanent Establishment. This may not be the norm, but when it comes to set-up certain "premises" in a foreign country (or acting in Spain as a foreign company), it is recommended to ensure that compliance with current legislation is fulfilled. If you manage a Permanent Establishment in Spain or out of Spain, contact us. We can assist you on any legal requirements.

Our previous post stated that one of the options allowing the expansion of business into a country that is not the companies’ original country of residence, is a permanent establishment. This facility does not have its own legal personality, but as far as the performance is concerned, it is quite independent, (regarding tax criteria, but not in terms of management). Its income and expenses run separately from those of the parent company. Differences between branches and permanent establishments The differences with the permanent establishment are basically those that arise between the tax and commercial regimes. In other words, we may say that every branch is a permanent establishment, but not every permanent establishment is a branch. In fact, the Law on Non-Resident Income, where permanent establishments are defined in its Article 13, states: "Management headquarters, branches, offices, factories, workshops, warehouses, shops or other establishments, mines, oil or gas wells, quarries, agricultural, forestry or livestock farms or any other place of exploration or extraction of natural resources, and construction, installation or assembly works whose duration exceeds six months shall be understood to constitute permanent establishments". In commercial terms, permanent establishments do not exist, since it is a purely fiscal concept, but branches in Spain are mainly governed by Royal Decree 1784/1996, of 19th of July, which approves the Regulations of the Commercial Register, specifically in Articles 295 and subsequent. The incorporation of a branch involves a series of commercial formalities. These end with the signing of the deed of incorporation at the notary's office. This incorporation is registered in the Commercial Register, the same pursuits as for the incorporation of an ordinary company or a foreign subsidiary apply. Registering a Branch However, in views of the lack of legal personality and subsequent liability (the parent company is responsible), it is crucial to bear in mind that there are a series of additional commercial commitments, such as the fact that once the branch has been incorporated and registered, the application of several files required by the Commercial Register referring to its foreign parent company, among others, will be compulsory: - the change of name or registered office is one of them. The renewal, appointment and removal of board of managing directors. Dissolution, appointment of liquidators, termination of liquidation and bankruptcy or insolvency proceedings of the foreign parent company. In most of the cases, those companies being resident in a state differing to the state of its permanent establishment for tax terms, but aiming to grant a wider management autonomy (besides other eventual market reasons, such as providing local brand identity to the non-resident company in that territory or transparency, such as filing accounts in the Register of that country), should approach a formal incorporation of a branch with a representative who is given powers of attorney. This pursuit is not a fiscal obligation. Its nature as a permanent establishment will allow the profits to be taxable in the country where benefits are born, regardless if it is formally a branch. From our International Department at Carrillo Asesores we can help you establish yourself abroad. Contact us. we will be delighted to assist you.

Our previous posts related to the exemptions at origin of the interests of loans between international group companies remarked that the concept of the effective beneficiary is essential. The same applies to exemption of dividend distributions in a group of companies from different EU countries. Besides the rest of requirements for the application of this regulation, defined in the European parent-subsidiary directive (click here in Spanish), this directive does not explicitly contemplate the concept of beneficial owner and does not refer to it. In fact, Article 5 just states: "The profits distributed by a subsidiary to its parent company shall be exempt from withholding tax at origin". However, both double taxation conventions and the European Union's own court of justice do take this into consideration, at least for practical purposes in an implicit way. In some rulings the application of the benefits of the directive is rejected when the beneficial owner is supposed to reside in a third state outside the Union, even though the parent-subsidiary directive itself does not indicate anything in this aspect. In fact, it makes sense to think that a directive that is designed to encourage capital movements within the European Union and to equate the dividend exemptions provided for in national legislation (as in Spain in Article 21 of the Corporate Income Tax Act) to the whole of Europe, if the part that "enjoys" those dividends is actually a resident of a third country, the part should not benefit from the possible advantages of the regulations. Sometimes problems of this kind can arise even without being a third country. For example, if we talk about certain territories such as Gibraltar (there is a ruling of 2 April 2020 where the Court of Justice of the European Union leaves out of the Directive a company incorporated in this area). Distributed benefits Although it is also true that - on the other hand - the norm only talks about distributed benefits and nothing else. Therefore, when considering an international group structure for tax purposes, it is recommendable to be clear about the dividend policy. Also whether or not this policy can lead to interpretations by the different European tax agencies. These interpretations could cause us some economic damage, either by the actual beneficiary of these dividends or by any other requirement. These aspects deserve an important part in the study of the tax planning of international groups with companies in more than one country. Do you need clarification of any of this concepts? Contact us. Our International Department will assist you with further information.

