Sánchez’s Government Lets Socimis & Sicavs Off the Fiscal Hook Despite Podemos’s Efforts

16 October 2018 – El Independiente

The Government has managed to dodge two demands from Podemos that had raised concerns in the financial community: the taxation of Socimis and the conditions of Sicavs, the companies that wealthy fortunes use to manage their assets.

The Budget Plan for 2019 approved on Monday at the extraordinary council of ministers does not allude to these two vehicles, despite the contumacious struggle by the purple party to put an end to their benefits. In fact, the Government led by Pedro Sánchez and Podemos had signed an agreement for the budget plan for next year, which included modifications to the conditions of both companies, but, in the end, that has been ruled out.

The aforementioned agreement, published on 11 October, included increasing the tax on Socimis (…), which currently operate under a special tax regime for collective investment institutions (funds and Sicavs).

For the income obtained during the exercise of their main activity (rental and leasing of properties), Socimis pay tax at a rate of 0%. And for income that they receive from other types of activities, they pay tax at a rate of 25%.

The pact between the Executive and Podemos was going to mean applying a tax rate of 15% on the profits not distributed by those entities. In the end, that measure does not form part of the budget for 2019.

The other victory earned by Sánchez over Pablo Iglesias stars Sicavs. Both parties had agreed to tighten control over these vehicles to avoid their fraudulent use. In the end, they will be subject to the same supervision that has applied to them until now.

The agreement had involved granting the inspection bodies of the Tax Authorities the competence to declare, for exclusive tax purposes, the breach of the requirements established for the Sicavs in the financial legislation. In other words, it gave powers to the institution to ensure that the vehicles had, as required by that law, 100 genuine shareholders, to combat the typical practice whereby a single investor controls most of the capital (…).

Similarly, the Government and Podemos had reached an agreement to “establish additional requirements for application by the Sicavs of a reduced tax rate aimed at ensuring their nature as collective investment instruments, for example, the establishment of a maximum capital concentration in the hands of a single investor (including the stakes of related individuals and legal entities). However, that measure, although it may reduce the volume of capital that these entities receive, would objectify the collective nature of these investment vehicles, facilitating their regularisation by the Tax Agencies in the cases of fraudulent uses of Sicavs”.

Taxes on the banks

The entities that have, for the time being, not managed to free themselves from the tax blow are the banks. The Government wants the next budget to include a specific tax that targets financial transactions. The so-called Tobin tax has already met firm opposition from the banks and regulators, which warn of the risks that its implementation would have for the growth of the economy.

The Government’s forecast is that the proceeds raised from such a tax would reach €850 million, according to the Minister for Finance, María Jesús Montero (…).

Original story: El Independiente (by Ana Antón)

Translation: Carmel Drake

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