A publication issued by “infoLibre” media on February 22nd, 2021 reported that - as a consequence of a notice spread through the "Football Leaks" portal - Real Madrid apparently accepted a financial operation with a serious tax risk. Independently to the criteria that we may have concerning the news or with regard to anyone’s behaviour, it may be interesting to review this topic with a highlight on the relevancy of the concept of beneficial owner, when it comes to perform international transactions; in addition to the tax damage that may be caused by its incorrect application or interpretation. Tax fraud in international loans and royalties In fact, a closer view at the notice mirrors on a Spanish legal entity (in this case “Real Madrid”), who has made payments to a legal entity in another EU country, in this case Luxembourg. Our previous post refers to the European Council Directive 2003/49/EC, say: "Interest or royalty payments from a Member State shall be exempt from any tax on such payments (whether collected by withholding tax or by assessment) in that source State, provided that the beneficial owner of the interest or royalties is a company of another Member State, or a permanent establishment situated in another Member State of a company of a Member State". Certainly, the controversy arises because the beneficial owner actually seems to be a company based in a country outside the European Union; in this case the Cayman Islands. Is that really a problem? Absolutely none! The directive would simply not apply, while the country issuing the payments usually would be obliged to make a withholding on account of non-resident income tax, in this case 24%, as the beneficial owner is from outside the EU (unless a possible agreement limits this taxation). All this may seem to affect only large multinational companies, but this is not necessarily the case. Let us view the following example, which will give us an accurate idea of the impact: Spanish company “X, S.L.” (of limited liability) enters into an agreement with Italian company “Y” to exploit its trademark, whilst execution of royalty payments of 100,000 euros per year. At first and by virtue of the aforementioned European Directive, these payments will be exempt from withholding tax in Spain and the Italian company will declare them as income for Italian corporate income tax purposes. However: What would happen if the beneficial owner is, in fact, a company based in a third country “Z”? The following scheme will help us to understand the differences: For the Spanish company there is no difference, at all; it pays the same either directly to the owner of the royalty, or by making the relative withholding. However, if no withholding tax was applied but effectively due, then the Spanish tax department may require that amount. Subsequently, a disbursement of 100.000 € will additionally raise 24.000 € required by the Authorities (plus penalties and interest). While some countries, such as Portugal, do have specific procedures for this purpose, the form does not officially exist in Spain, by now. Other means for compliance shall apply. Therefore, when working with non-resident companies, we recommend reviewing the performances "a priori" to avoid problems "a posteriori". In too many cases, bearing the initial cost of analysing a transaction accurately will turn into a very profitable investment, in the future. Do you need further assistance with this? Contact us. Our International Department will be glad to help you.

International business structures with representation in different countries may lend resources to each other. Will do this in order to finance themselves in an appropriate manner. Always respecting existing regulations on related-party transactions. A group company in one country may therefore lend money to a group company in another country, at market rates. But in which country will this interest income be taxed? If we refer to EU countries, Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States states in Article 1: "1. Interest or royalty payments from a Member State shall be exempt from any form of taxation on such payments (whether collected by deduction at source or by assessment) in that source State, provided that the beneficial owner of the interest or royalties is a company of another Member State or a permanent establishment situated in another Member State of a company of a Member State.” The concept of beneficial owner According to requirements and restrictions described in the Directive (available here in Spanish), interest generated by loans from another company not resident in the same country will initially be exempt in the home state. However, the concept of "beneficial owner" referred to in the Directive and also commented on in the OECD model double taxation agreement and in the various bilateral conventions between countries should be emphasised, as it is a concept originating in the Anglo-Saxon legal system. To this end, we find the analysis of the ruling of 26 February 2019 of the Court of Justice of the European Union very useful. It should be borne in mind that this ruling focuses the definition of this concept solely on interest payments between associated companies from different member states. It is not a mere intermediary or intermediary company The beneficiary of this interest must be effective for the exemption to take place. That is to say, it is not a mere intermediary or intermediary company, but it must have the power to freely dispose of this income. It is possible for a company to receive the interest, but not be considered the beneficial owner of it . Therefore the exemption cannot apply. As the taxpayer will be responsible for proving his status as the beneficial owner to the authorities in the event that he is required to do so because of a possible misapplication of the interest exemption, this aspect should be well documented both with regard to the loan itself and in the agreements between the associated companies. Contact us to solve any doubt. Our International Department at Carrillo Asesores we will be glad to help you.

More and more companies are launching online sales of their products. At the same time, more and more individuals are using this channel for their purchases. Our previous publications already stated that the sale to individuals on the Internet may have a specific treatment with regard to VAT topics, but in addition to this, the obligations to issue an invoice may vary depending on the residence of the individual buyer. So we may have to adapt our e-commerce software. Being a company means that I do have an obligation to issue an invoice in the online sale to individuals? Obligation to issue an invoice in the online sale to individuals Article 2 of the invoicing regulations lists the cases in which an invoice must be issued. In addition to pointing out that the recipient may require the issuance of the invoice, subsequently the obligation for the company to issue it, effectively exists. Even when it is not required, it will be mandatory with regard to online sales to individuals for: Sales to private individuals outside the European Union (exports). Sales to EU countries if they are sales with Spanish VAT (not under the distance selling regime) and the requirements to issue a simplified invoice (old tickets) that can replace a full invoice are not met. In fact, if the sale is made to a private individual in an EU country using the distance selling system, there rather would be no obligation under the invoicing regulations, unless the recipient requires it. However, the domestic legislation of the country in question will probably require issuance of an invoice (Spain does this for foreigners operating under this system, standardized at European level). Subsequently there will also be an obligation to issue an invoice here. Attention! In this case it would be under the conditions of the corresponding country (in its language, its currency, with its formal requirements, with other legal deadlines for the obligation to keep them...) which could cause management and computer adjustment costs. When the obligatory issuance of invoices is omitted severe sanctions may be applied It is important to bear in mind that serious tax infringements can be the case, even fines under the General Tax Law may be the consequence and severe sanctions may be applied, depending on the invoicing volume, when the obligatory issuance of invoices is omitted. We therefore suggest to consider these guidelines when starting our challenge of online sales, or for those undertakings already initiated. Contact our International Department to clarify anything about this. We will be glad to help you.